One of my former clients called me today asking me to reach out to a vendor we had worked with before for a new quote. This client has been told by big retailers he is approaching that he must be at a certain price point in order for them to carry his product. So this means we have to reduce the price with vendors in China. The only way to do this is to increase order QTY. Nothing but simple economies of scale at work here. My customer knows this and so he wants me to run some large QTYs by vendors to see what we need to do in order to get the price down.
I told him that this was all fine and dandy but I advised him that it was extremely risky to give a big order to a vendor he had not yet tested with a series of small orders. As they say in Chinese干大事必须从小事干起. ( gan da shi bi xu cong xiao shi gan qi ) trans: Before you do something big you need to do something small. Giving a big order to a new vendor is something I would never advise doing unless a person were prepared to spend a month in China supervising production. Of course the expense of doing that would offset any savings from economies of scale.
And this is the fundamental problem in China sourcing for small businesses, how do you get a vendor interested in your business at costs that work for you without giving them a huge order and assuming a lot of risk ? 20 or 30 years ago this was not a problem as China vendors just wanted the orders, big or small and the US retail landscape was not so competitive. Things are different now and vendors want big orders. Unfortunately all you can do is to try to find a vendor who you can work with and start small. Much easier said that done I should point out. The only other option is to re-design your product to make it cheaper. And right now this is what I am advising my client to do. Right now, I think that is his only shot.