Some things to consider when you have a new product and need a mold

Someone came to me with a new product the other day, an artistic and fanciful light fixture that they want to have made in China. They have tried to find someone to manufacture the product here in the US but, as you would expect, the cost is prohibitive.  The person has had some rough molds and prototypes made here and suggested that he could send these to China and have someone there run some samples for him and then maybe a small production order.  Not a good idea, I said.  There are a few things to consider here.

  • The molds this person has made might not be compatible with machines in China In fact, I bet this would be China vendor response were he to send the molds to China.
  • Compatibility of machines notwithstanding, vendors in China stand to make a good profit if they make a mold for a customer and they do not want to forfeit this profit.  And this is why when you get quotes for molded products the mold costs can be all over the board, so to speak. If you ask three vendors to quote on a mold, chances are their quotes will be off by thousands of dollars, because someone is making a hefty profit from the mold. I had project a few years ago for which I needed a mold and the quotes, for the same mold, were anywhere from $3,000.00 to $20,000.00.
  • If you send a vendor in China a mold you may not be able to get the mold back. You never know who you are dealing with and the vendor may just take the mold and start using it themselves.

If you do get your mold made in China make sure you know who you are dealing with because sometimes a factory will claim they own the mold, even though it is your design and you have paid for the mold.  There have been so many disputes like this over the years between SME’s and vendors in China that you just have to expect it to happen.  Just go over to the China Law Blog for some stories. To protect yourself you should have everything spelled out clearly in writing, as to who owns the molds and when they will be returned to you, and you should also be sure you have legal rights to your design before you ask someone in China to make the mold for you.

Finally, really the best way to do a molded product would be to have the CAD work done here in the US, including drawings and 3-D renderings, and then to send these to China so a mold can be made for you. In this way, you can project to vendors in China that you are serious about your product, for drawings look official and will show all proprietary information. Should any dispute arise with them you will have a record of your designs, what you would not have if you asked the vendor to do both the CAD and mold for you.

Needless to say, these are all costs you have to expect to incur if you have a unique product that you want to have manufactured overseas.  But if you can do it, it is worth it.

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Using online payment systems when you source in China

Until recently whenever you wanted to pay a sample fee to a vendor in China you would have to send a bank wire. Service charges for a wire transfer run between $30.00 -$50.00 and the wire can take up to a week to go through, although the ave time is 2-3 days. Not to mention the fact that you have to spend time to go to the bank and do all the paperwork for the wire transfer. Nowadays however, more and more vendors will accept Paypal as a way to pay for samples. I would say that whereas two years ago maybe one in ten vendors would have accepted Paypal, now it seems that about 50% of vendors will accept PayPal for sample fees. The advantages for you, the buyer, are obvious. Paying a vendor thru PayPal will save you a lot of time and a little money. PayPal also protects you if do not receive the samples or if the samples are not what you were expecting.

However, all this is not to say there will not be problems. A case in point: I have a client now who is ordering some samples from a vendor in China. This is a vendor who accepts PayPal. Last week I had an email from the vendor telling me that the samples were ready to go as soon as the sample fee was paid by my client. So I told my client who wrote back that he had already made a PayPal payment to the vendor several days previous to the vendor’s email. I checked again with the vendor who told me that there was no record of the PayPal payment from my client. We went back and forth for a few days and finally discovered the problem which was simply that the vendor was taking PayPal payments through his gmail address. However since Google is persona non grata in China the payments were not going through. So the vendor had to register another email address with PayPal and overall we lost about 4-5 days because of this. PayPal in China still has growing pains.

One other method of payment that many vendors accept nowadays is alipay which is Alibaba’s online payment system, and the largest payment system in China. Many vendors who sell on taobao.com (China’s equivalent of Amazon) use alipay as their payment system and the reviews are generally good. However, I would not recommend you use a China based payment system to pay for your sample fees for the simple reason that if you have a problem it may be hard to resolve it. If for example a vendor accepted alipay or wire transfer I would probably just opt for the wire transfer, time consuming as it is.

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Sourcing effectively in China is about being smart and practical

A small startup in Houston called me last week. They are looking for a supplier in China and they wanted to sound me out about helping them. They are focused on two goals as follows:

  1. They want a native English speaker with China experience to take them into China.
  2. They want to be sure that there are no surprises when they receive their orders.

Let’s look at both of these:

I think they have the right idea in terms of wanting to work with an American who has experience in China. This will save them a lot of time for the cultural gap between China and the US is so vast that you can spend a lot of time trying to bridge that gap, sometimes with little or no success. It just makes a lot of sense to have someone on your team who understands both your business and the country where you are having your product made. I don’t think you can underestimate the value of this. Beyond the obvious there is the trust factor as well. There are very upstanding vendors in China but there are a lot of unscrupulous vendors as well and the latter far outnumbers the former. If you do business with a vendor in China you really have no way to check on them, all the self-promotion and Alibaba gold certifications notwithstanding. If on the other hand you work with a an agent or liaison from your own country you can easily check their references and you will feel confident about going into China. So I think there is a tremendous comfort factor in approaching China with a local on your team as this company from Houston is trying to do. Think about it this way: The best thing is to know you can trust your supplier. But this takes years, if you can reach this level of trust at all. The next best thing is to know you can trust the person taking you into China. This takes a few days.

Their second requirement that they want to be certain that what they order is what they get is wishful thinking. This really is an American way of thinking which has no practical application in China. I told them that the only way to ensure that you are getting what you order is to go to China and inspect everything before it goes into the container. Needless to say, for a small company or start up on a shoestring budget this is not realistic. Even for big companies with big orders 100% inspection is unrealistic. I emphasized that sourcing in China is all about reducing risk. But you can never eliminate that risk altogether ( unless as I said you inspect every piece). The goal should never be a perfect order but simply an order which allows you to meet the demand from your customers with ample stock on hand.

In short, sourcing effectively in China is about being smart, going into China with someone who has experience there and it is about being practical, not expecting perfection from your China partners.

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Evaluating a potential supplier – more tips

I have been thinking more about this over the last several days and I have come up with a couple more tips that you might find useful when trying to determine if a prospective supplier is right for you. These are as follows:

1.) Consider how far your vendor lives from the factory. You are going to be communicating with your vendor on a regular basis and will be expecting them to pass on all of your instructions and concerns to their workers. It is imperative, therefore, that the vendor lives in close proximity to the factory and is there at least a few times a week. “Mr Huang” in my previous post lived three hours from his factory and relied on his brother – who lived nearby – to manage the workers. When I was at the factory, I asked one of the workers how often Mr. Huang or his assistant came to the factory and was told once every two weeks. Vendors do not like to go to the factories because the roads are bad causing significant wear and tear on vehicles, there are sometimes significant bottlenecks with the traffic meaning a three-hour trip can take all day and, most importantly, there is an abundance of down-time at the factory and nothing to do.

2.) It can sometimes be insightful to meet a vendors family. I will never forget making a trip to China to talk to a couple of suppliers, one from Anhui and one from Guangxi Province. I spent a few days with each and in that time had occasion to meet their families. Mr Zhang, the Anhui vendor, had a son whom he seemed to be having significant trouble with. He was attending a private school in Beijing but, from all appearences, was not very motivated. Well, as it turned out, Mr. Zhang’s son was just like Mr. Zhang. Even when we dangled promises of lucrative orders in front of him, Mr Zhang moved with all the alacrity of a snail. He was always behind on the production and shipping schedule and this caused significant problems with our customer because we were delivering a seasonal product. In fact at one point our customer had to stop their order processing just to wait for our deliveries. After just one year we cut ties with Mr. Zhang.

Mr. Ma, the Guangxi vendor, on the other hand, was an impeccable vendor. Although he could not boast first-rate production facilities he always delivered product on time that was according to specifications and very clean. But this was not surprising to me after meeting Mr. Ma’s son, a sharp kid who was studying engineering at a very good university in Beijing. He also spoke great English. In fact, Mr. Ma’s other two sons were also attending very reputable universities. That a rural vendor – Mr. Ma lived close to the factory, five hours from the nearest city – would be able to send three children to good universities spoke volumes about Mr. Ma’s work ethic and values. Of course, you are not going to select a vendor just because he sends his son or daughter to a good university, but how he/she runs his/her family can be a clue as to how he/she runs his/her business.

These, then, are some of the little things that can help you to evaluate a vendor.