Designating certain vendors as “PD vendors”

What people are saying about Mulberry Fields
“A very interesting blog….” – a company in France

Just an afterthought on my last post about finalizing your product designs before approaching new vendors with projects. Ideally you want to finish your product design before you approach prospective vendors with projects. That should always be your goal.

However it is unavoidable when you have a new product to sometimes look at it and see ways it can be better. That is the nature of Product Development. Of course you need to inform your vendor, at the very least to see what the new costs are. The question then is how do you manage product development with a prospective vendor without frustrating them or, as time goes on, having them come to see you as a customer they just don’t take seriously, the subject of yesterday’s post ?

I have come to realize that when the PD process takes too long you need to designate certain vendors as “PD vendors.” These are vendors whom you have made inquiries with over the long term and who have provided you with useful information on your product e.g. design suggestions, general costs and other information and maybe even some samples. However, you probably want to think twice about ordering from them even if their quality and pricing is good because you have given them enough doubts about your company that they may no longer take you seriously as a long term player in China ( even though they will of course take your order.). And if a vendor in China does not take you seriously that is when there are problems. But you can use the information these “PD vendors” have given you to finalize your product. You can then approach other vendors with the confidence (theirs and your) that this is the product you are going to order, and hopefully sooner than later.

http://www.theeastasiaco.com

Do you really need to speak Chinese to do business in China ?

What people are saying about Mulberry Fields
” A very interesting blog..” – a company in France

I was talking with a client yesterday who told that he met someone recently who has been sourcing out of China for over twenty years and this person said that it was not necessary to speak Chinese. I do not disagree with this. If you go to the Canton Fair you will see that 99.9% of overseas visitors speak little or no Chinese. And many of them do just fine, I am sure, doing business with vendors who speak English.

Still I think it is much harder to do business in China if you do not speak at least a modicum of Chinese. The advantages to speaking Chinese are many. Some are as follows:

1.) You will have more vendors to choose from. Many vendors are more comfortable speaking in Chinese than in English. It is no reflection on the vendor if they do not speak English well. It may simply be a geographical or personnel issue ( maybe the local foreign language college just does not have a lot of qualified candidates). If you insist on English you may very well be eliminating perfectly good vendors.

At the same time how well a vendor communicates in English should not be a deciding factor in choosing a vendor. I would rather deal with a person who replied promptly to my inquires in imperfect English (or Chinese) than one who replied in fluent English but who was not reliable. I know a lot of vendors like the latter. In short, a vendor’s attitude and capability in making your product should be the determining factor in whether you give them an order. English should be a consideration of course (after all communication is very important) but you don’t want it to be the main criterion for your vendor selection.

2.) Your vendors will respect you more if you show them they can speak Chinese (Even though they will always want to communicate with you in English it is important to show them that you can speak a little of their language as well). Make no mistake about it that business in China is changing and nowadays it is as much you soliciting their business as it is they soliciting your business.

3.) If you can achieve some proficiency in Chinese, you will understand a lot more about your production when you are at the factory. You will have the opportunity to talk with workers and managers about your product. When you use a translator these discussion are filtered so you only hear what you want to hear. And if CSR (Corporate Social Responsibility) is important to you and your customers then when you are at the factory it is imperative that you talk directly to the workers. Of course it takes years to learn Mandarin well enough to be at this level. But if you plan to do business in China for many years, you might as well start now.

4.) You may hear things you are not meant to hear which will allow you to make important decisions. I once overheard a discussion between a vendor and a factory owner about a YKK zipper which the vendor had told me was genuine. The factory owner, however, told the vendor that she didn’t know if it was genuine. Well, right there I knew that I was being mislead and based on this I did not select this factory. Of course if I did not know Chinese then I might have ended up putting zippers on my bags that broke after a day’s use. In this instance my knowledge of Mandarin proved invaluable to my client.

5.) If you do travel to China and speak no Chinese, you may experience a lot of frustration and this may color your visit with your vendor. On the other hand if you can speak some Chinese you will probably be more relaxed overall, you will have more fun and this will inform your relationship with your vendor.

http://www.theeastasiaco.com

China is a great place to do business. But don’t let anyone tell you it is easy!

What people are saying about Mulberry Fields
“I have already learned a great deal about China and your business through your website and blog posts. Very impressive. ” – a children’s products company in Toronto.

I am doing an article for my June newsletter EAC Newsletter subscribe on Home Depot’s failure in China and the thought occurred to me that, look, China is just not an easy place to do business. Home Depot invested about 130 million dollars in its 12 stores in China and they closed the last of them in Sept 2012. When you think of how much planning and investment went into the venture it is really astounding that they failed. After all, we are not talking about a small regional DIY chain here but the biggest DIY store in the world. Ditto for Best Buy who attempted to enter the China market but closed the last of their five mega stores there last year as well. What is the line in the Robert Burns poem, “The best laid schemes of mice and men often go awry.”

I think it is useful when you source in China to remember the examples of Home Depot and Best Buy et al. From what I have read the main reason that Home Deport and Best Buy did not succeed in China was that they simply just failed to accept the fact that China is different from the US and that success in the US does not necessarily translate to success in China. So keep this in mind at all times when you are sourcing or doing business in China. Respect China for what it is and do not force your external cultural pre-concepts and expectations on the country you are doing business in. And and give yourself a break if something does not go as you expect. As I have said many times before, the goal to succeeding in China is managing your expectations. And a heavy dose of realism does not hurt either.

I sometimes have what I call a “China Zen Moment.” This is when I see beyond specific topics like auditing vendors, product testing, trade shows, communicating with vendors, doing spec sheets etc etc and I am able to reduce China Sourcing to its simplest terms. Here are some of those Zen moments
How to win in China
China quality is not that bad
Doing business in China is easy
Don’t expect perfection
Locals too find the going difficult

http://www.theeastasiaco.com

China’s internal consumer demand spells competition for overseas companies sourcing in China

What people are saying about Mulberry Fields
“What you say is absolutely true about what you need to do in order to succeed in China.” – a company in Italy

I was reading a report on China’s textile industry recently. The astounding thing is that demand from inside China for home textiles is growing while demand from outside China is decreasing. In the first 6 mos of 2012, for example, domestic demand for home textiles grew over 20% over the previous year whereas demand from outside China in the same period grew just over 1 %. The same trend can be seen in other industries as well. For example, domestic demand was a driver last year in China’s seasonal decorations industry as orders for Christmas goods from abroad slumped. Over 30 % of orders for seasonal goods in some manufacturing belts came from within China. Christmas after all is big in China too, believe it or not.

This really underlies what I have been seeing over the past couple of years, namely that China vendors are no longer desperate for orders from the countries that have traditionally driven China’s export industry over the last 30 years, for the simple reason that there is growing demand from within China. I would add that China’s export markets showing the most growth recently are from emerging market countries ASEAN Nations, Russia, Africa et al. These were the countries driving home textile exports from China in 2012. And this is why on some projects when I send out inquires some vendors do not even bother to return my emails if they have decided they do not want the business based on my target costs or QTYs. Many vendors nowadays have a simple take it or leave it attitude. I think this is the most challenging thing about doing business in China nowadays.

If you are sourcing in China you really need to be aware of this. You need to be organized, polite and most importantly flexible on price and on quality as well. As I am in the habit of saying recently, over the next decade sourcing in China may be as much a case of you soliciting their business as they soliciting your business.

Here are some other blog posts on how China is changing and the implications for you:

Work on that attitude when you do business in China
Quality not cost
The End of Cheap China; Book Review
Buyers and suppliers nowadays

http://www.theeastasiaco.com

Is it better to go with a big vendor or small vendor in China ?

What people are saying about Mulberry Fields
“….very impressed with your blogs and knowledge.” – former Director of Product Development at Williams Sonoma

This is a follow-up post on a blog I wrote a few weeks ago about a client of mine who is thinking about giving an order to a good size company which is part of a conglomerate. Selecting a vendor

I remember about eight years ago I was working for a company in the US and I was in China with a couple of my colleagues to visit some suppliers. On our agenda was a courtesy visit to a big vendor outside of Shanghai, a vendor that supplied some of the biggest home décor retailers in Europe. Our orders must have seemed small in comparison and I am not sure how important they regarded us. However, the first clue was when they I called to arrange a time to come visit and the vendor did not offer any transportation to their office (highly unusual in China). When we arrived at the office we were asked to wait for 90 minutes. When our Account Manager came out, after exchanging pleasantries he asked us “what can I do for you?” And the attitude displayed during that visit was pretty much emblematic of their attitude when we did business with them. When there were problems it was hard to get them solved. And the only reason we continued in the relationship with this supplier was that they were European managed and had very high quality standards. But we were obviously too small to count for much with them.

More recently I met a bag vendor at the Canton Fair. This is a big company and they do bags for a lot of well-known companies. They were friendly and the costs they gave me at the fair were extremely good. So I thought I would give them a try. Accordingly after the fair I began the process of developing samples with them. Whereas other vendors took a few weeks or so to get me samples this vendor took over two months, and only because of constant follow-up emails from me. The sample, however, was good and my client wanted to proceed with them. I told her that I couldn’t recommend this vendor anymore because of all the delays but I would at least follow-up with them as she had asked me to do. I sent them an email accordingly and when I did not hear back from them in a couple of weeks, I told my customer that she really was barking up the wrong tree with this vendor. She simply did not have the order QTYs that interested them. She agreed and we dropped them from the list. Two months later, the vendor replied to my email. Our decision had obviously been the correct one.

Although it would not be accurate to say that all big vendors give you this lackluster treatment, it really is the typical treatment you will get with big suppliers in China – unless you are an important customer for them and have very good order QTYs.

Another thing to consider is that if you have a design driven product and you are used to working closely with your vendor you are much better off working with a smaller vendor even if costs are higher. You will not be able to expect the same input on your design from a large supplier. They are just too busy.

http://www.theeastasiaco.com

Critical defects vs acceptable defects. Giving vendors a break is good for buyers too.

What people are saying about Mulberry Fields
“I have already learned a great deal about China and your business through your website and blog posts. Very impressive. ” – A Company in Toronto.

A client of mine is about to give an order to a vendor in China. I have advised him to give the vendor a QC checklist as well as adding all QC points in an appendix to the Sales Contract. QC points should also go on all product spec sheets submitted to the vendor. The idea is that whenever that vendor is looking at your order, your QC points are going to be reinforced.

At the same time you should establish in your own mind what are “critical” QC defects and what are acceptable QC defects. Critical defects are things that would make the product unsellable or returnable by your customer. For example on a wooden picture frame a “critical” defect would be a broken clasp, a cracked frame or glass. An acceptable defect might be a shade of color lighter than specified, a streak in the velvet fabric on the picture frame backing, etc. These are things a customer might notice but would not likely result in a return or lost sale.

In your discussions with your vendor on the QC checklist you should make sure you tell your vendor which defects are going to be considered “critical.” And give these points special emphasis. This is not to say you should not make equal mention of acceptable defects. You should but the tone of your directive should be “please try to avoid these problems” instead of “we will not accept product with these problems.” The idea here is to cut your vendor some slack so that they can feel confident in making your order and to avoid confrontations about quality unless it is your perception that the issue clearly jeopardizes sales of your product.

As I always say “Work with your vendor. Not against them.”

Here are some related posts that will help you work with your vendors, and not against them.

Setting tolerances for production
Being on the same page with your vendor
Inspections are good for your vendor
Give your vendors specs ASAP

The best way to find a reliable supplier in China. Part 4 of 4

What people are saying about Mulberry Fields
“I have read through quite a few of your blog posts and have enjoyed them very very much. We do business in China and face many of the challenges you describe. Much of what you write resonates with me and there are some very helpful tips”     -an apparel company in Utah.

So you have found three suppliers from your Canton Fair visit.  These are vendors you have met in person and worked closely with on samples over 2-3 months. You are pleased with their costs, the quality of their samples and, most importantly, their communication. You are beginning to feel in the comfort zone with these people. The final step is to make sure they are who they say they are.  To do this you need to visit them.

But before you visit your prospective vendors, a preliminary step should be to do a credit check on them with a China business verification service. Some of these services are expensive. Some are very reasonable but this is a step you definitely want to take before you arrange visits with any potential suppliers. The service I refer my clients to costs about $ 250 for a credit report on a Chinese company, much more reasonable than D and B who also offers this service. The report my clients receive tells them all about the company including, number of employees, date company was established, annual revenue as well percentage of domestic and overseas sales. The report will also detail any important events in the company’s history e.g. a name or location change and any litigation the company has been involved in. It is a fairly lengthy report.  In fact what you should do is ask the company some of these same questions and then cross check their answers with the credit report to make sure there are no glaring inconsistencies. You are about to risk your business on an unknown and untested supplier in a country which is a wasteland of failed sourcing ventures. It behooves you to know as much as you can about your supplier and try to establish early on if they are trustworthy or not. Credit reports push you in that direction.

Let’s say that after you run a credit report on your three prospects you do not feel the credit report of one of the vendors was acceptable. That leaves you with 2 vendors. These are the vendors you have decided to visit.

When you go to China to visit a new vendor, you should count on spending 3 full days with each vendor. In this time you can see their facility and discuss your projects with them.  You should have a factory checklist just as if you were doing an audit. But the purpose of the trip is mainly to make sure that the vendor you have been working with over the past few months does in fact own the factory (you would be surprised).  This will be apparent early on as you the vendor interact with the people at the factory.  If you have asked for photos of your vendor’s facility when you first started sampling with them (highly recommended), you will also be able to verify that the facility is the same all along. If your vendor takes you to a place that you do not recognize from earlier photos then you have a red flag.  You should also devote a full or at least half day to local sightseeing ( you are paying your respect to China by doing this and it is a very important ritual in vendor visits). What you don’t want to do is rush in and rush out, as if you are telling the vendor all you care about is your product and cost. In short, the more time you spend with your supplier the better you will know them –for good or bad. Again, don’t rush in and out.

Generally you should be able to visit 2 vendors with a 7-10 day trip in China. Vendors will arrange your hotel for you ( and may even pay for it) and they will pay all your meals for you, so in a sense all you have to do is pay your airfare. That is a pretty sweet deal in and of itself. You may end up spending 3-4 K on your trip which is nothing compared to the sales you will have if you are able to deliver quality product to your customers when they want it.

www.theeastasiaco.com

Here are the other posts in this series:
Part 3
Part 2
Part 1

Doing business in China ? Leave the attitude at home.

What people are saying about Mulberry Fields
“I have read through quite a few of your blog posts and have enjoyed them very very much. We do business in China and face many of the challenges you describe. Much of what you write resonates with me and there are some very helpful tips”  -an apparel company in Utah.

About a month ago on Linked In there was a discussion started by someone who claims he was “ripped off” by an Asian supplier.  Needless to say the title of the discussion, which has seen a fair amount of activity, betrays the person’s own prejudices about China. I am assuming that the supplier in question is Chinese because the discussion is in the Business in China group.

I also read a book review recently of a new book written by someone who worked in the China office of a US company. As I have had the same experience, I found the review interesting. The gist of the book, as I read the review, was that the Americans paid little respect to their Chinese counterparts . And this was my experience when I worked for a major US textile company in China some 15 years ago. In terms of how Americans treat their Chinese colleagues, sadly it does not appear that things have gotten better.

In fact, the mentality among many overseas business people who do business in China is that the Chinese are there to dictate to and are not worthy of respect. I have accompanied numerous colleagues to China over the years who didn’t even think it was necessary to learn how to say “hello” or “thank you” in a country where they would be spending a week or two. This attitude is owing not only to historical biases towards the Chinese in countries like the US  but also to the fact that China before Reform and Opening was a very poor country, and one that was at political loggerheads with the developed world.  So the negative attitudes towards China persist.

But things have changed in China. China has the world’s second largest economy and one day may own the top spot. Its big cities like Beijing and Shanghai are world-class and they can be mentioned in the same breath with Paris, Tokyo, New York.  China’s athletes, entertainers and artists are also world-class. China applied for 25 % of the world’s patents in 2011 and a Chinese writer won the Nobel Prize in literature in 2012. And the list could go on and on.

In short, China today is not the China of old. The Chinese are aware of this. If you are doing business in China you need to be aware of this as well.

www.theeastasiaco.com

The best way to find a reliable supplier in China. Part 3 of 4

What people are saying about Mulberry Fields
“Your blog speaks to the many issues I have experience with when doing business in China” – a California company

Once you return from China with a list of 10-15 vendors whom you have met and think you can move forward with, the next step should be to confirm costs on all the products you have discussed with vendors in China. Try to draw out the process over a couple of weeks to test vendor responsiveness.  It is inevitable that some vendors will not reply or do so slowly.  Some vendors may be very busy after the show but that is no excuse for them not  to reply to your email within 24-48 hrs.  Many will. Of course, vendors who are slow or unresponsive are vendors you would not want to deal with anyway. After all pricing comes in you should be able to eliminate some vendors based on poor follow up and/or pricing and your notes from the show.

For those vendors you decide to move forward with you should prepare a rigorous sample order.  You can see the sample order as a “pilot” order of sorts. It will give you an idea of how a vendor might be to work with over the long term.  You should select a product for sampling that will test all of a vendor’s capabilities. In other words, don’t give the vendor a product that will be easy for them to do but instead choose the a product that might pose some challenges for them, for example a product with a difficult to source component or a special fabric e.g. ballistic nylon or a product that requires a certain printing technology, e.g. digital printing on wood. And then give the same sample request to all vendors.

You will see how they communicate; how they solve problems;  if they hold their pricing steady;  if their quality can meet your standards etc act.  If you do this with 10-15 vendors you will find that only about 4 or 5 will be able to pass muster.  At least that has been my experience. But in eliminating the bad vendors you have substantially reduced your risk in sourcing from China. And the vendors that remain should be potentially good partners for you.

When your samples come back you should have 2-3 vendors whom you can move forward with and should feel reasonably confident in doing business with.

Here are the other posts in this series:

Part 4
Part 2
Part 1

www.theeastasiaco.com

 

 

Why getting a vendor referral may not be the best way to find a vendor in China

What people are saying about Mulberry Fields
“I have read through quite a few of your blog posts and have enjoyed them very very much. We do business in China and face many of the challenges you describe. Much of what you write resonates with me and there are some very helpful tips”   a company in Utah

BLOG POST

The other day a popular China blogger  wrote that finding a factory through a referral is the best way to find a vendor in China.  This always sounds good in theory but it is in fact very hard to do in practice.  Here is why:

1.)   Just because someone introduces you to a factory does not mean that factory is going to want your business. They might have no interest at all unless your QTYs are large or the person who had introduced you was a very good customer of theirs.  Even then who is to say if they would treat your orders with the same importance.  A case in point: a couple of years ago I got  a vendor referral from a friend of mine but when I approached the vendor I got no response. The vendor in question was a huge apparel factory outside of Shanghai that obviously did not need the business I was prepared to offer them for they never replied to me even after two or three emails and a phone call.  Even had they eventually replied to me I probably would not have not have pursued the business with them based on their feeble response.  And this has happened a few other times that I can remember.   I would argue that it is preferable to work with a responsive vendor whom you found on your own at a trade show than with an non-responsive vendor you had been introduced to by a third-party even if that vendor came with a good recommendation.  

2.)    If you work with a China agent who introduces you to a factory, they are most certainly getting a commission from the FTY to do so.  This is SOP in China. This is not then an objective referral based on the factory’s capabilities and your needs.  And the same thing as # 1 above. The factory may really not want your order to begin with but may just be taking the order as a favor to the agent.  But you have no way of knowing this.

3.)    If you work with a US based sourcing company, once again you may be partnered with a factory that may have little or no interest in your order.  They may simply take the order because they have a longstanding relationship with the sourcing company.  Nor will you likely have the opportunity to work directly with the factory.  All your communication will be relayed from the US office to the China office to the vendor.  If you have a design-driven product,  that really demands you sit down with the vendor to discuss, you will have problems.  But if you have a low-value product e.g. promotional goods, simple molded product, certain toys using a factory via a US based sourcing company might not be a bad way to go.

4.)    How many people do you know who are going to refer you to a vendor if it means that the vendor may pay more attention to your orders than theirs?  If I worked with a factory that had a tendency to be behind in their production schedule and late in deliveries, the last thing I would want them to do would be to take on additional orders, unless those were my orders.

5.)    How likely is it that you actually know someone who knows a factory in China that can do your product? Many factories in China have niche manufacturing capabilities. For example, I have been working on a hat project for the last year and have discovered that not all hat factories can do all kinds of hats.  Depending on your product, it sometimes can take a while to find a good vendor.

If you do get a referral for a factory and you want to consider it you should ask yourself three questions:

a.)  How well do you know the person who is giving you the referral ?  And what is your relationship with them ?  If it is someone I have known for a while and trusted I would be inclined to listen to them.  If I didn’t know them well, I would be very cautious.

b.) What is the relationship of that person with the factory ?   Does the person have a longstanding relationship with the factory and are they regarded as an important customer ?  Or have they just done a few small orders with the factory ? If the latter, then once again I would be very cautious.

c.) Has the factory expressed strong interest in your orders ?   Suffice it to say you do not want to give your orders to a factory that is not really interested in your business.  Don’t just assume that this is China and all vendors want orders.  Vendors are very picky nowadays.

Depending on how you answer these questions the referral might be the best solution for your. Or the worst.

In short,  all things considered,  I think the best way to find a vendors in China is to meet those vendors yourself and gauge their capabilities and level of interest in your business.

www.theeastasiaco.com