When you put your vendor on a pedestal it is time for a reality check

I am working on a project now with a vendor in China that I have known for about four years. I met this vendor at the Canton Fair and I have run a few sourcing projects by them over the last few years. They have always proven very reliable in terms of making sure they understand my clients’ product designs and getting me quotes and/or samples in a very timely fashion. And this project has been no different. However recently I sent them an email asking them to send in samples and it was about ten days before I heard anything back from them. I called and left a message as well. But to no avail. When they finally did get back to me there was no apology or explanation for the delay. They may simply have been busy with another order or perhaps they were preparing for the Canton Fair. Fortunately it was only a sample order but, boy, was it frustrating for both me and my client. At one point I was even questioning myself about how well I knew this vendor and I was preparing to reach out to alternative vendors. The lesson here is never to take anything for granted when you source in China. That seemingly trustworthy vendor you have known and done business with for the last few years may suddenly turn out to be completely unreliable. I have seen it happen many times before and it could easily have happened this time as well, had the vendor decided they were tired of working on projects with me that as yet had not resulted in any sizeable orders for them. So always have backups no matter how well things are going and when you start to put your vendor on a pedestal it is time to give yourself a reality check. I have written on this before but it bears remembering. Even I, who have doing business in China for 25 years, have to remember this sometimes.

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Book Review: Age of Ambition, Chasing Fortune, Truth and Faith in the New China. By Evan Osnos

I always enjoyed Evan Osnos’s articles on China when he was the Beijing based correspondent for the New Yorker. Osnos lived in Beijing for eight years and speaks Chinese, two attributes that informed his writing on China which I have always found to be informative and entertaining.

Osnos’s recent book on China, Age of Ambition, Chasing Fortune, Truth and Faith in the New China is every bit as good as his writing in the New Yorker. He paints portraits of some of today’s most well-known dissidents including Ai Wei Wei and Chen Guangcheng as well as the popular anti-government blogger Han Han. And there are profiles as well of figures who have risen to become part of China’s elite, including a lady who runs China’s most popular dating site and a prominent journalist. In some instances these are the typical rags-to riches tales that are recounted so often in books on China nowadays and in this respect  Age of Ambition mirrors other recent books on China. Osnos’s book stands out, however, because he has access to many of China’s most central figures, by virtue of his assignment in Beijing for one of America’s most established magazines. For this reason we are often on the receiving end of the Government’s attempts at coercion and censorship, sometimes successful, often not. And that is what this book is really about, China’s hectic change and the Government’s attempts to keep up and to keep order.

There are also very good sections about the China Bullet train disaster, an accident that was very much owing to corruption, and a well-publicized incident in the South in which a small girl was hit by a car and no one came to her aid. These were big news stories both in China and overseas and Osnos gives us riveting accounts of both.

Still there are weaknesses. The Age of Ambition would have profited had Osnos spent a few months in 2nd or 3rd tier cities feeling the pulse of rural China which still makes up over 50% of the population. For example how effective are the Government’s efforts to curb freedom of expression in cities other than Beijing and Shanghai, where Osnos seems to spend most of his time ? In fact Osnos focuses almost exclusively on establishment figures in modern day Beijing, Starbucks or upscale office buildings being the setting for many of his interviews. A portrait of a textile factory owner in Jinagsu grappling with issues such as pollution and labor unrest would have been preferable to the portrait Osnos gives us of the blogger Han Han who, as both fervent anti-government blogger and amateur Formula 1 driver, obviously has some credibility issues. Osnos glosses over the hypocrisy of Han Han and his often banal blog posts and seems more dazzled by Han Han’s celebrity.

Osnos is also overly critical of China’s progress. He lambasts the Government’s censorship efforts, without acknowledging that mob unrest has a long history in rural China going back to the early Nineteenth Century and that Government fears about internet rumors fanning mob violence are in some cases well-founded. Religious cults, for example, pose a far more serious threat to political and social order in China than they do in more advanced democracies like the US or Japan and China has good reason to worry. Osnos moreover belittles China’s achievements in science and technology, not to mention the achievements of a couple of the individuals he has befriended and whom he profiles. He mocks the English teacher Michael’s attempts to master English and yet he portrays Michael as a friend.

Like other more recent writers on China, Osnos lacks the perspective of someone who was present in China in the 1980s and early 1990s when the country was mired in backwardness and had yet to experience the fruits of the Deng reforms. China was one of the poorest countries in the world then. Today it is one of the richest. Development on that scale means big problems and yet too many writers on China today, Osnos being one of them, focus on the problems and seem to forget the achievement, an achievement that long-time China watcher Henry Kissinger calls the “miracle of our time. “

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In China nowadays its the foreigners who are poor

I saw an interesting article online the other day in which it was said that Chinese consumers now regard Louis Vuitton as a pedestrian brand. In one way it did not surprise me, for there are a lot of Chinese nowadays with a lot of money. Most of my old colleagues at the Shanghai Textile company where I worked as Deputy GM 20 years ago, now have more money than I could dream of. One of those colleagues bought a home in Toronto several years back and paid 1 million dollars in cash. Another colleague has two villas in Shanghai each valued at over 2 million dollars. But when I read the article about Louis Vuitton bags in China I thought back to a project I had a few years ago helping a New Jersey company source leather handbags in China. The guy who hired me, Neal, had seen the bags when he was at the Canton Show but had a hard time following up with the vendor. Her email did not work, the phone number he had for her did not work, in other words the same old frustrating exercise trying to get in touch with a vendor in China. But Neal really wanted these bags so he asked me if I could help him.    I finally was able to get ahold of the vendor and requested a price list. What she sent me was a list with many bags whose FOB China cost was over $1000.00. I couldn’t believe it and when I expressed my surprise to Neal, he just kind of nonchalantly said “oh yeah, I forgot to tell you they are not cheap bags.”   Still for someone who lived in Shanghai in the early 1990s when an average salary for a college educated company employee was about $ 50.00 a month, and Adidas or Nike were prestigious brands that company employees saved months for, the thought of a $1000.00 bag was something to get used to. And judging by my reaction when I read the article about Louis Vuitton bags it is still something I am not used to.

But as my old friend and Shanghai resident for 25 years now, Andrew, said to me a few years back “It used to be that the foreigners had money and the Chinese were poor. Now the Chinese have money and the foreigners are poor.” Times have changed. And nowhere more so than in China.

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Understanding the role of samples in product development

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Generally when you are getting samples from China vendors for a new product there are three samples you want to be concerned with. Sometimes people confuse these terms so I thought I would clarify them.

Proto samples. are samples of a product where the design has not yet been fixed. For example I currently have a customer who has a concept for a new product. I gave some specs to a vendor in China whom I have worked with before and the vendor did some samples for me. The samples are rough but they will give my customer something to build on. Sometimes it may take two or three rounds of proto samples to get a sample and product you are pleased with.

Pre-Production samples. Once you have approved a product or design, you request samples from the vendor for approval. These are Pre-Production samples and should mimic production. However, from my experience, even pre-production samples sometimes need a couple of rounds before the vendor gets it right. Ideally you want the vendor to submit multiple pre-production samples to you so you will have plenty in the event you send someone to China to do an inspection or if go yourself (advisable). You also send some of the approved samples back to the vendor with a date and signature so they will have a standard for production. Some vendors are very sloppy about keeping counter samples so you need to discuss this with them and insist on it. Just remember it is always better to be stuck with too many samples than too few.

TOP or production samples. Assuming you are not in China for the production and your vendor is proceeding on his/her own, you need to ask your vendor to send you samples from the first lot of production This will allow you to see that everything is going as per the approved samples ( you would be surprised how often it doesn’t ) Ideally you would want the vendor to stop production until you have approved TOP samples, but of course most vendors are not willing to do this, especially if they have other orders to do. Still insist on the TOP samples, have your vendor FEDEX them to you and let them know if anything is remiss ASAP. You might even draw it into your sales contract that TOP samples must be sent and approved before the bulk of production can be started. Depending on the vendor and how badly they wanted your business, they might agree to this.

A final thought: Always have your vendor label your samples clearly and preferably in marker and not with a tag. Tags fall off. Ink does not. Anyone who has dealt with as many samples as I have knows how easily samples can be mixed up, misplaced, lost, or simply mis-tagged. The best way to prevent this is with a marker.

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How to win in China

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I got an email from a customer today. He was very happy with some samples I had sent him recently. We had requested samples from about 4-5 vendors over the past 4 months and although some vendors did not pass muster, one did. This is a design driven product and my customer has high standards. He wrote: “I just received the hats today and they look great! Even better than our originals.” I am sure he is very excited because the search for a new vendor has taken some time. My client’s first vendor kept raising prices on him and there were some quality issues with his last order. 10,000 hats he had to repair himself. That is when he came to me.

So it looks like we have found a new vendor. But it is far too early to celebrate. So much work still needs to be done. The first step should be to send someone up to inspect the vendor’s facility. Vendor visits are invaluable because until you actually see a vendor’s factory you have no idea who you are dealing with. Vendor visits also tell the vendor you are serious about doing business with them. They appreciate the visits and it is an opportunity for you to reinforce your quality standards and tell the vendor how you do business. Then you have to get the order to the vendor which means you first need the order yourself ( my client is in discussions with his customers but still does not have a hard order). It is important here not to wait too long can because if you do then things can change quickly. A vendor that was hungry for orders in Nov. 2012 may not be hungry for orders in April 2013. And who is to say that the vendor will not raise their costs after they get a first order, what happened with another client of mine as I detailed in a previous blog post. In the event the vendor does raise costs we have to find other vendors, something I am now working on.

In short there is just so much work to be done yet. Still if you find a vendor who can make a quality product and meet your target costs you should see yourself as going into the locker room at halftime with the lead. But don’t lose sight that there is still an entire half to play. How you manage your vendor in the second half will determine the outcome of your business.

Forgive the football analogy but this is Super Bowl Weekend. Enjoy the game !

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Doing business in China is easy.

What people are saying about China Tips for Small Businesses

” A very interesting blog..”   – a company in France

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Every so often I have an enlightened moment where all my thoughts on China coalesce and I can see things more clearly than I saw them before. And this happened this weekend. I was thinking about some of my own projects and also about the “China chatter” that I read on other China blogs and Linked In – much of which has to do with how difficult it is to do business in China – and I realized that doing business in China is not difficult at all as long as you practice three things.

Patience
Common sense
Due diligence

If you can do these three things ( and 2/3 is not good enough) you can succeed in China. But what do I mean when I say patience, common sense and due diligence ? Here are some examples.

Patience: Many people try to source in China and after a couple bad experiences with vendors they met on alibaba, but never in person, they swear off on Chinese vendors and Chinese quality. This is not being patient. In fact there are a lot of bad vendors in China but also a lot of good ones. Sometimes you have to spend time, burning through a few vendors before you find one you can work with. It may take you a couple of years. But this is what I mean by being patient.

Common Sense: I have worked for companies and have had among my own clients individuals who just ignored the alarm bells and who insisted working with vendors who were not interested in working with them. Mr. F is a good example. Mr. F really liked the product of a certain vendor in Shandong Province. But the vendor did not seem to be interested in Mr F’s QTYs and felt his target costs were much too low. The vendor was simply not interested in the business Mr. F was offering them and this was quite clear in their emails. But Mr. F insisted on pursuing the vendor because he liked their unique product designs. Common sense, at least to me, says that you do not want to do business with those who do not want to do business with you. Another example of common sense is checking your order before it leaves China. But many people just don’t do this or they allow the vendor to do it. Common sense tells me that vendors are not going to QC your orders like you or an objective third party would.

Due Diligence: I can never get over how many people give orders to China vendors they have never met and know very little about. They trust the vendor because the vendor has given them a good sample and seems easy to work with. And most of all they like the cost. In short, you need to find out as much as possible about the vendors you are going to do business with even if that means paying 3K for a plane ticket and getting on a plane to China so you can meet the vendor yourself. This is an example of due diligence.

 

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China vendor communication – how to evaluate

I have a project now sourcing some BOPP packaging. I have reached out to between 10 -15 vendors with whom I have been communicating over the past couple of weeks. Some of these vendors I have met and some are brand new to me. There are often multiple emails in a day as I have a lot of questions – all part of my screening process. I have noticed that there are certain vendors who are very enthusiastic at first, answering every question I ask of them. But then after a week or two, their replies do not come in as fast. It is as if they have lost some interest in the project – after providing me with initial costs – and they just don’t feel like answering all the questions I throw at them. Other vendors are very good and answer everything. These are of course the vendors you probably want to deal with although there is no guarantee that at some point they also will not become unresponsive. In any case, there is tremendous value in this exercise because in just a few weeks you can get a pretty good idea of which vendors are responsible and which vendors you simply want to eliminate. Those of us who have done orders in China know how important, in fact how critical good communication is.

So I have gotten in the habit of making a list of questions that I ask vendors e.g. shipping terms, printing and mold charges, QC process etc etc. that I like to disperse over several emails, the goal being to drag out the process a bit just to see who are the best communicators among the 10-15 vendors I have targeted. You would be surprised how well this works. As I tell my clients, if it is this difficult communicating with vendor x when just requesting prices, imagine how difficult it will be at production time !

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