A letter from a start up that wants to source in China

I had an inquiry from a person in Australia this morning. I get so many inquiries like this so I thought I would publish the inquiry and my reply accordingly. I think it will be useful for others who are experiencing the same frustrations in their China sourcing.

Hi,

I have read quite a number of your blogs and I wanted to ask you for some advice. My name is Robert and I am in the process of forming a startup active wear label in Australia. I have a pattern maker here in Australia so that part is covered but otherwise I am not sure how to progress forward to having my line manufactured. I have found the process to source a quality manufacturer in China who is willing to work with me both time consuming and very difficult. To start my runs will be small as I don’t know what will work for my target market and what wont. Over time this is something I hope to develop obviously, but I see the need right now to work with someone who understands China and how best to bring a product from design to production. I am hoping you can help me out or point me in the right direction.

Any help or tips are most welcome

Thank you

Dear Robert.

The first step before you do anything is to finalize your designs.  Then based on one of your completed designs I would make a special mock design for a prototype and start sending this out to vendors for feedback/ quotes. Please note that you have to be very specific about sizing and material specifications, as well as packaging. Don’t neglect any product detail. In other words, you really have to know your design and product needs inside out (no pun intended). Where most people have problems is that they have not finalized their design, and don’t understand their own product. And then they leave it to their vendor to educate them. Not only does this add considerable time and cost to a project but it tells potentially good vendors that you are an amateur.  That is not the kind of message you want to send to someone whom you are about to enter into a contractual agreement with.   Here is a little synopsis of what you need to do.

1.) Finalize your designs.  Pantones, sizing, material specifications.  Testing requirements if applicable (children’s clothing).  All packaging as well down.

2.) Project your first order QTY and target cost. Remember that the cost of your product will go up with packaging and shipping so be aware of this when you try to come up with a target cost.

3.) Reach out to vendors. Start with 20 vendors.  You can use alibaba for this or I can help you working from my file of vendors, which is substantial and generally does not cover the same landscape as alibaba.

4.) See who gives you the best price and who leaves you with the best impression as far as quality of response/feedback goes.  Watch carefully and eliminate two types of vendors as follows: those who are very slow to reply to you or those whose cost is simply prohibitive for your needs. Aim to have 6-7 vendors after this weeding out process.

5.) Go down to your local discount chain and buy a product that has similar material/packaging specifications as your own. Send pcs aka swatches of this material along with one of your designs to the 5-6 vendors you have targeted.  See what kind of revised pricing the vendors come back with. Once again eliminate vendors whose response is feeble or whose revised cost is simply too high.  At this point, maybe you have 3-4 vendors who look promising.

6.) Request samples but watch out for excessive sample fees. If a vendor overcharges you on a sample it will likely mean that they will over-charge you in production. Stay away from vendors like this.

Good luck !

DSCF0132

Advertisements

Outsourcing in China. Get used to it.

http://www.theeastasiaco.com

Outsourcing is a paradox. It is a practice that is often necessary for the long-term health of a business or organization and at the same time it is a concept that engenders considerable animosity among electorates esp. in election years. When US companies send jobs overseas, for example, American jobs are lost. But many more jobs might be lost if a company refused to outsource, was unable to meet the high cost of US labor and went out of business. Like it or not, outsourcing is simply one of the realities of Globalization. It is unavoidable.

In China these days, some companies in provinces where the cost of labor and materials is high have begun to outsource orders to other areas within China where costs are lower. These outsourcing factories, usually in coastal provinces, simply cannot compete if their costs are too high. In fact if you do an order in Eastern China or South China and part of it is not outsourced, that is highly unusual. One vendor wrote to me:

“For the labor cost, because zhejiang is developed area in china, so the labor cost is not cheap,but will cheap than guangdong I think.And some factory now buy the material and send to west china workshop to handmade it, for the cost is much cheap. Like some jewelry order we have, we buy the material and send to our jiangxin workshop to make.”

Many US companies are uncomfortable with the practice of outsourcing in China because it renders their supply china less transparent. For some industries with strict safety standards, e.g. construction, pharmaceuticals, toys etc outsourcing can be a real headache because there is sometimes no way to know if subcontractors are qualified and are using parts and materials in accordance with international safety standards. Other industries where product safety is not so much an issue nevertheless worry about outsourcing because it may lead to inconsistent quality over production lots. At some point though you have to accept that outsourcing is normal and you should not be discouraged if you find out your vendor is outsourcing part of your order. What is important is to make sure your vendor has very strict procedures as regards subcontractors and is not accepting product into his factory that does not meet your company or order standards. A simple visit to your vendor’s factory is usually enough to determine this. Once again this is why getting on a plane and going to China to see for yourself is so important when you do business there.

IMG_6514

The new buyer-supplier relationship in China

Since China opened its doors to the West in 1978, overseas buyers have come to demand and expect perfection from their Chinese suppliers, even for low value-handicraft product.  Up until very recently this mindset was tolerated by Chinese vendors because over the years orders from overseas accounted for most, if not all, of their sales revenue.  There was very little demand coming from within China itself and Chinese suppliers had no choice but to defer to their overseas customers.  But this is  no longer the case as domestic demand – not orders from abroad – is driving a myriad of Chinese industries nowadays.  A case in point : during my visit to the Canton Fair last month I saw more mainland buyers than I had ever seen at the fair previously and I overheard conversations in Mandarin in which vendors were negotiating with domestic, not overseas, customers.

In fact, if given the choice Chinese vendors would probably prefer to manufacture for the domestic market for several reasons:

1.)  Chinese customers present very few, if any, language or cultural barriers. When communicating with overseas customers, on the other hand,  China vendors must pay for skilled staff who can speak English, and they must entertain overseas customers, often at their own expense.

2.) There are significant incidental costs when dealing with overseas customers.  For example vendors may be asked to pay hefty air freight charges for late or incorrect samples and/or production.  Orders are also subject to lengthy delays because of design requirements, and there are frequent lags in international communication and logistics. I don’t know if I have ever been in a Chinese factory where a worker or management has not complained about an overseas customer’s product specifications or lead-time requirements.

3.) The market in China for consumer goods is not sophisticated vis-a-vis markets in the west.  There are no extensive product testing protocols in China that rival CPSIA in the US or EN-71 in Europe. One vendor recently told me that most of the PU his factory used had not been tested for Phthalates and that if my customer wanted Phthalates free PU they would have to order a special grade at a much higher cost.  In other words, Phthalates is not something Chinese factories have to worry about when they manufacture for their own markets.

The result is that many Chinese vendors now seem to have a take it or leave it attitude with overseas customers. I have been surprised how many companies I have contacted this year have not sought to follow-up on samples sent to me or who have expressed little or no interest in doing business with certain of my customers. They have failed to do so either because the MOQs I have provided them with are not large when compared to those of other overseas buyers, or there is plenty of domestic demand with equal, if not larger, QTYs. 

Overseas buyers need to exercise some sensitivity about these changes in China manufacturing, all the more so if they do not have large order QTYs. Sampling demands should be kept to a minimum and product design should be well thought out on the buyer end so that little is left to the vendor to solve on his/her own. Vendors do not want to spend valuable time re-designing your products.   Buyers should not rush vendors or work under the assumption that their order is the most important order the vendor has on their production schedule.  Most often it is not.  The point is this:  China vendors still want your orders.  But  they are no longer  desperate for them.