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.

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What can go wrong if you don’t do your due diligence in China

What people are saying about Mulberry Fields
“Your blog posts are excellent.”    a company in California with a presence in China.

I was thinking more today about vendor referrals and I came across this article from Money Magazine back in 2007. The article is not exactly current but the issue it addresses is, namely what can go wrong when you enter into a partnership with the wrong vendor, especially a vendor that someone else has referred you to.  I have heard so many stories like this over the years and the common denominator is always that the buying party did not check out their vendor thoroughly before giving them the order and/or did not inspect the order before it left China.

There are two lessons in this article: the first is not to take a vendor referral or hire a sourcing company without doing your due diligence. As someone who has been going to China for 25 years, I was astounded to read that there are apparently China sourcing companies, where the principals have never even been to China.  The second lesson is to manage your production in China aggressively.

Here is the link to the article.

http://money.cnn.com/2007/07/26/magazines/fsb/china_sourcing.fsb/index.htm

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China factory location. Why this is important

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”   – from a company in Utah

BLOG POST

It is always a good idea when you are considering a new vendor to ask where their factory is in relation to their office. Why is this important ? The reason is that your vendor will be giving your order to the factory. If the factory is at some distance from the vendor’s office then communication may be neither timely nor efficient. In fact, vendors do not like to spend time at factories which, in China, are usually out in the countryside. Roads in China can be rough with lengthy traffic bottlenecks and I don’t think anyone – vendors or their customers – enjoy sitting in a car for 3 hrs on a crumbling Chinese road. Some vendors, I would venture to say, only go out to their factories when there is an emergency, a very late order or when they have a buyer in town.

But if you have a design driven product with a lot of requirements you need your vendor to be at the factory so they can communicate your needs to the factory manager and the workers and monitor quality closely as the order proceeds. . Therefore location of office vis a vis factory is important. If your vendor’s office is more than an hour away from the factory you have to ask them how they communicate with the factory? Are there computers so design or production hiccups that cannot be communicated over the phone can be emailed? Do they have any kind of video conferencing facilities? This is a reason why buyers need to make factory visits. Only they can determine these things for themselves.

You also have to consider the factory’s distance from the subcontractors. I remember being at a factory a couple of years ago. Some of my customer’s order was being outsourced. I had no problem with this but I wanted to go see the subcontractors (usually cottage industries set up in proximity to the main factory). However, I was told that the subcontracting “factory” was about 2 hrs from the main factory and that the round trip might take much of the day. That told me right there that the main vendor was probably not spending much time with his subcontractors. Who was making sure they were doing the order correctly? Who was making sure they were on schedule? Villagers after all do not have cell phones, faxes, PCs, teleconferencing facilities.

Ideally you want to find a vendor whose factory is within an hour of their office and where the subcontractors are within 30 min from the factory. These are very reasonable distances to navigate.. If your vendor has a factory that is 2 hours away from his. /her office then you should be concerned.

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No inspection. Bad quality. Don’t blame your vendor.

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I was reading another China blog today about an order gone bad. It was the same scenario we see over and over: Overseas company places an order in China; Overseas company does not inspect the order; China vendor delivers bad quality; Overseas company goes ballistic. I read the post and commented on it of course. But it got me to thinking about something. Whenever there is a bad shipment out of China the tendency is to blame the China vendor. But if you don’t inspect your order and it turns out something is wrong, then can you really blame the vendor? If you buy a pair of shoes without trying them on and you get home and the shoes are too big, whose fault is it?

I would add that it is true that a lot of vendors cut corners when you don’t look and that accounts for a significant amount of bad product out of China. Thus the need to inspect. But at the same time many vendors just don’t understand the sophisticated markets they are producing for and without the guidance of the buyer (in the form of incessant communication and detailed specs during pre-production and inspections during the main stages of production) they ship a lot of bad product. Thus, again, the need to inspect. Of course, when you inspect an order in China and see something that you don’t like, the SOP is to have the vendor fix the product in question before you allow them to ship it. You inspect it and OK, they ship it and you get what you ordered. Plain and simple in most cases.

Given China’s global standing as an emerging economy and its somewhat undeserved reputation as a country that churns out a lot of inferior quality product, I personally feel one can not fault a vendor for delivering poor quality product if the product has not been inspected by the buyer or a buyer designated third-party before the order leaves China.

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How to evaluate a potential China supplier. A useful tip.

Sometimes when I have a sourcing project I will send out an extensive questionnaire to potential suppliers. I usually draw up the questionnaire with my client and we try to cover all the clients’ needs on the questionnaire, from particular machines to production capacity.

As I see it, the questionnaire serves three purposes as follows:

1.) A completed questionnaire tells me what the vendor is capable of in terms of production capacity and quality standards. It will tell me about their QC and production process and who their sub-contractors are, if any. It will tell me about the size of their office and factory and how far one is from the other ( a very important piece of info). If my client has specific requirements in terms of machines e.g. a kiln for drying furniture this will be detailed on the questionnaire. Of course, there is no assurance that what the vendor fills out is in fact the truth, but follow up factory audits with questionnaire in hand should reveal any discrepancies. For example let’s say your vendor has answered on the questionnaire that they do not use sub-contractors. But when you are on-site for a factory audit you ask them about the machine embroidered logo for your product and they cannot show you where it is made. Well, right then you know they have out-sourced it.

2.) A questionnaire will tell me how earnest the supplier is. If the vendor fills out the questionnaire completely and offers a lot of information then I know they will probably be good to work with come production time. If a vendor sends back a questionnaire that is incomplete then right there that is a warning sign. You would be surprised at the character of responses I get when I send these out, but the good factories always fill out the questionnaire thoroughly.

3.) The questionnaire tells the vendor that you are organized and probably have experience dealing with a lot of factories. Right then it puts you in a position of authority.

I also think that you should ask for extensive photos of facilities when you are evaluating new suppliers. Sometimes you can tell just from one photo how a vendor might be to work with. I remember getting photos from one vendor last year. I had asked them to send me photos of their factory. One of the photos showed a container being loaded, and the cartons were just jammed in. I knew this was not the way to load a container – especially when the product is wooden furniture as it was in this case – and right there I had doubts about the vendor.

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