Imports Oriental Blog

International apparel manufacturing and sourcing. If we don't make it, we can find it.

Category : Manufacturing

Working well with Chinese suppliers

Tanya Crossman

Tanya Crossman

Last week Renaud wrote a piece about working with Chinese suppliers I enjoyed.

He starts out by saying that when you first start working with Chinese suppliers, you may notice a need to change certain habits.

It is very important to define the product requirements in the smallest details, including the labeling and the packaging.

I’m with him here! It’s important not to make assumptions. Don’t rely upon the supplier’s “common sense”. The problem with this isn’t that your supplier is “stupid” but rather that he doesn’t know what you’re thinking. You have a clear idea in your head of what a label should look like, whether you realize it or not. It may be that you think it “obvious” what a label should look like. If you do not communicate these specifics clearly, don’t complain when the supplier goes with his own assumptions of what makes for a good label!

Labeling and packaging are aspects of production we have changed our system on over time. Originally, all product was shipped to our warehouse where we did our own quality control and per-piece inspection, before labelling and packaging every piece by hand, ensuring no mistakes. At the time, this was something our supplier could not handle to a standard which was acceptable to us. Over time, as we have trained our supplier and improved other aspects of production, we have moved more of the labeling and packaging tasks to the production factory. When punctuality, quality, quantity, and color tolerances were all happening well, we added these extra jobs.

Quality and timing are never guaranteed. Expect a very bad experience, and you might be pleasantly surprised.

If by “expect a bad situation” he means “plan for the worst” then I am in total agreement! Things go wrong. It happens. It happens when you’ve made the same product at the same factory with no problems before. It happens when you have time to recover and when you don’t. Having a contingency plan ahead of time saves time and stress when those unforeseen problems crop up. Some questions to think about:

  • What will I do if the product is not ready on time?
  • When do I need it, as opposed to when I want it?
  • How will I respond if product quality is unacceptable?
  • How do I prioritize different production values (punctuality, cost, quality…)?
  • What scenario would force me to cancel the order?

Monitor production closely and micro-manage the whole process.

Yes, yes, yes! Keep in regular contact with your supplier – make sure you know the specifics of what’s happening with production. This kind of micro-managing helps not because your supplier is not going to look out for you (although that can be the case on occasion) but rather that your supplier may well have a different set of values to you. He may value punctuality over quality, or price over time – whereas your values may be opposite. This shows out when things go wrong (which they inevitably do, eventually, even to the most reliable of suppliers). When a choice has to be made -such as “I can either get them done on time OR at the price/quality promised” – the supplier will do what seems best to HIM, which may not be your own preference.

If you know what’s going on at every step of production, you have a chance to step in and make those calls yourself, rather than finding out weeks later what the supplier decided to do. We have several times averted what could have been problematic issues simply by asking specific questions and letting our preferences/values be known. When production was inevitably delayed, we knew early enough to accomodate the delay, rather than promising a delivery date to our own buyers we would later find out we could not keep.

Don’t take everything they tell you for granted. Once production is under way, in 50% of cases you are not told the truth.

I don’t entirely agree here. Although there certainly are unscrupulous suppliers out there who will lie and cheat and do whatever they can to make a fast buck, these “deceptions” aren’t always so malicious in intent. Sometimes it is simply a case of different priorities, leadership styles, or manners of dealing with conflict. While it is good to assume you don’t have the whole story, let it be a healthy awareness rather than an overly suspicious nature.

Don’t promise anything beyond the next order. It is useless. Your counter-party thinks short-term and in a distributive manner (“there is a pie to share, and I want the bigger half”).

Again, I’m not in total agreement here. I absolutely believe you should never promise a future order you can’t guarantee you’ll be placing with your current supplier, longterm relationships are very beneficial. Saying you are going to place an order later won’t gain you any extra leverage with your current problems, but a history of placing regular orders will. Chinese suppliers look more at your past history than at future possibilities. While this means you have no benefit when starting out, it does mean there is benefit in sticking with an imperfect but proficient supplier rather than constantly looking for a better supplier every time. Over time, a supplier will learn your values, know what details you get upset over, and future orders (and problems) will be worked through more smoothly. (This is especially true when you work with smaller factories).

I remember working with a buyer who had set up a very strong (nearly bullet-proof) system for avoiding getting burned. . .He had a theory that once a relationship has turned sour–for whatever reason–he’d better cut his costs and stop everything right away with the supplier in question. I saw first-hand how brutally he acted against a poor supplier who had committed an involuntary mistake. . .That supplier got about 100,000 USD worth of product cancelled, and the importer lost a relatively good supplier. The bottom line is to try to understand the real situation. It is not easy, but it is far better than assuming the worse and resorting to knee-jerk reactions.

Here’s the important part – if you persevere through small/unintentional mistakes, problems that come from ignorance or bad planning rather than from malicious intent, you can train your supplier over time, improving their quality while building a relationship. Giving up at the first small sign of trouble means you’ll never realize the benefits of a long-term supplier relationship.

Do you have any long-term relationships with suppliers you cherish?
How have your supplier relationships changed over time?

3 Comments

Posted in : Business in China, Export, International Business, Manufacturing

Don’t try to compete on cost alone – add value!

Tanya Crossman

Tanya Crossman

The following story comes from an old post on China Law Blog. I re-read the post recently and wanted to share the story – it’s a China classic.

There’s a story I often tell clients regarding China pricing. Co-blogger, Steve Dickinson, is a long time friend of a very successful Chinese factory owner in Shandong Province. Steve visited his friend at his factory one day and his friend complained about how his fans were so noisy and were always breaking down. Steve commented on their incredibly poor quality and the owner noted that they cost about USD$10. A few months later, Steve returned to the factory with a gift: a $250 top of the line American fan. A few more months later, the factory owner told Steve that the fan had increased worker productivity because they could now hear their music. And every few months for years, this factory owner brags to Steve about how well the fan is working and how long it has lasted. It is not an exaggeration to say this one fan taught this factory owner the benefit of not buying strictly on cost.

Reading the description of workers enjoying their music while working reminds me of a visit I made to one of our suppliers’ factories. He showed us around a newly renovated sewing room, where 20+ seamstresses worked on different parts of children’s pajamas for export to South Korea. A radio played the ladies’ favorite station, entertaining them as they worked. Then I spotted a sole young man in the sewing room. He sat at his machine, in a room full of women – listening to his own music through headphones. I wonder how many weeks he spent listening to music he couldn’t stand before coming up with that solution!

Back to the subject, though; the post talks about how foreign companies cannot compete with local operations on cost alone – very true. In fact, one of the reasons that IP theft is such a problem is that once a local factory has learned how to make your product, they can offer it directly for a much lower price. To compete, you must offer something that is of greater value than a cost saving.

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Posted in : Business in China, International Business, Manufacturing

Leverage – having a China presence changes the game

Tanya Crossman

Tanya Crossman

Today we’re looking at a recent post on Silk Road International. David talks about leverage, and how even a careful buyer can get into trouble when they don’t have enough of it.

David uses two cases studies to illustrate this. In one case, good preparation did not make up for a lack of in-person inspection, and a whole shipment of bad product resulted.

They had done almost everything correct.  But they didn’t have on-sight QC and when their product showed up incorrect, the small percentage (10%) they had retained for just this kind of situation was not enough to compensate for an entire order of unusable product.

In the second case, the company again prepared well, but full payment upfront meant there was no leverage for fixing problems down the track.

Both companies had the same basic problem–without some sort of physical presence in the factory neither of them had any leverage.  Once there were production problems (that cost time and/or money to resolve) the factory had no incentive to fix or replace anything.  And since neither of the companies had a presence in China they had no means of enforcing any of their demands (or even their originally contracted standards). I’d like to say that this is unusual and these two companies just had bad luck.  But the reality is that this is more common that not.

Having a presence in China makes a big difference when it comes to leverage in negotiations. If your supplier knows you can just get in a car or on a train and visit in a few hours’ time, he has greater incentive to keep you happy, and to resolve any problems that arise. If he knows you will visit to inspect product in the factory during production, he has a greater incentive to watch over production quality. If you are not in China yourself, having a trusted employee or agent on the ground can help.

Tying payments to QC inspection reports helps a ton.  As does being in the factory for critical production points (or having someone represent you there).  Remember, if you’re not doing your own QC or at least tying payments to QC reports, you’ve got no reason to expect that you’ll get what you’ve contracted for–you have no way to enforce your standards and the factory has no incentive not to save as much money as possible.

The important thing is to give the factory an incentive to meet your requirements (be it in terms of quality, punctuality, or cost). We regularly work with small factories. This makes us a higher priority customer (our orders form a larger part of the factory’s bottom line) but quality control can be a big issue in the beginning. We use a range of methods to improve quality. Continuing to work with the same factory over time, however, has many long term benefits, not the least of which being the build up of guanxi.

Our strategies included:

  • sending out own staff to train the factory’s quality inspectors
  • a contract stipulating we only pay for items that have passed our own independent QC (items than failed inspection were returned; we would pay for any that were suitably rectified and sent back to us)
  • a bonus for orders with a defect rate under 10%
  • when quality standards rose across the board, we focussed on improving adherence to schedule

One last point from David’s article:

It’s the same thing if you’re sourcing product or asking for samples.  If there is no incentive other than your word that “I’m going to place a really big order–there is so much potential here for us to make a ton of money!” then there is probably no chance that you’ll be anyone’s priority project… Remember, foreign clients are now a serious RISK.  The tables have turned in the last three years and you are now seen as a liability not an opportunity until you prove otherwise.  Without significant leverage, budget-conscious risk-adverse Chinese factories will just not take the gamble.

It’s a big risk to assume that as a foreign buyer you are automatically an attractive customer that any supplier would love to have. Even if you have been buying from China a long time, a new factory has no guarantee that you will buy big from them. There’s no shortcut – be a good customer, and over time you will prove yourself worthy of a supplier’s best efforts.

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Posted in : Business in China, Export, International Business, Manufacturing

What to do when your supplier sees no reason to continue

Tanya Crossman

Tanya Crossman

David Dayton wrote a good “story” post this week. He tells the story of a situation his company was in where their supplier did not want to continue working on an order, and the strategies they employed to motivate production.

No matter what the reason, when your factory has officially passed the we’re-losing-money-on-this-project point, expect to see product laying around, no more QC, no managers, and expect no one to answer your calls.

Here are David’s four main action points – how they moved things forward:

1. We continually reassured them that even though things were late we were indeed still interested in the remaining qtty’s.
2. We then reassured them that we were going to not only pay for what we ordered, but we would pay on time and pay for any additional costs that were due to changes or our mistakes
3. I went into the factory and met with the owner.
4. To get what we wanted (product done correctly, at the same price, ASAP) we basically gave in on everything that we could that didn’t affect product quality or cost us cash out of pocket.

In our situation we had two positions of strength–the outstanding balance of payments and our physical presence in the factory.

David also makes a good point about dealing with factory managers, and how they can be part of the problem:

Managers, the very people that you’re depending on to help you push through difficulties, may be the problem.  Just like back home, different departments in large organizations work on budgets and they allot time to specific projects.  They when they overspend in either time or money, they get in trouble.  Precisely because they are tied to these specific limits they can’t always see the big picture.  Sometime a single project that busts their budget is the worst thing they can imagine and so they freeze up or stop the hemorrhaging in their department.  When this happens, you need to get up a level, get above the managerial trees and recruit a GM or owner to direct these lower lever guys to do what’s best for the factory (as opposed to what’s best for their personal fiefdom).

This is one of the reasons we prefer to deal with smaller factories. That way we deal with the boss, the one who stands to lose and gain the most by getting the order done right. The boss of a small factory has the power to rearrange everything if he decides it is necessary.

Read the full story here.

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Posted in : Business in China, Export, Manufacturing

Face and Business Relationships in China

Tanya Crossman

Tanya Crossman

David Dayton at Silk Road International recently posted a great discussion on the concept of “Face”.

I’ve heard some people simplify dealing with face into “just be polite and you’ll be fine.”  This is certainly part of it, but has nothing to do with things that you can’t say in Chinese that are perfectly acceptable to say in America.  And how do you politely and professional discuss lies, broken contracts, sub-standard samples, non-disclosed changes in production and unapproved production locations (sub suppliers)?…Face is not just being polite, it’s more than that.  It’s complicated.

Complicated is right! “Face” goes hand in hand with “guanxi” (relationship). Both look to a long-term relationship – that words and actions are about building the future, not just aiming for the best deal (personally or professionally) right now.

One of the tricks to working in a very face-conscious culture is to let others know that you know their lying without actually saying as much.  You have to show that you know more than they realized without publicly pointing fingers.

This is a good point. Pointing directly to a known lie will damage a relationship. Alluding to it subtly allows the other party to change tack without a confrontation. While the western sense of “justice” often demands that deliberate lies be outed and apologies made, insisting on this in the context of China will damage the relationship.

I have learned to say things like “how strange, I was told this document is no longer required, perhaps the rule changed recently” or “Miss Li told me it should only cost this much. I think the price might be different because we are hiring the whole building”. Such a sentence doesn’t reference the person I am dealing with at all – it shifts the reason for the discrepancy between what we are each saying to something outside our direct interaction.

Even when you’re in the right, you have to give them a way out and you have to keep your cool.  It’s a VERY tall order.

Create an opening for the other person to put responsibility for the problem elsewhere, so they can move on to a solution. It can be hard to maintain the calm required to apply the concepts of “face,” however, when such grace is not extended to you in return. I have lost my cool many times, but I have found it more effective to avoid these confrontations. Sometimes yelling will get things done faster, but it damages my relationship with the individual involved, and, worse, colors their opinion of foreigners in general. Someone down the track may be treated more harshly because of a confrontation I instigated for my own personal gain.

David uses an example from his experiences with a Chinese factory, and resolving problems with the boss.

I then outlined the mistakes and problems in the sample process that he was responsible for.  Of course, being the boss, he had no clue what had actually gone on in the trenches during the 6 months of samples—he’s only been shown the bills and been told that we were locked in due to the testing we’d done. But instead of helping, my phone calls and emails that pointed out all the details about his employee’s mistakes made him lose face.

In this case, the two sides of the dispute are working from different information. This distance from big boss to factory line is not uncommon and can have unintended consequences – the boss may honestly be unaware of problems created on the factory floor. (This is one reason we like to work with smaller factories, where the owner has a more hands-on role).

While everyone is polite now, and we still have the same price as agreed, my professional issues with the processes were never addressed.  Of course, a factory employee has probably been dressed-down, but how do I know that anything has been taken care of?!  And worse case scenario, what if the anger has just been transferred to the employee who will now sabotage things later?  This is where having a savvy and trusted Chinese employee is invaluable.

No matter how long a foreigner lives and works in China, he will never understand “face” as completely and naturally as a native Chinese. The advice and perspective of “a savvy and trusted Chinese employee” can be invaluable. If we have trouble with a supplier, input from our Chinese managers on how to best resolve the tension in the relationship is invaluable. There can be benefit in leveraging both direct pressure from the American boss and softer persuasion from understanding Chinese employees. One person can point out quality problems, while another can smooth ruffled feathers.

Face is public, but retaliation is private and discrete.  Problem solving “western-style” is completely unacceptable in Asia—confrontations, “open” discussions about the merits of various plans, brainstorming, finger pointing for problems and praising individuals for success, email trails with names and dates, etc.  In short, personal accountability in a collective face-conscious society is not something you should expect to encounter.

This is not to say that face means no one takes responsibility for mistakes. The important thing to understand is that accountability and responsibility look different in a Chinese concept. Looking at a situation from a western mindset and insisting on behaving accordingly is an inefficient way of settling disputes. Even when a short term solution is created, there will be long term repercussions.

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Posted in : Business Relationships, Business in China, International Business, Manufacturing

Does Negotiating Low Prices lead to Lower Product Quality?

Danny Coyle

Danny Coyle

Renaud at Quality Inspection Blog ran a post last month discussing how price negotiations can sometimes have a negative impact on production quality. The basic idea is this: if you negotiate a very low price, a supplier may get the margin he needs by skimping on the quality of the end product.

“A Chinese factory has intense pressure to grow up fast. Every day they hear stories of other manufacturers that achieved impressive growth with aggressive tactics. The temptation to do the same is very strong…  importers should not count on a supplier’s ethical standards.” (read the article here)

Recently we ran into a similar situation when we negotiated the price for a new product with a supplier we’ve been using for 5 years.  He’s developed a lot of his processes and quality control measures because we have sent our own people to his factory to help him do it.

The new product is expected to sell hundreds of thousands of pieces.  So we asked him to give us his best price and continued to put pressure on him to give us a rock-bottom price.

He began to manufacture the product (after sampling) and gave us the first samples off the line.  We received them and they were sub-standard.  Basically, they were falling apart at the seams (literally).

I called him and asked what was going on.  He complained that we had driven the cost so low that this is what we get for that price.  I told him that after 5 years of training him on our quality standard he decided to abandon it.  He knows we don’t accept product like that.  He gave me the ultimatum (take it or cancel it) and I hung up on him.  A few hours later, our staff found a way to solve the problem, communicated it to him, and he’s back on board.

So it’s not always a price issue, sometimes it’s just a China issue!

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Posted in : Business Ethics, Business Relationships, Business in China, Entrepreneurs, Export, International Business, Manufacturing, Textile Industry

Knitwear: It’s all about Details and Service

Danny Coyle

Danny Coyle

Our business focuses on Textiles and Garments.  We started in jewelry, but now we only specialize garments and textiles. For about 5 years we focused on woven garments, but in the last year we’ve shifted to knitwear items.  The difference between our two lines of business is much greater than I expected.

Our woven apparel business is product-based.  We have a few core products with item codes; a customer can tell us the code # they want, and buy that product with minimal customized adaptations.

Knit apparel is a totally different story. It’s all about service and details. The customer’s need to get a long list of details exactly correct makes it hard for overseas buyers to source knitwear from China without going to a large, established, expensive factory with large minimum requirements..

A long list of details

A typical knitwear order with 5-10 styles could have as many as 1,000 individual details to receive from the buyer and then execute and monitor.  These details include:

  • garment measurements (20-30 per style)
  • garment style and construction details (yarn tension, knitting style, design elements)
  • manufacturing details (requirements for washing, drying, and ironing)
  • yarn details (color, composition, handfeel)
  • accessories

Then there are all the other details involved in international trade deals, such as:

  • Documents required by the customer
  • Labeling
  • Packaging
  • Payment terms
  • Shipping

Every one of these details has the potential to destroy an entire project.  While this may also be the case in many other industries, knitwear manufacturing includes a variety of subjective criteria that that cannot be quantified – suitability is up to the opinion of the buyer.  Handfeel variations, color variations, and even measurement tolerances can be acceptable to one buyer, and unacceptable to another.

Managing the varied and subtle details is a very complex undertaking. It is impossible to cover all your bases from a distance. This is where we come in, with a blend of foreign expertise and hometown advantage.

Where service comes in

Our job is to fully understand all aspects of the project, effectively communicate all requirements to the relevant parties, then monitor each stage of the process to return finished products in line with customer expectations. In short, we oversee and manage the entire project, from start to finish.

We take the detailed instructions we receive from our customers and explain them to all the suppliers involved – dyeing factories, knitting factories, after care providers, etc. We frequently work with smaller factories as they give the time and attention to detail that is required for smaller orders, without the higher costs associated with large factories.

The communication hub we provide creates benefit on all sides. Our foreign staff walk customers through the details of each style with greater effectiveness than a small factory owner could. Our local staff communicate with small factories more clearly than a foreign buyer could.

By using our services, our customers leverage the benefits of boutique factories while keeping their costs down.

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Posted in : Business in China, Knitwear, Manufacturing, Textile Industry

Should you choose to partner with Big Factories or Small Factories?

Danny Coyle

Danny Coyle

There are big differences in the way large, established factories operate, as opposed to smaller boutique-style factories. To choose the best manufacturer for your products, you must weigh the pros and cons.

From our experiences with manufacturing in China, we almost always choose to use small factories rather than big ones.

Here are a few reasons why:

  • Lower minimums
  • Usually cheaper
  • More flexible
  • Unaccustomed to working with Chinese-speaking foreigners (find it interesting)
  • More readily adjusted to our way of doing things

Flexibility

When choosing a factory, you must consider his attitude to project changes. A big factory requires its customers to be very precise and orderly. These factories do not like to take on a project unless all details are clearly confirmed up front. This sort of factory is uncomfortable proceeding on verbal instructions, especially when the orders are large  – they won’t just trust a foreign buyer’s word that this new method will work, or this new idea is going to sell big.

Of course, the smaller factories have their own set of headaches. Very few have English-speaking staff. Not all have adequate quality control systems in place. In manufacturing the types of products we sell, however, flexibility and responding to unknowns on the fly is important. Our bigger factories have a harder time with this. The flexibility we gain in working with smaller factories is worth the losses in other areas.

Guanxi

The most significant gain in doing business with smaller factories is guanxi. Guanxi, or relationship, is more easily built with smaller factories, as usually there is one factory owner you will deal with. All the accommodations made on both sides are carried forward with the same working relationship. When that one owner likes you, you have it made (although the converse is also true).

This is because the owner of a small factory is usually directly involved in production, overseeing all steps involved. Rather than an aloof observer waiting for information to be passed to his huge corner office, the small factory owner will hopefully be on the factory floor working with your order hands-on.

Communication is clearer and progress made faster, too, as you always talk with the decision-maker, not a salesperson who isn’t involved with production. Messages don’t have to be passed along the line, chewing up time and delaying progress.

If you experience headaches working with big companies, try a small one.  They have worked out for us.

Do you prefer working with big factories or small factories?
What other pros/cons have you noticed?

7 Comments

Posted in : Business in China, Manufacturing, Textile Industry

Product Testing: Navigating the complicated process to success

Tanya Crossman

Tanya Crossman

Last week David Dayton at Silk Road International wrote a post on testing procedures in China. It’s clear that his experiences have been frustrating, to say the least. Testing our products for lead content was a fairly simple matter (relatively speaking!) but in other industries the quality testing can be very difficult to complete.

He gives some good advice on how to improve your chances of getting testing completed correctly.

First, if at first you don’t succeed, try, try again! David’s experiences indicate that testing varies from factory to factory, so if your product fails the testing, it could be worth re-sending to another certified factory.

Three clients switched testing companies after products failed their first round of tests.  ALL three had the exact same products pass the tests after they switched to a different testing company! We pulled and sent all the SAME samples for ALL three clients and mailed them ourselves to the two different testing companies so I can personally testify that NOTHING changed in the samples between tests.  But the results were different—radically different.

If a mistake was made in the testing procedure, many places will re-test for free – but that would mean knowing that a mistake was made, and then getting the factory to admit it. Not easy!

If there are problems with the testing methodology you can get the tests redone for free (at least that’s the policy of the two companies that we’ve been working with).  The problem is, unless you get them to admit themselves that there is a mistake/problem, you’ll never know that maybe you could have either passed the tests or you could have your stuff retested again for free.  This is significant when testing for a single item can cost thousands of dollars.

Another big issue is that many Chinese suppliers do not understand the importance of product testing. With such a range of short cut options available, why pay so much money to test every product every time?

The fact that we are actually testing our own products when suppliers could either buy fake certificates of completed tests (ANY test you want: LHAMA, RohS, CPSIA, ASTM, etc., 1,500RMB) or just change the dates on older tests (“It’s all the same materials.”) was completely not understood.  In fact, the idea that we would be testing and were tying payments to test results made more than one factory very nervous.  We had one back out completely and two others expressed concerns along the lines of, “But we’re not sure if we can control all the materials.  What do we do if they don’t pass the tests?”  Which is precisely the point—you need to “control all the materials.”

David includes a snapshot of their process for getting testing done for products, and holding suppliers to those standards.

For us the processes usually goes something like this.  Contract out with the supplier for the testing sample process—these means that we pay for what is often free, but we get agreements (in Chinese) that we can enforce later when we have to make sure that production matches 100%.  Pull our own samples, send to independent third party testing company, sign new contracts and initiate PO’s with suppliers and then pull, test and repeat.

Of course, a good process doesn’t ensure a smooth run. While they may not understand the need for testing, suppliers understand the investment of time and money in the testing process. This investment, they realise, ties the buyer to them – to their product specifically.

Where it gets really frustrating for us is [when] suppliers realize…they now have the upper hand.  Since they are now “legit” they figure that can raise the price as much as they want (and request copies of our testing results) to release any goods. . .This type of problem is difficult, but usually resolvable; even though getting past these changes and into actual production can sometimes cost a lot (time, money, face, emotion).

What’s not resolvable is when a factory decides that they need to save money (aka: make more profit of this one order) and change either some of the raw materials or change part of the already approved production processes. If either of these things happens when doing both pre-production and in-line testing the supplier is going to get caught almost every time–but it still happens, often  Of course, now the entire production run will be rejected.  And if you didn’t have a fight on your hands before, you most likely will now.

As you can see, the testing process is long and difficult, on many levels. The bottom line is, though, that for many industries this testing is essential. No matter how difficult it is to monitor the process and ensure that what you receive from the supplier really does match the required quality standards, YOU as the importer, will be the one held accountable should there be a problem down the line.

After having gone through this process over the last 18 months with 4 different clients in completely different industries, I would be completely shocked if all the product in the US that is “CPSIA Certified” really is, in fact, certified.  There are just too many tantalizing options for individuals in the process to cut corners and take a huge one-off profit; there are too many people that just don’t understand how important testing standards are; and there are just too many people involved that will NOT be held accountable if, in 5 years, some component is found to not comply with the standards.

What about you? What are your experiences with product testing in China?

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Posted in : Business Ethics, Business in China, Export, International Business, Manufacturing

1 Country, 2 Systems: Compensation for Errors in the Chinese Manufacturing Industry

Danny Coyle

Danny Coyle

Chinese manufacturers know that foreigners do business differently. Some suppliers will try to use the Chinese method, but switch to the foreign method when that gives them a better deal.  Don’t get suckered into a 1 country, 2 systems business relationship.

The Chinese Way vs. the Western Way

As foreigners, we are so quick to think the western way is better, without really understanding the Chinese way.  Understanding the Chinese way helps you manage expectations and smoothes dealings with suppliers.

Delays are part of the game of manufacturing in whatever industry you are in.  Problems happen.  How we (foreigners) deal with those problems is what makes us different.  Not better, just different.

When a mistake is made, westerners generally expect immediate payback. When a problem happens in a Chinese factory, the payback rarely happens immediately. Compensation is not directly related to the problem itself.  The payback usually happens in the long term. While you may expect a discount on the order your factory made a mistake on, that does not always fit the Chinese model and may not happen.

I learned this more than ever last week.  We’ve had a few minor hiccups with one of our factories.  These problems were more annoying inconveniences than setbacks and deal breakers. If I was dealing with a foreign company, I’d probably ask for a discount on the invoice value.  I understood, however, that asking for monetary discounts or compensation on this order was not going to get the point across.  I realized that my payback was going to come on the next order.

Asking for an immediate response in the form of a discount would probably just insult the factory manager, and do more long term harm than good. So I’ll be content for the time being knowing that my return is coming on future orders.

BUT.

A Chinese factory may want to cheat the savvy foreigner over by combining the western and Chinese methods.   What we are talking about here is relationship (guanxi), so on my next order, I should experience an increase in ‘guanxi’.  That means he pushes my order to the front of the queue, or puts a few more laborers on our products and gives my order a little bit more time and attention.

If you are still getting a lack of attention, a high price, or further delays from the factory on the second order, then something’s wrong with the relationship. He took all the benefits of the Chinese way on the first order, and all the benefits of the western way on the second order.

The Conclusion

When the minor annoyances happened, I explained to my staff that we will pick only one way to deal with this problem. We will either do the Chinese way, or the Western way, but not both.  If he wants to give us a discount, great!  And if he wants to give us better service on the second order, fantastic.  But we must have one of those options (and preferably both) on future orders.

For China-savvy manufacturers: don’t let the “1 country, 2 systems” strategy infect your manufacturing processes!

Have you ever encountered a supplier trying to get the best of both worlds, at your expense?
What strategies do you employ when a mistake is made on your order?

Disclaimer:
I read an article that had a few sentences discussing the Chinese way of ‘payback on later orders’ idea on another blog; I think it was on Chinese Negotiation.  After my experience last week with our factory, I decided to write this article but can’t find the exact post I’d like to refer to.

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Posted in : Business Ethics, Business Relationships, Business in China, Manufacturing, Textile Industry

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