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

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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?

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Posted in : Business in China, Export, 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

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

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

BOPS – the Balance Of Power Shift

Jill Coyle

Jill Coyle

Read a great article on Chinese Negotiation Blog recently about the power struggle between supplier and customer. They use the term “BOPS” (Balance Of Power Shift) which I love! It succinctly defines what I’ve usually just called the cold shoulder.

I’ve always found it rather confusing when suddenly a supplier just didn’t want to do a sample for us (a supplier we’ve used for 6 years), or when a supplier just took his sweet old time when we were telling him, “This could be a moneymaker if you finished it THIS YEAR!”

Read the full BOPS article here

Everything is about relationship here in China. One thing that helps is to just continue to build those customer-supplier relationships – go see your supplier when possible, try to do negotiations face-to-face, go out to lunch, etc. It’s much harder for a supplier to write you off when you’re right there in front of him.

Building long term relationships with our suppliers in a high priority for Imports Oriental. To read more about how we’ve improved product through working with our suppliers in person, check out these  two articles

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

Apparel Production MOQs (Minimum Order Quantity) – part 2

Danny Coyle

Danny Coyle

In this two part series we’re taking a look at some of the underlying reasons behind the minimums set by suppliers. In part one we discussed third-party fabric production and how this drives up your supplier’s MOQs. In part two we look at the way your supplier’s staffing problems can affect MOQs.

Staffing Issues

Another common factor considered by suppliers when setting MOQs is juggling staff numbers and responsibilities. If a 3,000 piece MOQ is based on staffing rather than fabric, what your supplier is really saying is that he needs 3,000 pieces worth of work to make your order worth his while.  If this is your supplier’s main consideration, your solution needs to help him solve his recruitment problems.

  • Order other products

Does this supplier offer other products you are interested in? Try ordering 500 pieces of six different products. If staffing is the main motivator, the total size of the order is what matters more to your supplier than the number of pieces per item.

  • Be patient – offer to wait longer

A supplier who produces good garments is probably already busy – there are no workers sitting around waiting to do small orders.  Offering to wait longer for your order to be completed may do the trick if both you and the supplier are willing to contract the work out or to hire temporary workers. It is easier for your supplier to fill a few temporary positions lasting two months than find twenty people willing to work full time for only two weeks.

This list is not exhaustive – the reason for your supplier’s MOQ may not be listed above.  Our suppliers have been more than willing to discuss the reasons behind their MOQ.  Asking them about how the MOQs are calculated has helped us navigate through to successful solutions many times.

Be careful promising that you will place big orders after your first trial order.  Every factory has heard this story many times.  It is not new.  Be upfront with your plans, but don’t be surprised if they don’t take your future promise of big orders very seriously.

Keep in mind that your supplier is probably already offering an MOQ much lower than their ideal in order to cater to new buyers. In our case, a normal order is at least 10,000pcs. This is the order size that keeps our business running smoothly.  In order to attract new business we offer a smaller MOQ of 1,000pcs, something we can do in the short term but which will not sustain us long term. This gives us a chance to prove our value to customers who are not willing to take a 10,000pc risk on their first time out.

Trying new things is a way to build your business. If you find an interesting product, don’t let a high MOQ turn you off the idea. Think about how help your supplier help you, be flexible and, most of all, be creative. You may well find a way to make your suppliers’ MOQs work for you.

What about you? What have your experience with MOQs been in China? Have you found other ways to get around problematic MOQs?

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

Apparel Production MOQs (Minimum Order Quantity) – are they arbitrarily set?

Danny Coyle

Danny Coyle

MOQ: 3,000pcs/color

This detail may send new apparel importers running. High minimums often discourage new buyers from taking a risk on new products, which makes sense – if the product doesn’t sell well, you’re stuck with merchandise taking up space (and cash) in your warehouse.

However, most suppliers don’t set arbitrary minimums – there are reasons behind the numbers they come up with.

Understanding what governs your supplier’s MOQs can help you in 2 ways:

1)      it can help you be aware of the problems your supplier faces

2)      it can make it easier to find a minimum that works for both parties

In this two part article we will look at two common MOQ problems and creative solutions that have worked for us.

Third-Party Fabric Production

Apparel MOQs can be based on the amount of fabric required, since many manufacturers purchase fabric from a third party provider. If your supplier says he needs a minimum order of 3,000 pieces, he may actually mean he needs to order at least 3,000 meters of fabric.  If this is the restriction governing the MOQ, here are several options to pursue, allowing your supplier to meet his fabric minimum while making it a less risky investment for you.

  • Make a variety of items from the same fabric

Oftentimes the buyer can suggest making different items from the one fabric.  When you order 3,000pcs many suppliers will allow you to include a range of sizes or styles.  We’ve often gotten around this MOQ issue by making scarves with the same fabric used in our blouses.  By being creative in cutting the fabric we’ve found a use for a significant amount of our unused fabric.

  • Use Stock Fabric

Many fabric-dying houses keep small amounts of fabric in stock. We’ve found that the most important consideration in using stock fabrics has been color. If we are willing to compromise on accuracy of fabric color, suppliers may agree to do smaller orders from their own stock fabric. However, keep in mind that color, quality and quantity may vary widely from month to month (and from factory to factory).

Next week we’ll look at another issue that affects MOQs – staffing problems.

Click here to read part two.

3 Comments

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

Dealing with Chinese Suppliers

Danny Coyle

Danny Coyle

Came across two very good articles this week, both about dealing with Chinese suppliers.

One is on Quality Inspection Blog, a favorite of ours. It deals with the concept of reputation – important for foreign buyers to maintain but not so important for most Chinese suppliers. Unfair, perhaps, but how the game is played. Read the whole article here.

The second is on Foreign Entrepreneurs In China. The post is a list of 12 tips for dealing with Chinese suppliers. Lots of good information which lines up with our own experiences here over the years. Tips #5 (“I can’t” is not in their vocabulary, so be wary if you get silence for an answer) and #6 (Make them recap the agreements, do not assume they understood just because you feel you were clear enough) are particularly astute. Read all 12 tips here.

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

Should You Manufacture In China?

Tanya Crossman

Tanya Crossman

Dan Feldman at China Manufacturing Blog posted a bunch of interesting pieces this week, including two articles regarding Lean Manufacturing.

The one that really grabbed my attention was a discussion of who should outsource manufacturing to China. Dan gives a list of 10 points that make up the ideal candidate for China manufacturing.

If you’re considering having a product made in China, read this first!

Are You The Ideal Candidate For Sourcing In China?

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Posted in : Business in China, International Business, Manufacturing

Under Promise, Over Deliver

Tanya Crossman

Tanya Crossman

Great post on Silk Road International this week.  The story is specifically located in Vietnam, but the same concepts definitely apply in China.

Under Promise, Over Deliver

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

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