New China Buyers Q&A from the HK GS Sourcing Fair
Show Questions:
1. Q: “How do you tie QC to payments to your supplier?”
A: First, any 3PQC needs to be paid for by you, not your supplier. We’ve had people that have told us proudly that they negotiated the 3PQ be paid for by their supplier. Bad idea. You want your QC to be completely beholden to you. Understand that suppliers often have no qualms about paying a few hundred dollars to a 3PQC inspector to get a $100K order “approved.” 3PQC inspectors that make only a few hundred to a thousand a month have a hard time not taking the payments too.
Having said that, you can certainly charge back to the factory the costs of extra QC necessary to reinspect rejected product.
True story: We have a supplier that complains that the QC for one of the world’s largest box stores are so corrupt, top to bottom, that they almost can’t afford to work with them even though their volume is huge. Huge, I tell you. The QC are so secure in their ability to extort money from suppliers to pass already good quality product that they basically dare the supplier to expose their corruption. The QC can make thousand of dollars a month on top of their individual salaries and if they get fired they can still use their employer’s name and experience to get a good job in the future.
Second, you need to be very clear in your contract that while you may pay for the balance of the order before the goods are released to port you will not make any payments until 3PQC has confirmed with both you and the supplier that the goods meet spec.
One of the best ways to do this is to do multiple QC visits. If you are only visiting the day before product is scheduled to leave and you find problems it may be too late to fix the problems and still hit delivery dates. At the very least unpacking items, reworking them and repackaging them are going to damage the retail packaging and increase the number of returns you get from your domestic clients.
Finally, with every QC visit you need to have the report signed, stamped, dated by both a manager in the factory and the QC inspector. Then you leave a copy with the factory, have the original return with the QC inspector and you get a faxed or emailed copy too. This makes sure that everyone is on the same quality page from the very beginning. Make these QC reports part of your contracts too–that repairs, replacements, etc must be completed and reinspected prior to final payment.
2. Q: “Ok, so we need to do product testing, how do we make sure that we don’t test “golden samples” but test actual product?”
First, you have to have someone you trust pull the samples from the production line. DO NOT TRUST THE SUPPLIER TO DO THIS FOR YOU. Remember they have no incentive to give you the real thing. Their incentive is to submit something that passes the tests since they’ve already bought the raw materials and started production. If you don’t have anyone that is on the ground representing you directly you can hire someone like SRI or any other 3P service provider to go to the factory, pick the samples themselves and then take it to their own (or contracted) lab and test it and send the results back to you.
True Story: We had a supplier that created inks for one of their client’s tests that were completely different from the inks that they supplied the client in their products. They did this with the complete knowledge and consent of the client!!! The client bought the cheapest inks possible and requested the supplier provide better quality inks to the testing companies. The supplier had no issues with this blatantly dishonest request from their client. If you do, and you should, you need to take appropriate steps to secure actual products for testing.
Second, you need to consider testing at multiple times in the process. Depending on the size of your order (and the size of your liability!!) you should test materials before they are used, test samples before production starts, test in-line samples as production is on going and then test final product before it ships. Remember, liability is ultimately your responsibility.
3. Q: “Condisering the language barriers between me and my potential suppliers, how do I communicate the technical information that is necessary to manufacture my product correctly?”
A: Keep it simple, stupid. Use the same format and processes as much as possible. Let you suppliers know how you expect to communicate and ask them what they expect and what they are used to. Often there are types of software (or the newest versions of software) that may not be in China yet. Talk with your supplier about what you are using before you send them documents they can’t open.
Also keep records of EVERYTHING. Copy and past Skype, QQ, MSN or other chats into word documents and email them to your suppliers after the conversation is completed. Type instructions in bullet-point formats so that they can be easly read and more easily understood. Confirm and reconfirm each of the specific/important technical points involved in your product’s production.
True Story: I was hired part time as a Thai speaker to sit in on meetings and make sure that each side is talking about the same things. I did this while I was in grad school for a couple of companies that were working in Thailand and needed someone that could speak Thai. The company would prep me on the technical details and I’d look up the specific translations before the meeting. Then I just listened in to all their calls and made corrections to each party’s understandings as needed. It worked out great from the companies (one of whom I later worked with) and I got some much needed cash to supplement my student income.
4. Q: “How do I know that my factory is certified to meet the standards of my home country?”
A: You don’t!! Know this: Factory certification does not mean actual compliance. Your factory may have the ability to be compliant but may not know how to exactly achieve it. They may have been “certified” but may not be updating that certification. They may be meeting all that they are asked to do and while that technically gets them the certification certificate but doesn’t really meet standards that you require. So what to you do? You hire third party testing and engineers to work with the factory to do QC at all points of the production process.
True story: We were supplying a client that needed to ultimately deliver product to one of the large entertainment companies in the US. This company had a factory audit standard that required all suppliers be audited before the PO was issued. We were using at least 11 different suppliers and called and told the entertainment company’s audit company that they’d need to spend at least a week auditing all the suppliers. They told us straight out that they don’t want to know about 10 of the suppliers and we should pick the best factory, prep them for the visit, and they’ll come out for a single visit and leave.
Charles Kirmuss of infinity tells the story of a factory that he worked with that was technically ISO certified but had no clue how to actually be compliant. He wrote the ISO compliance manual for them! He helped them implement all the necessary procedures to make sure that (at least) his product was both certified and compliant.
If you are willing to work with your factories you can both get what you want and develop a lasting relationship that is good for both parties.
5. Q: “How do I find somebody that I can trust?”
A: Here’s my business card.
Nobody cares about your product as much as you do—so make the outward commitments to your product quality and factory relationship that will teach your supplier that you really care and expect them to care also. This means you need to participate with your supplier in training and education. My personal theory on QC in China is that there is a direct relationship between the amount of time you personally spend with(in) your factory and the level of quality you will get shipped to you in the end.
Finally, best story of the show, courtesy of Mike Bellamy (Passagemaker). Mike asked a group of factory owners/managers how they can produce new designs each year when they have absolutely no R&D budget or department. Their answer? “From foreigners at tradeshows!!” Yup, that info that you’re passing out as info to get bids is being used by the factories that don’t get your orders to create their “own” new line of products. This, my friends, is the real Chinese economic miracle.