Another day, another interesting conversation (headache) with a factory.

We’ve been working on samples for a large order of clothes for over a year now.  The clothes are cool, new, fun.  But it’s been a very difficult process getting to the end of the road—the start of actual production.

We’ve got the PO signed, the deposit paid and what happens?  Factory tells us: “We don’t think that we can do this order.  We’re really busy now.”  This, of course, was the response to the payment of the deposit.  No indications prior to the placing of the order that there would be anything problems.  We’ve talked EVERY day in the two weeks preceding the actual transfer of funds and every conversation was great.  “Of course we can meet these dates.” “Of course we’ll work with you QC.”  “Of course we’ll meet all the QC standards (you’ll never be as strict as our Japanese clients.)”

So we’ve spent the last week just trying to get them to keep the commitments that they agreed too (signed and chopped) in the contract.  Every single line in the contract was review with them before they signed it.  Every point was agreed to.  Dates were confirmed.  Qtty’s and time frames agreed to.

And then they got the money and EVERY item that was important (material, quality, times, prices) were all no longer committed to.

We have a negotiator/problem solver that we hired just for situations like this.  She worked on the factory for three days before we got back to the point where we were when we made the deposit in the first place.  (Side note–this person does the least amount of actual daily punch-the-clock work in the office, but saves us more money than any other single employee other than maybe QC.)

Here is what she reported to me after the order issues had been resolved.

1. They did it on purpose.  She said that there are times when there are legitimate concerns and changes and times when it is completely a strategy to get more money.  The major difference between real and fake issues include: when you can track changes in material prices, you can see factory capacity already maxed out, or there are differences in the samples and production standards.

2. Fighting about the contract is not nearly as effective as begging.  It’s all about face.  They know they are wrong but allowing them power can often be as effective as offering them money.  The end result of our negotiations is them being in power anyway—they have the deposit, the control the speed for the production line, they monitor the QC, purchase the materials—there is so much that could be sabotaged and be made to look it was just bad luck.  So, giving them the face now and admitting that we’re at their mercy is both pleasing to them and the truth.  We don’t pay any more (yet) and can still go after them legally if we had too.  But at this point they are pretty pleased with themselves and we’re just glad to be back to square one.

3. Thanking them profusely (gifts) is the correct response.  A dinner will cost $100 for the manager that told us “we moved other projects back for you.”  A shirt or wallet (brand name but from Ross or another US discount store) gives tons of face and costs $20.  It fulfills the social obligation we had to the manager for “helping” and it saves us a bundle of money we would have wasted in transferring the order or suing them or fighting and raising the price.  I’ve often said that sometimes the best option is paying more to get what you had already agreed to.  When it’s a small gift or dinner it’s almost not even painful.  Ego is a bit hard to swallow, but that’s about it.

Sometimes you are totally in the right. Sometimes people lie to you.  Sometimes there is nothing you can do about it.  But the end goal, which is often very very hard to remember, is to get the project done (correctly, on time and on budget).  You may not get what you wanted at the originally contracted-for price, but on balance you’re still getting what you want (and it’s still at a savings too!).

8 Responses to “Another day, another interesting conversation (headache) with a factory.”

  1. Reminds me of the book Poorly Made in China… the author has so many stories of deliberate monkey business like this.

  2. […] • Når det så er sagt, så er det nærmest en forretningskultur, at kinesiske virksomheder forsøger at presse penge af udenlandske samarbejdspartnere, som de også gerne snyder & bedrager, uanset hvad der nu måtte stå i de dersens værdiløse kontrakter, som man blandt andet kan læse i den underholdende “Poorly Made In China“, som jeg også har skrevet om her. Silk Road International er endnu en gang rendt i lignende problemer. De har brugt et år på at forberede en produktion af tøj med en kinesisk partner, der får uger før den skal sættes igang pludselig ikke kan behandle ordren. […]

  3. […] Doing business, with Chinese factory characteristics: “Every single line in the contract was review with them before they signed it. Every point was agreed to. Dates were confirmed. Qtty’s and time frames agreed to. […]

  4. Very interesting blog. I haven’t been to Hong Kong for 30 years, when five of us from the US were brought in to help train the fledgling visual effects department at Shaw Brother Studio in bluescreen, animation, optical printing and matte painting techniques. The Chinese were wonderful, warm people but the work was frustrating, to say the least. I wish I had then the insight you provide here. It wasn’t until the end of the two months that I realized the importance of “face” and that it was why things would be messed up, though everyone swore they understood the process and why everyone said they understood an instruction perfectly, then would go and do completely the opposite. I think Americans are fairly confident and don’t mind admitting our mistakes or confessing our ignorance, but the Chinese self-confidence is less and there is tremendous anxiety over being perceived as “less than”–as in less knowledgeable or less capable or less educated. At least that was my observation 30 years ago.

  5. […] Silk Road International Blog is one of my favorite blogs. It is written by David Dayton, an “international procurement and project management” specialist with more than twenty years of Asia experience. What I like so much about his blog is that it so often brings us up close and personal and it just tells it like it is. Though the posts are usually about dealing with Chinese factories, they very often “hit me where I live.” This is especially true of David’s most recent post, “Another day, another interesting conversation (headache) with a factory.“ […]

  6. Wow. I stumbled upon your blog by way of China law blog. This is the only article that I’ve read and I have to say that I’ll be reading a lot more. I moved to China 8 months ago and have dealt with these situations before. Sometimes this country confounds the mind. It really is a different way to do business. We all have to be on our toes. Especially when deception is a commonly played game. Smoke and mirrors. It is what it is. Thanks you for posting some helpful insight. I will defiantly be reading more.

  7. Great article, one of the few english blogs that reveals the culture of doing business in China. Look forward to more posts. Keep up the good work!

    ceo@chinafirstcapital.com

  8. […] Another Day Another Interesting Conversation […]