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And now for something completely different….

We’ve never had a post from anyone that was not an SRI employee.  Today is the first.

The most trusted source of Asian suppliers!

October 20, 2011 by Global Sources

Many buyers don’t do business with China suppliers because they think most of them are unreliable. Well, Global Sources has got the sourcing help to find trustworthy suppliers, not fly-by-night shops. Each verified supplier on our site and in our magazines is visited at least three times to make sure that their company is a real, export-ready, with real products and real offices. Some of the specific tools we offer buyers to source more confidently, with less risk are:

Online sourcing directory

GlobalSources.com lists millions of products from hundreds of thousands of suppliers. Use our search functions to sort and filter suppliers by business type, location and more.  Contact suppliers directly using our convenient online inquiry form to get answers to questions on product specifications, pricing, shipping and more.

Industry-specific sourcing magazines

Subscribe to free e-magazines and receive new issues monthly by e-mail.  Every month buyers get updates on new products, news on market trends and accurate contact details for hundreds of verified suppliers. There are 18 industry-specific titles, so each magazine provides targeted information. Clicking on a supplier ad in the e-magazine lets buyers contact that supplier directly or go to their websites to learn more about them. Print subscriptions also available.

China Sourcing Fairs

Meet thousands of suppliers in-person at Global Sources’ specialized tradeshows, held in seven key locations in Asia, South Africa, the US and the Middle East. Buyers can sit down with suppliers to see all the latest products available. Check out upcoming tradeshows at China Sourcing Fairs. And if you can’t visit in-person, look at our Online Sourcing Fairs, which allow you to “virtually” visit the fairs (both past and future).

New product updates in your chosen categories

With Product Alert updates, buyers know when new products in their selected categories are posted online. On the same day, in fact.  Fine tune the types of products you’re looking for by choosing from over 6,000 categories. And receive industry news in your areas of interest too. Save time and effort with these free product & news updates.

In-depth information on key China industries

China Sourcing Reports offer buyers detailed profiles of key manufacturers in China and elsewhere in Asia – plus information on best-selling export products, pricing forecasts, industry trends and more. See all 99 sourcing reports currently available. Prices range from $75 to $400.

PLUS…learn how to avoid common pitfalls when you’re sourcing from China. Check out the “What Every Buyer Should Know” page. This is where we’ve posted proven best practices, insights from experts in the field and first-hand advice from experienced China buyers.

Global Sources has been helping buyers make more confident, more informed China sourcing decisions for over 40 years, through its online directory, trade shows, research reports and monthly magazines. Learn more about Global Sources’ products and services.

Location, location, location and other suggestions for selecting the best supplier

1. Location counts—Sure the price may be better, but you need to factor in how long people have been doing business both in that factory and in that area (sub suppliers).  The rule of thumb is this: the most advanced suppliers are found in HK/Taiwan, then Guandong, then other East Coast cities, then the rest of China..  Sure there are different types of factories in all places.  And no doubt there are different types of bosses in each as well.  But in general the different locations will give you a general idea of the quality of the industry in the area–Guangdong province opened up for business 10-15 years before anywhere else in the country and so the depth of managerial experience is better there than anywhere else in the country.  Ditto for larger more experienced range of sub suppliers.  QC stats bear this out.  Remember, China may be cheaper, but it’s also measurably more difficult.

2. Price does not equal cost.  Let’s be honest, most people are coming to China to save money.  And so that’s why people work with horrible factories and take stupid risks with bad suppliers–they think that the cost savings will be worth it.  People would like to think that profit margin will take a small hit in the name of “cooperation.”  But my experience is this: when prices go down, quality will be affected first.  Competition is VERY high in China, so the incentive to cut prices (quality) to increase margins is VERY high as well.  People still have to have a set level of income to stay alive and if getting your business means lowering the price, things OTHER than profit are going to take the hit.  The reality is that profit is the very LAST item that will be cut.

Ask your self these three questions about your supplier.  Do they have the right capacity (techniques, processes and machinery)?  Do they have the right people (enough workers, experienced mangers professional communicators)?  Are they using/have access to the right raw materials (can they pass your independent testing)?  If you’re getting a “cheap” price, that probably means that you’re not getting 1 or more of these three questions answered satisfactorily.

3. A lot of things are out of your supplier’s control—and if they can’t control it, they will not take responsibility for it (even if they didn’t tell you they wouldn’t).  The dirty little secret in Chinese manufacturing is that EVERYONE is a middle-man, EVERYONE sub’s out some % of their work.  But nobody will tell you this.  The problem is that they’re usually subbing out to friends and family and they would lose face if they required a 3PQ check on the raw materials they bought from people they were close too.  So you have to do it your self.  If you do not step in and QC your suppliers sub suppliers NO ONE ELSE WILL.  And, when there are problems, the factory will not be responsible for product they didn’t make (even if they bought it and didn’t tell you).

4.  Always be prepared to (re)negotiate!  Everything.

5.  More love for SRI—we’re in the top 10 of China Business Blogs for the last decade!  Great mag on China’s ex-pat culture to boot!

And finally, for the next two weeks I will be speaking in HK and online 3 more times.  Most of the presentations will be at the Global Sources China Sourcing Fair held at the Hong Kong Asia-World Expo out by the Hong Kong Airport.

First presentation: Buying from China: What new buyers need to know.

Oct 27th at the Fashion, Garments and Accessories Show

Second presentation: Improving your sourcing performance.

Oct 28th at the Fashion, Garments and Accessories Show

The third presentation will be on online webinar hosted by China Business Webinars.  Nov 3rd online, Preparing to work in China, what you need to know before you get here.  You can register here.

So what’s China really like? Part 62704

Like I’ve said before, this is probably the question that I get asked the most—and the answer, today from the WSJ, is: “it depends on which part of the elephant you’re touching at the moment.”  From the article, “He said he didn’t think corporate transparency was any worse now than before, but “I don’t know why people believed [the numbers] so much in the past.””

Yup, while China is a complete different place than it was 20 years ago, China isn’t really any different today than it was 16 years ago when I first arrived. Yes, the infrastructure is MUCH better, but it’s not safer (high-speed rail).  Yes, there is much more money especially in cities, but crime and poverty are still dominant daily issues for most Chinese.  Yes, the standard of living has gone up for many, but the quality of life (food in particular) is horrible.  And connections are still the way the game is played.

Sometimes living in China can be great, sometimes scary and if you’re a buyer—you need to be doing QC 24/7 (eating, sleeping and dreaming about QC).

Here are a few different versions of China all from today’s  inbox.

1. Selling US-made chopsticks to the Chinese.

2. Chinese buyers in SEA—locals beware.

Hi David,

I came across your post on why a buyer should always do QC.  I have a concern about a potential business deal and would be grateful if you could offer me some advice.

I am a buyer from SEA who has access to product X. My friend introduced me to a Malaysian company who has a buyer from China. The buyers from China want to visit the actual facility in X.  I’m glad to take them and I suggested them to meet at our company office to see samples and videos, sign Non-comps and then proceed to the location.  But they disagree and want to come to the supplier site without any agreement in place.

What do you suggest I do? I am afraid they will by pass me and go straight to the supplier.

Thanks,

____________

If they won’t sign anything, you’re right not to take them.  You’re also right that they will probably find someone else if you don’t take them.  You have to choose—do you want to work with them or not already knowing that they will probably not follow any contracts or agreements that you sign together.

If it was my choice I wouldn’t do it.  Sure you might be passing up some money, but the problems and the potential to get stuck with a client that won’t pay or will lie to you/cut you out is just not worth it.

DD

3. US Citizenship for my Chinese wife.

4. Scared to eat.  If you can read Chinese, you can regularly read about chemicals in chicken feet, pork, bad oil, etc.  Here’s a look at some of the issues around the Chinese food industry highlighted by the recent pork issues in Wal-Mart.

4. Molds again and again.  You didn’t think I could get through this blog without a good (bad?) production-problem story, did you?!

We’ve had more than our share of mold issues with a project that we’re working with a factory in Fujian–so many in fact that the client asked me today, “Is it just our bad luck or are there serious issues with this factory and/or our product?”  My answer–just our bad luck.  Sometimes things really do just go wrong.  We’ve had a number of temp molds break and the final mold, because of some imperfections and changes was brittle and broke as well.  Each brake requires time to build another mold.  The good news is that the factory has been very good at accepting responsibility for both the problems and delays.  The project isn’t huge, but the factory has been good about working with us.

So which China is it now?  Or more importantly, which China is it going to be to be for you?  This one, or this one? I’m decidedly on the fence.  Actually I think it will be more of the former, but a really rich and arrogant and petulant version of the former.  Like the last two options in this article.

Just know that it’s always changing—that’s probably the only think that you can count on in China.  But watch out for the pop!

A Chinese Steve Jobs? Also: SRI Speaking Schedule for Oct

First my speaking schedule for October.

I will be speaking in HK and online 7 times in the next 4 weeks.  Most of the presentations will be at the Global Sources China Sourcing Fair held at the Hong Kong Asia-World Expo out by the Hong Kong Airport.

First presentation: Buying from China: What new buyers need to know.

Oct 12th at the Global Sources Electronics Show

Oct 20th at the Gifts, Premiums and Home Show

Oct 27th at the Fashion, Garments and Accessories Show

Second presentation: Improving your sourcing performance.

Oct 14th at the Global Sources Electronics Show

Oct 22nd at the Gifts, Premiums and Home Show

Oct 28th at the Fashion, Garments and Accessories Show

The third presentation will be on online webinar hosted by China Business Webinars.  Nov 3rd online, Preparing to work in China, what you need to know before you get here.  You can register here.

____________

Now for the good stuff!

Why do you have manufacturing problems in China?  Why can’t “simple” changes be made on the fly?  Why can’t problems be discussed openly and directly in China?

The Chinese interviewees in this article indirectly answer these questions while talking about why there isn’t a Steve Jobs from China (yet).

  1. The economics of China inhibit innovation.
  2. The politics of China inhibit innovation.
  3. The educational system of China inhibits innovation.
  4. The lack of a autonomous and effective legal system inhibits innovation.

Sad on so many levels.

I would add another answer: China has only been able to even start asking questions like this in the last decade.  Give them 50 more years (assuming growth and progress can continue as have the last 30 years, a major assumption that I won’t make).

I’ve been saying these same things for 10 years—Chinese are as smart and capable as anyone else and there is both great capacity and opportunity in China.  But there are social and structural barriers to innovation, problem solving, negotiations and intellectual protections.  Sure there are various levels of these same problems (and others) everywhere else too.  But in China, the point is, that you’ve got to be aware that even though “it sure looks like they’ve got a lot of money” and they use the same iPhones and even have better/newer/cooler office buildings than we do in much of the west, business is not understood or managed the same.  The goals and processes are not the same.  The legal/political/historical/social/cultural environments are completely different.  And that means that “business” is different.

So what works?

1. If you’re going to be manufacturing in China for China, then do the market adaptations in China.  Closely related to the reality of China knocking off everything on the planet is the fact that they are at the same time making the market specific adjustments necessary to be successful in China.

2. If you’re manufacturing in China for export then stick to your guns on your product spec’s but allow for changes in the manufacturing process that will maximize the local advantages (labor or materials or weather, etc.)

3.Make serious investments into you suppliers and their processes.  This will improve both the product/services you receive but will increase the quality of everything the supplier (and eventually the industry) produces.

3A. Understand BEFORE you set deadlines that manufacturing in China will require more time, more rounds of pre-production samples and more QC during production than you’re probably used to budgeting for.  Pad your dates and plan for more full man-days of QC during production.

4. Accept the fact that China is or soon will be the largest ________ on the planet . As such it will soon have an inordinate amount of influence in just about everything that goes on in business (if it already doesn’t). Learn to work with it instead of against it—for (a lack of) innovation, this means that much of your pre-production work will have to be done abroad.  This new reality isn’t exclusively a good or bad thing, it just is.  There’s some of both for sure.

Other interesting items from the article.

  1. The successful Chinese  are counted as “Chinese” regardless of where they were born/raised (all from Taiwan).  Mainland Chinese assume that anyone that is “ethnically” Chinese has a blood/cultural/inherent tie to “China” regardless of if that person has ever lived/studied about/can speak the language of/or even cared about the current PRC.  Once Chinese always Chinese.  Interesting implications of that for national security here.  This causes more than a few uncomfortable situations as groups of Chinese get together overseas.  Typically the mainlanders get a crash course in global politics at their first social setting–Chinese and (PR)China are not synonymous.
  2. There are successful Chinese and Chinese companies, but the article notes that they are either group efforts in China or individuals outside of China.  Jack Ma (Alibaba) is raised as a notable exception.

 

What to ask for at a tradeshow (and afterwards too)

I recently received this email from someone planning on going to a show this fall and I thought that it would be a good blog since I get multiple similar requests each year about this time.

Good-day David,

I read your piece on “It’s just a little bit more. They can afford it, right?”  I enjoyed your straight- forward opinion.

It also made me aware to be “cautious” when attending the China Sourcing fair in November. It is my first time I am attending, seeking business opportunities.  With the economic struggles we still feel the pain as we are small fish here.

My question to you here is: could you give me any suggestions on what questions to ask the suppliers and what to look out for?  Also what products do you suggest I should look at for our market here.

Anything else you think I will need to know?

Thank-you for your input and help in this regard.

Linda

 

Thanks for your email questions.  Yes, there is a lot that you’ll need to ask suppliers to make sure that they are both who they claim to be and are appropriate fit for you.

First questions to ask the suppliers at the show.

  1. Where is the facility and can you go to visit (this week while you’re in the country)?
  2. Will the person that you’re speaking with at the show be in the factory when you go to visit (so you don’t have to repeat everything you’ve gone through today)?
  3. Do they have business documents that they’ll let you see?
  4. Will they let you talk with engineers and other managers?
  5. Will they allow 3PQ?
  6. Can they give you referrals?
  7. Will they sign (and keep) NDA’s and other agreements?
  8. Can you meet and even QC sub-suppliers?
  9. Do they have the correct export documentation?
  10. Have they exported to your country/region on the world before?
  11. How much of their production do they outsource?
  12. How do they deal with non-conforming product?

Second, questions that you need to ask to understand if they are right for you.  You need to realize that just because you find a great factory that doesn’t mean that it’s a great fit for you and your project.  You need to realize that if you’re too big/too demanding/too advanced or if you’re too small for them you’ll not get the service that you really want or need.

  1. What is there average order qtty?  Is your order similar?
  2. What is their average order time?  Is your lead time sufficient?
  3. Have they done similar projects (similar levels of customization, similar components)?
  4. Can you communicate with them effectively and do you feel comfortable working with them?

Third, questions you’ll need to ask when you visit them.  I would never advise anyone buying from China to pay cash to a factory that they hadn’t personally visited.  You need to confirm everything that they’ve told you at the show–remember, it’s a tradeSHOW (emphasis on SHOW).  Who they really are and what they really can do may be very different from what you see in the booth at the show venue.

  1. What are their current conditions (social compliance, environment compliance, etc)?
  2. Do you approve of the processes that you see (what you see them do for others is exactly what they’ll be doing for you)?
  3. Is their physical capacity what they told you/enough for you?
  4. Do you feel confident that they can make your product?

Fourth, There are then things you’ll want to confirm before you place an order (even for samples).

  1. Can you verify their business documents?  Did you pay for business information from a 3rd party?
  2. Is their level of English (or your level of Chinese) good enough to resolve the problems that will come up in production?
  3. Can you trust them to keep their commitments and work with you like you expect?
  4. Do you own and can you pull all your molds and dyes in case you’d like to move to another facility?

Finally, let me share with you some things that you need to do yourself.  I know that I regularly bash on factories that are not honest about what they can do, but I’ve had just as many bad experiences (and lost more money with) Western clients that didn’t keep their end of the deal.  So realize that even though you should rightly be worried about the supplier you’ll potentially be working with, you too have a MAJOR responsibility to be both wise (don’t pay with out doing QC) and honest (keep you contracted agreements too).

  1. Always keep you word concerning dates and monies and anything else that is your responsibility.
  2. Always take into account the reality that if you’re late with art (or money or answers) it will cause production delays (usually longer than your delay).
  3. There will be problems so take notes and keep records and follow up on anything that you’re not clear on.
  4. NEVER MAKE ANY ASSUMPTIONS.
  5. Never make any changes from you spec’s or your contract.
  6. File all legal work in your home country and in China BEFORE you start passing out spec’s to anyone (even at the show).
  7. Spec out all your details and present them in a consistent and clear format.
  8. Meet FACE TO FACE with your factory as much as possible.
  9. Admit when problems are your fault and take responsibility for them.
  10. There will always be problems—usually you can work through them.   But always find a back up facility just in case.
I will be speaking at shows for Global Sources in HK 6 times this month.  Oct 12th, 14th, 20th, 22th, 27th, 28th.