Expecting the Unexpected

We’re back!No, we were not on vacation for all of last month.  Not all of it, at least.  We’ve actually been so busy that I’m wondering where the depression I’ve been reading about is.  Really.  Back in SLC, the stores, mall parking lots, theaters and restaurants were so full that we had to adjust evenings out and shopping trips because seats and parking spots we’re completely full/sold out.  I was thrilled to see this.  And I’m so glad that, while it’s certainly bad out there, it’s nice to see that it’s just the media that is making it worse—meaning it’s not as bad as we read about every day.Also, I was told that a couple of interviews I did in November were on the CBS Evening News (with Katie Couric) in the US last month.  Twice!  December 1st and 11th.  Thanks for letting me know, CBS.  I’ve got a link to one of the clips here. Nothing for the other one, though.A little bit of a story here.  I interviewed with CBS on camera for 20+ minutes each at of a couple of locations and there was a ton of factory film footage too.  I spent 6-8 hours total with them over two days.  All that for 5 seconds!  I guess that means I’m still due 14 minutes and 55 seconds more of fame.Now for the real blog.We’ve had a number of issues that have come up in production during the last month that individually wouldn’t be huge deals, but collectively they really begin to add up.  Not all of these problems happen on every project, of course.  But they are common enough on many projects that you’ve got to be aware of the potential for these to pop up at any time.If you don’t know that these things could potentially happen to you, you’ll be caught of guard and the surprise can be almost as bad as the problem itself.  So, to help prep for impending issues (which WILL happen, you can count on it), here are some of the common avoidable "surprises."1.    Price changes will only make your price go up (except for shipping).This isn’t as crazy as it sounds.  Typically, factories pre-buy a limited amount of product, as do local distributors.  When prices are going up, they bid out to you the new, higher price, before it actually hits them since they don’t know when you’ll actually pay a deposit.  The reverse is true when prices go down.  Since they economy slowed way down many suppliers have been left with stock in their warehouses—expensive stock at that.  Now that gas prices are back down they are still holding on to stock that they want to sell first.  So the drop isn’t as fast as the rise.  The only real exception to this is international shipping, which seems to go up and down just about as fast as other market prices.The answer here is to know as much (or more) about the costs of component parts than your supplier.  This may not be worth if for small pieces or small orders, but for anything over $25K you can probably save yourself 1-2% and that’s certainly worth it.An easy way to do this is to bid out the same item with multiple suppliers.  You’ll be able to tell what your price should most likely be by throwing out the outliers on both ends.2.    Mistakes will be your responsibility.This is probably the most irritating part about doing business in China.  No one is responsible for anything that has to do with “your” product.  For example, we had a factory bid on a product, totally spec’d out, with material samples and photos.  They gave us a bid and we placed an order.  Then, just today they came back and said: “Sorry, we made a mistake.  The cost is 30% more and there are dye fees for each of the colors (21).”  They refuse to eat the costs of their own mistakes despite the fact that we have a contract and PO and have paid the deposit.  Or, rather, it’s because we have all this in place already that they can just give us an ultimatum.  Why?  Because they know that the order, for less than $10K is not enough to go to court over.  And we need it as a component in a larger product.  And we’ve already paid a deposit.  We’re committed and they know it.This is the worst kind of mistake.  Productions errors you at least can talk about and often, if you’re on-site, can even fix on the spot.  But this type is just something that comes out of left field.  Something that can’t be verified and leaves you with few if any options but to pay.  I swear that people stay up nights thinking up these types of issues just to make a buck or two.3.    Delays will be your responsibility (unless otherwise contracted against).Same as with the costs of mistakes, if you don’t plan for delays, they will be a major hurdle to you completing your project on time.  Everything is late and so up front we always build in a buffer for each item.  But sometimes you get a component supplier that is just killing you on time and slowing everything down.  I’m not talking about big orders.  Again. This is little stuff—$5K to $10K worth of component parts for a larger project.  My experience is that if you’re not willing to go to court over it then you have very little leverage.This happens MUCH more with our Southeast Asian suppliers than it does for us in China.  Honestly, one of the good things about China is that so much of what we do is so close to Shenzhen and can all be done in huge capacities in relatively short amounts of time.The key to keeping things on track is to get not just finish dates but process dates and then to (independently) confirm them.  Was raw material delivered on time?  Were molds delivered on time?  Did production start on time?  You should be doing in-line QC anyway, so you’ve got a least one day when you’ll be able to see where the supplier is in terms of production goals.  But verification (best way is in person) is essential to getting things done on time.4.    Art and designs will be changed unless you are involved in the process.If you are not involved in every step of the mold or (re)design process be warned that production will NOT match art.  As far as I can tell, this is due to three factors.  Engineer’s ability/experience, willingness of the factory to really do what you want, and material or technological limitations.  If we fly someone over from the US we can almost always get exactly what we want—and the factory usually learns a few tricks in the process.  If we are asking for a lot of molded items within a short time, we get cut corners.But even simple stuff like the placement of text on printed cards can be “adjusted” by local suppliers, sometimes not on purpose.  Often if factories are not using the same software (version) as the US then the fonts or placements will not be the same over here.Last month we were offered a molded sample of “our” new designed product that was the same general shape but nothing else matched.  Turns out, they already had a mold from a previous client and just thought that they could pass that piece off on us as our since they were relatively similar.There is just no better solution to this problem them being here.  We had a client that asked: “should we send art for factory engineers to work with on their own or should we come over and work with them directly?”  No contest.  If you’re spending money you should be intimately involved with how it’s spent.  We bring engineers and designers over to work with factories many times each year and outside of a few issues of food poisoning, we’ve had great results—much better than if we had just passed along spec’s and waited for product.5.    Extras and rejects will be resold to others and/or recycled into your final product.Your exclusive distributor in the EU calls you one day and says “Hey, we’re going to end our agreement with you!! You’ve sold product to another distributor!”  You’re lost, confused and know that you haven’t sold to anyone else in the EU.  What happened?  Yup, all your production rejects found their way to market.  Surprise!  We’ve had a couple of people come to us with this problem.  And, I’ll admit, we know that it happened to us once with a factory in Thailand too.In the normal course of production and printing you’ll have a decent % of rejects—probably a higher % than what you get in the US as process are just not as tight over here in many things.  This is to be expected.  And most of these will be sold to recyclers or recycled in house.  The qttys are so small that they may find their way into the local Chinese markets but no farther than that.  Not really a big problem.  But when you have a significant % of a production run or even an entire run of products that are rejected you really need to control what happens to them.  We’ve heard of people that have watch their product be loaded onto garbage trucks to be destroyed only to find out that the trucks went out one gate and rounded back to another and the product was sold to people who took it out of country and into the client’s home markets.  I personally know that multiple factories that I’ve worked with sell functionally correct but esthetically incorrect product to international distributors on a regular basis.  Do you really think that anyone outside of North American or Europe cares if the widget is lime green instead of forest green?  Well, they don’t.Specify exactly what will happen to rejects, overruns, samples, etc.  Have QA confirm it.  Build into contracts that if any product that is found outside of the factory will be fined or sued.Sorry, this is getting long….so I’ll break it into two parts and post the rest later this week.  Part II will included:6.    No one can control Chinese workers around national holidays.7.    Everything NOT specifically detailed in the contract will be charged back to you or substituted at the lowest possible cost by the supplier.8.    Build in extra time for every stage—even if it pushes you past your deadline.9.    Either specify up front or fix it later.10.    Double confirm that you are talking about the same thing.11.    Assume that everything will NOT go according to plan and plan accordingly.12.    Anything less than a signed stamped “YES” is a “NO.”  And even a contract is only as good as the verification/enforcement.