Archive for July, 2011

Sourcing and Manufacturing Agents in China

July 26th, 2011 No comments

If your company is understaffed or on a tight budget it’s a useful consideration to use a sourcing, QC and manufacturing agent when manufacturing in China. These are 3rd party entities that act on your behalf in China and in the factories.

It is sometimes an expensive affair flying out to a supplier in China to watch over a production or to solve a quality issue. A sourcing agent is a viable solution. Many SME’s use these services in order to guarantee quality and delivery time in a cost effective way.

A typical sourcing and manufacturing agent can provide:

  • Factory Audits and supplier checks
  • Quality Control on your order
  • Sourcing new products
  • Managing and coordinating multiple orders in different locations

There are a lot of sourcing and manufacturing agents in China. While on the surface they all appear to provide the same service, it is important to select a company to represent you that:

  • Insists on signing an NDA that protects your interests
  • Requests all relevant drawings and a control sample
  • Cares about what you are producing and takes pride in their work
  • Can solve your production problems and issues
  • Represents your company properly as a member of your team
  • Asks the right questions to you and to the supplier
  • Provides a clear report of issues discovered and solved
  • Has on the ground experience in China within your relevant sector
  • Gives you useful and timely updates of progress
  • Always works within your budget

You know you have the right partner looking after your interests on a day to day basis in China when your orders are delivered on time with no nasty surprises and in great condition.

If you want to know more about what a sourcing agent can do for you, and for a free, no-obligations quote, click here.

Poll: What comes first when outsourcing to China? Tell us what YOU think!

July 21st, 2011 No comments



Chinese Factories: Is your factory outsourcing your order?

July 21st, 2011 No comments

On many occasions I have seen factories outsource total or part orders to other factories without the knowledge of their clients. As discussed in our previous article, is this an acceptable practice for you as the buyer?

If you have vetted a facility or had a factory approved for your organisation’s production, you most likely feel safe in the knowledge that your products will be manufactured there. You may believe you have a sense for the people involved in the manufacture of your product. However, if an order is outsourced to another facility without your knowledge, you have no idea of the people who are physically producing your order. The most important thing about the manufacture of your product is the knowledge that the people doing so know exactly what your requirements are. In your business, you manage the expectation of your clients so why shouldn’t your suppliers do the same?

We all know things get lost in translation and the more people involved in ‘Chinese Whispers’ the more chance your instructions will be misinterpreted. If you have received a final product that is very different to your production sample, there are high chances that an unknown element has been involved in the process. There are lots of clues that can tell you whether your supplier is outsourcing your order to another factory. The evidence is there to be discovered, you just need to know where to look, what to look for, and who to ask.

If you are curious as to whether this practice is occurring at one of your suppliers, it might be a good idea to get a 3rd party to investigate or at least use their expertise and experience to report to you what they think.

Factories in China: Production Samples and Final Products

July 14th, 2011 No comments

Why is it that we hear so many stories about the differences between approved production samples and the final bulk product?

I have heard so many excuses over the years blaming raw materials, real large scale production, ambient temperature, extra chemicals, original sample degradation over time, etc. It’s a real minefield and a drag on your resources to be embroiled in an argument about why your final products are nothing like the approved production samples. This is, of course a sign of a factory not in control of their purchasing or production. It is also a sign that you, as the customer are not fully in control too. An approved sample is an agreement between you and the manufacturer that they will produce that item for you in the quantities you require. If there are any changes from either side, it should be mutually agreed upon. There should be more than one approved sample produced so that more than one party can reference it. At least a minimum of one for the manufacturer and one for the buyer should be produced.

It would make sense to have representation at the manufacturing facility prior to the order being sent/delivered to check this sample against the mass produced product to determine any issues and discrepancies before they are shipped. As I have said before, to discover a fault or difference after acceptance of a delivery is often useless to the buyer and effort then needs to be spent on either refunding the items or sending them back. This rarely happens and many SME with substandard product are forced to sell at cheaper price, making a lower margin and releasing a poorer quality brand onto the market.
Most manufacturers of course don’t want to make these mistakes but when a purchasing or sales department member gets involved with your product, what might seem like a small change to them (link to cost saving raw materials) could end up being a crucial detail for your brand. You are the owner of your brand and product and you know it better than anyone else. If you have manufacturing documentation, and product specification clearly spelled out, then any deviation in the final product from that is deemed not suitable for you or your brand.
To have 3rd party representation on the ground in these facilities at the time of production, comparing your approved samples, checking materials and your product specifications can save you time, money and hassle in the future.
For more advice on managing your China sourcing and a free quotation, visit the ETP official website.

How to increase your influence over China manufacturers: Part 2

July 14th, 2011 No comments

Locking clients in with ‘special order’ items and MOQ stock purchase

A regular and effective business trick of Chinese manufacturers is to convince the purchaser that a material used is a ‘special’ one and needs to be ordered in advance and more often than not, the minimum order quantity (MOQ) is above your required amount, prompting them to explain that they need to order more, but they can use this on the next order.

It is also difficult for you to get the supplier information about this component and this helps the supplier ‘lock’ you into future business. If you need to look for another supplier, then the whole process of tracking down this ‘special’ order material begins again and the new supplier has an item they can use as leverage against you. At least this material will not appreciate in price, if you can afford to buy more than your order requirement. If the supplier buys it, you really have no idea how much is being used until the next time it is ordered and the price has risen yet again.

There are 2 different options the supplier normally presents you with:

1. You purchase a quantity to last a certain amount of orders – You bear the cost and are effectively locked in until it runs out.
2. The supplier purchases a quantity to last a certain amount of orders – You guarantee the supplier this business.
Both situations seem to satisfy the client whether you are financially constrained or not but actually they satisfy the supplier even more, with both eventualities leading to more business with them. A long and good working relationship is indeed an advantage between both parties however if these types of concessions are being made where you as the client are buying into a longer term contract with the supplier, you have to be convinced you are getting the best possible product out of them.

A 3rd party quality control service can, over the long term, assist you on a daily basis to maintain and increase the quality of your product locally.
For more information on dealing with your production in China, please visit the official ETP website.

Dealing with Chinese Factories – Can they produce your entire order in-house?

July 13th, 2011 No comments

Smaller Chinese factories commonly outsource orders that are too large or are stretching their capacity. These factories would generally not tell you this and so without proper representation on the ground you will most likely not know this.

The outsourced factory may be producing highly inferior quality to the standards that you thought you were getting, based on the initial provided samples. A factory may buy the whole order’s worth of raw materials and hire outsourced factories to fabricate it. There are a few reasons why they could be doing this – This may be as a cost saving measure. They may be trying to develop relationships or guanxi with another factory. They may not have the facilities in-house that they promised you. Or they may be bartering with your business to make use of additional factory facilities or machinery in the future.

Considering the above, ask yourself these questions:
- Is it important to know that the factory/supplier you are buying your products from manufacture your order elsewhere?

- Is it ok that your products are being made in a place you haven’t been told about or inspected before?

- If outsourced facilities seem to make the same quality products as per your order, does that make it ok that your products are being assembled in unknown locations?

- If completed order arrives at your destination and there is a marked difference in quality from your expectation that hasn’t been properly explained, the root cause could be an outsourced factory. Would your supplier tell you this? Wouldn’t you want to know this information?

If any of the answers to the above questions make you feel uncertain about the standards of your production in China, having a 3rd party representative on the ground can assist you. Inspecting the factory and the above aspects can help you get a firmer idea of what is really going on, allowing you to make more informed decisions.
Visit the official ETP website for more information on sourcing products in China.

Dealing with Chinese Factories: Protecting your IPR – Basics

July 12th, 2011 No comments

Protecting your IPR with small and large factories alike is always an issue in China. You can be assured that most of these factories only do business with foreign entities and foreign markets but a sample of your product will more than likely end up in their showroom as an example of their work.

There are no strong legal frameworks as yet in China to protect your brand from being picked up by others and produced by the factory for sale in other territories and markets. We have all heard stories of similar SME produced products being sold under a different brand in another country unbeknownst to the original purchaser/customer. It is your brand, your design and it should remain in your hands which territories your designs and products go to. You need to stay in control of all relevant production documentation in order to prevent this.

A good working relationship with the production facility can help build trust and confidence. However there is still nothing stopping your product from ‘falling off the back of a truck’ or leaving through the back door. In this case, the saying ‘imitation is the best form of flattery’ is untrue. You want to be in control of your product and brand development and it’s no-one else’s place to take your designs.

As mentioned in previous articles there is no strong legal framework yet in China to protect you from copyright infringement, especially if it is a new market product. Getting components made in several different places and assembled in another is a solution many adopt but this can get very expensive.

An NDA doesn’t hold strong between an International client and a Chinese supplier but having one certainly doesn’t hurt. Having a 3rd party representing you on the ground in China looking out for your product and brand, applying pressure on the manufacturer and supplier to keep your product trade secrets under wraps can help eliminate and reduce the chances of copyright infringement.

For more information on protecting your brand and products, visit our official website for a free sourcing and IPR protection quote.

Dealing with Small Factories in China: Pros and Cons

July 11th, 2011 No comments

Small Chinese factories offer lots of pros and cons, and it is important to weigh these up before taking a leap with a supplier. They can give you the attention that a large factory can’t. They can spend extra attention to detail on your products, but smaller factories cannot turn an order around as fast as a large factory and they cannot produce very large orders in a short time.

They will also have a higher overhead overall and their stock material purchasing prices will be higher due to the smaller facility/smaller storage. If product and component prices are cheaper than a larger factory, then it’s worth looking closely to the quality of the purchased materials and ultimately the end product.

If you are an SME or on a budget it’s tempting to use a smaller Chinese factory if you are satisfied with their product. There is that level of personability that makes them easier to deal with and a willingness to work with you in order to grow their business.

If you choose to go with a smaller production facility make sure you have and control of all your product drawings, samples details. This will allow you to more easily move to new or additional facilities if the need arises due to order demand or better prices. It is also a useful leverage tool. Knowing that you have relevant information to do with as you please, the supplier will be more incentivised to keep you happy and keep you from talking to their competition.

For more conclusive advice on how to manage your order in China, visit our website for a free sourcing and manufacturing consultation and quotation.

How to control your China production more: Part 2

July 8th, 2011 No comments

Some buyers don’t worry so much about the production schedule in China and instead only pressure for the products to be finished in time for the shipping date. In my opinion, this is risky and is partly the cause of generally low quality and defective products in western markets. If the onus is on production and logistics department to rush its workers to finish on a deadline, quality measures can be easily ignored. Your order will not be considered crucial and may be pushed down the production list to be completed at the last minute.

Many Chinese factories employ migrant workers because they are cheap. They are generally low skilled, low paid and the factory rarely offers proper training. We don’t expect the workers to care too much about the finer details of your product at 9pm on a night shift and you shouldn’t expect them too either. It is the responsibility of the facility and department heads to push this agenda and in turn your responsibility to push them. Bringing in a 3rd party to view the quality of production and push the agenda of quality on the factory floor can let you know how well the production department functions.

Once the product is completed it is very difficult to pinpoint where exactly a quality issue arose from and so outlining quality control measures from the start and maintaining this is crucial to having the best product. Constant 3rd party monitoring of the manufacturer and product is one of the only ways to ensure this. As a buyer/client it is important always to press the quality requirements with the factory from the start and maintain a good communication with them. If this is done through a 3rd party then you can always have an objective view and while continuing to operate your day-to-day business.

Checking the quality of your product after it has arrived in the destination country is too late and not worth the risk. Current payment methods with Chinese manufacturers do not favour the buyer. More often than not it involves a 30% down payment before any work has begun and then the final 70% to be paid once the shipment/container is loaded and on the sea. This means that your product could be fully paid for without you being able to appraise the final production quality. For many buyers this is a difficult situation, but one they must accept and pressure the production facility from afar using emails and phone calls and perhaps a site visit which entails international travel and company expense of both time and money. A quality control company can represent you at a fraction of the cost of travelling to the facility whilst having invaluable knowledge of local manufacturing and the local market.

The pressure is of course on the production facility to produce your goods in a decent quality to ensure repeat business from you. What if your order/shipment arrives with part of the product having a heavy defect? Who will pay for the return cost? Who will pay for reworking? What are the business implications of having unsellable/unusable stock? You can negotiate with the supplier for a discount on the next order but is it worth it in the short term to your business to let that happen?

Why take chances with your products and your business? Eliminate these issues before they occur.

For a free consultation and quote for quality control and delivery services, visit the ETP official website .

How to increase your influence over China manufacturers: Part 1

July 8th, 2011 No comments

Production Drawings and Samples

Every purchaser/buyer whether they are developing new or producing existing products should have a detailed set of drawings and samples of their product to ensure that no changes creep into it over time. We have all heard nightmare stories of manufacturers over a period substituting cheaper, lower quality components to increase their profit margin. A local eye on the materials used and manufacturing process will help to eliminate the chances of this happening to your product. Moving forward with your production partner, you need to be sure that the quality is maintained so your product’s integrity is never called into question.

We all know why the manufacturers will attempt to substitute components and elements of the product for substandard and cheaper parts. They do this as inflation rises in China, raw materials increase in price, local wages rise, tax increases and the only place where they can squeeze extra revenue and margin from is the products they produce. Having understood this it is most important that you are represented during production runs and your product guidelines and rules are fully adhered to.

Make sure you maintain control of all documentation at all times. When an SME finds a manufacturer to develop new products it is very tempting just to use the manufacturer’s designs (as seen on a trade show or factory/showroom visit) and to place your logo or label on it. This item is part of your brand now. You should request all details of the item including;

- Material type and specification

- Material samples

- Technical drawings, inc. tolerances and weights

- Notes on production

- Product samples

If you have this information, you will be better prepared and find it easier to source your items from other factories if the need arises. ISO9001:14001 states that all the above can and should be provided by the manufacturer so there is no reason not to have it. This is also a useful leverage tool. Knowing that you have relevant information, the supplier will be more incentivised to keep you happy.

For a free quotation and consultation, visit our official China sourcing and quality control website.