Posts Tagged ‘sourcing’

Suppliers going back on their word (Part 2)

December 5th, 2011 No comments
Give an inch...

Give an inch...

(Have you read Part 1 of this article?)

By this point, the overseas purchaser has been let down dreadfully by the supplier and had to compromise their margins in order to have their goods released. But it got worse. When the CI (Original Paper Commercial Invoice) and COO (Certificate of Origin) were requested from the supplier, they refused to do even this stating that it would cost yet more money to produce these documents and therefore not worth it.

We explained that in order to export the products these documents were required from the manufacturer. This was met this time with abuse and a refusal to have anything else to do with the matter. The aggression showed by the supplier at this point was typical to a kneejerk reaction by a lot of suppliers when their back is at a wall and they have gone so far that even though they are wrong, they don’t want to lose face by admitting it or even compromising.

Luckily my time in China has allowed me to meet some influential individuals in the export and customs world here and we were able to get some documentation to push the order through customs and onto the ship for our client. This documentation was also enough to comply with import, customs and duty purposes when it arrived at its destination port. Doing it this way should of course always be a last resort.

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Suppliers going back on their word (Part 1)

December 5th, 2011 No comments

Recently I was contacted to assist in a case whereby a Chinese supplier had decided to change their mind about delivery terms on an order. This was post-production and while it was held at a 3rd party shipping agent. Initially, a quote was supplied to a European purchaser that was priced for FOB, Chinese port. These terms were accepted and the ordered processed.

Somewhere between ordering and before loading onto the vessel at the port, the supplier decided to change their mind and claim that this was no longer FOB and were only prepared to pay a small courier fee to the shipping agent. Not only did they do that but they also refused to offer a Commercial Invoice and Certificate of Origin – two documents that are critical when exporting from China and importing into your own country.
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Planning your China Order: Don’t miss your chance

August 2nd, 2011 No comments
Time waits for no man

Time waits for...

It is important to time and plan your orders right. If you place an order too late you may find yourself at the back of the queue for production and delivery and therefore miss your intended delivery date.

Seasonal items are a perfect example of this. Many Chinese factories don’t carry stock in anticipation of upcoming orders. They work on an order by order basis. This means that if you order too late, there may be a long queue of pending orders for production in front of you. This can seriously affect your intended delivery to market dates. In this case the old adage is true, ‘If you fail to plan, you plan to fail.

If it is a new product you intend on purchasing it’s advisable to start the research and product development as early as possible to give you enough time to make sure you have the product you need without any unwanted order urgency. This is especially true when talking about viewing and approving product samples. This is a vital step in any new product ordering and time involved can vary drastically depending on the item and factory. It is also important to consider the time and expense involved in delivering your sample from the factory to your country.

As a guideline, we would suggest for new products starting the search at least 1-2 months before you want to order them. If you are not sure when the peak production times for these items are, think about when your market needs them and deduct 3-4 months off that date.

A supporting guideline to remember is that it usually takes a normal factory 30-60 days to produce orders and another 30 days for transport. If you add in customs and further potential delivery issues, you can allow for a sensible total of 120 days from your order date before your products are ready to be distributed and sold.

There are likely many Chinese factories that can produce your item and their products will be of varying quality. However, if it is peak production time you may be tempted to go with a cheaper/smaller factory in China who promises a swifter delivery time. Make sure you check the quality of their facility and product. You can save time and money during this process by hiring a 3rd party manufacturing and QC consultancy to act on your behalf to ensure that your products will be produced to the standard you need and with the right factory.

A 3rd party manufacturing and QC consultancy company on the ground in China can also aid you to negotiate with a larger factory that has initially stated that they are too busy to deal with your order or they can find a factory of a similar quality that can do so. If there is a delivery date that must be met, they can also act on your behalf to pressure the factory on a daily basis to meet it.

It’s important to consider these points because when you need to reorder your item, you can know when to do this and be able to easily put this cost and time into your annual budget and plan. All the above can give your company better structure and smoother delivery to market for all your products.

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 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.