3 Devastating Mistakes Importers Make When Manufacturing When Manufacturing New Products In China
This blog post we will discuss the top 3 common mistakes we see importers make. We will discuss what they are and the solutions you can employ, ensuring you don’t fall into the trap of Chinese and Asian supply chains.
Realistically manufacturing in China is tough, it’s tough because it can seem very alien; a million miles away from what you are used to and a million miles away from your ‘home’ office.
There are indeed several traps that you as an importer of product need to be aware of, that’s what we will be discussing today.
Mistake number 1:
Choosing the wrong supplier, or using a single supplier with no backup options
Choosing the wrong supplier from the start is a fatal death blow right from the inception. It goes without saying that a good supplier, with a robust background in your chosen product, is the perfect base to launch off and get a foothold into a successful launch.
Then what does a poor supplier look like? It’s a supplier who on paper looks very good. They may take you out for a nice meal; they may promise to make your product cheaper, faster, more robust than what you can get currently. They may promise that they have relationships with shipping agents that can not be beaten or their quality procedures are the best. But at the end of the day give you headaches, poor products late delivery of products and are a nightmare to work with.
Whichever supplier it may be; good or bad, a suppliers job is to get money from you; the level of service received in exchange for that money is entirely in your control.
Let’s discuss how you can mitigate some of those risks and:
How to ensure that you select the correct supplier
There is no one silver bullet for selecting the correct supplier; it really is about ensuring that you conduct your due diligence at every stage of the process when selecting your manufacturing partner.
But, there are a few foundations that you can work too, ensuring that you kick off the relationship in a positive way and find the best supplier for you and your product.
The first is ensuring that you have robust requirements right from the start.
It weeds out the good the bad and the downright ugly.
There are several ways to approach the initial contact with suppliers; we always advise constructing an RFQ with all the relevant information in it. Be sure to check out our blog post on constructing an RFQ.
The RFQ is the first contact that you will likely have with a supplier. You can weed out a lot of bad suppliers just by having clear and concise instructions, set out in a way that is easy to understand, is not open to ambiguity and has drawings that are easy to follow.
Don’t just choose suppliers on price alone.
You remember the old saying- you get what you pay for. Well if anything holds here, it’s that. You really do get what you pay for in China and Asia. If a price seems too good to be true, it usually is. Don’t get too hung up on chasing the lowest cost.
Instead, aim for quality first and then negotiate on price. Remember, you really want to build relationships with suppliers, you want them to look after you as much as they can, however, if you have been beating them with a big stick to get the absolute cheapest possible price, it’s probably safe to say they won’t be looking after all your interests.
Ok, I understand saying you should be searching for quality instead of cost is a straightforward thing to say in principle, but in practice, how can you put it into action?
Let’s say we have sent our RFQ to several suppliers. And a few suppliers come back with questions; you can tell a lot about the suppliers understanding of the product based upon the questions, does it seem like they have grasped the product?
Are they asking daft questions back that show they don’t have the level of understanding about the product that you would expect this sort of supplier to know?
This communication avenue is not just a one-way street, you can ask questions here too, such as; what manufacturing procedures do you use, what is it you usually produce, is there any stock, or samples you can send to show what level and quality of the product you usually make, what are the quality tests and procedures that you employ on current stock production?
Being on the ground mitigates some of the biggest mistakes and risks.
Its no lie, some suppliers, even the gold star suppliers on Alibaba, will shaft you, it can sometimes be the wild west out in Asia. There is always the potential; you on the other side of the world, faceless, just words on a screen, for you to be strung along and scammed.
Being on the ground in the market, meeting these people face to face- in the facility- reduces this risk substantially.
But, and its a big but. If 2020 has shown us anything, it’s not always a possibility to get to the market, into the factory.
Having a trustworthy contact on the ground is a must. But let’s not get too ahead of ourselves here. have a read here why you need a sourcing agent in China.
Pick more than one supplier.
One of the biggest mistakes we see is importers working their way into a corner, and it’s of their own making. When sourcing anywhere in the world its a far better idea to keep your options open with regards to suppliers. Having one supplier is great, especially if you are generating robust relations and products with them.
But, there becomes a point that if a single supplier has a monopoly on you and your product; and they know it, then they will start to squeeze you for more cash, or they may start to let quality slide. If there is only one supply of product from one source, then you will have nowhere to turn when quality issues arise.
The way to mitigate some of this risk is by spreading your product line across suppliers and let them know you are doing it. I appreciate it’s not for everyone and its very much dependent upon your own situation. However, not only does it give you the benefit of driving down the cost in negotiations, but also it gives you the upper hand in ensuring that suppliers comply with your quality standards.
Mistake number 2:
Lack of preparation and not understanding time scales
Make no mistake; you cannot plan enough when launching a product onshore offshore or indeed on anyshore. If you don’t plan accordingly, you will be doomed with quality issues, late delivery, constant supplier excuses and a company that runs dry of capital before it gains a decent quality product.
To gain a good quality product from China, you need to have prepared as much as possible before supplier selection, prepare for supplier questions, requests, prepare for price negotiations, prepare for sample testing, prepare for production runs, prepare for production sampling, prepare for shipping, delivery and imports.
It’s a lot to prepare, and indeed we won’t be going into all the topics in great detail in this discussion. There will be issues, regardless of the preparations you put in place. However, the depth and severity of the issues that arise will be a direct correlation to the preparation you put into the production and manufacture of your product.
So let’s list some of the top headlines that you need to prepare before approaching suppliers to produce your stock in China.
How much do you need?
Volume has a direct correlation to cost. Now you may be thinking, well I don’t know how many/ much I need because I don’t know the price of what I want.
I know it’s a hard one to overcome, especially when working to a set budget. It’s a bit of chicken and egg scenario.
But, not knowing your exact requirement in numbers and asking for a finger in the air cost is not always the best angle to take when looking to source a new product from a new supplier.
A better angle is asking the supplier’s to give you a range of costs based upon a few different MOQs and different scenarios. You can then start to prepare the questions around cost and what is included in these costs.
Regardless of the cost vs MOQ, it’s always better at this point to have a few different options from a few different suppliers. This will give you the best angle to approach your supplier negotiations. The more information you have, the better. This is the true power of proper preparation.
Not understanding time scales.
Stuff happens in China and Asia at breakneck speeds; you can not imagine the speed that some production runs happen. Literally, you can send a request to a supplier one day and the next day, to your surprise stock will be ready.
But… and this is where it all starts to come clearer, this is when you have planned, you have developed those relationships with your suppliers, you have got your timing plan in hand, you have shared it with the necessary team members. You have systems and processes in place already. These things don’t happen overnight, and if it’s your first product in China with a new supplier, don’t underestimate the time it will take to develop a decent product.
On one of our most recent items, we are 4 months into a project, and only just gaining samples because the factories in the area in question are on shut down because of air pollution issues.
If it can happen, it will happen, and sometimes, much like one of the issues we are experiencing, the issue is far outside our, and our supplier’s scope of influence. This 4-month gap in timescale was baked into the timeline because we know, from past projects that sometimes things that cannot be avoided happen, these unforeseen issues cannot be underestimated.
If you have your planning down to fine art, you have all your ducks in a row and you are prepared for every eventuality, get a timescale in your head, and then double it. That is more likely where you will be. Really understand the timescales and start early!
Mistake number 3:
Not setting the correct terms and conditions from the start
By far the biggest issue you can save yourself from is ensuring you have the terms and conditions laid out in a contract from the start.
Having a contract that references your drawings, standards and expectations on price, shipping terms, and any other details are not only good practice to employ, it also ensures that everyone understands expectations.
Review contracts, review standards and review the designs over and over again. It ensures that you and your supplier are constantly on the same page. This is not only reserved for the larger orders either; the greater that you are at setting expectations with terms and reviewing them regularly, the better the end components will be.
What should a contract contain?
At the very minimum, there need to be service expectations. Sample reference and quality expectations.
There needs to be an understanding of fee’s and what quality expectations there are. You also need to include the terms around quality rejects, in the event of quality issues, who will take the fall. Who will cover the cost of re-manufacture. You need to get the agreement of quality acceptance, and what the expectations are, you will never get 100% of components at an acceptable level. Have an inspection baked into the contract. This inspection needs to be conducted by either you or a third party and any issues observed need to be assessed to a standard.
What it all boils down to?
You can mitigate some of the biggest mistakes when importing through planning.
By far, if we were were to look at the road of failures, the main reason why these failures occurred was because of a failure to plan.
If you want help in building a plan around importing and manufacturing new product then get in touch with us here.
We have a discovery call where we can get an understanding of your current situation, your current plans and we offer free advice on your next course of action and where to look to get the best source of information for your own importing journey.
Get in touch with us here, and be sure to follow along on our LinkedIn page here.
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