China sourcing: meeting the challenges, achieving success

11.02.11

Sourcing your retail store fixtures and fittings from China offers significant potential in terms of cost savings.  Developments in manufacturing processes combined with improvements in technology and equipment ensure quality products at very competitive prices.  But naturally, sourcing from another country presents challenges.  Understanding the unique challenges of sourcing from China ensures your experience is productive, positive and most of all profitable.

First things first...

Finding the right factory with the right people should form the cornerstone of any sourcing project.  China has some of the best factories in the world...but also some of the worst.  The internet makes finding a factory easy but it's rather like sticking a pin in a telephone directory.  The more successful way to find a reputable and reliable factory is either to send one of your own staff to China (importantly, one who speaks the language and understands the culture), or to use the services of a reliable sourcing agent with a base in China who will support you through the process.  A good agency will employ both Chinese nationals and English speaking staff and will understand the local way of doing things, but will also ensure factories meet European standards. 

If you're looking to find a factory yourself, the key things to consider include:

Specialism: Some factories may specialise in parts, others in plastics and others in electronics. Find a factory relevant to your particular requirements.

Experience: This isn't necessarily the same as being specialised. An experienced factory with experienced staff should be able to advise you on the most efficient and effective way of producing your product.

Size: Don't assume that the bigger the factory the better. If a factory is very big and your order relatively small, you may find you're not top of the list in terms of priority. On the other hand, a small factory may not have the capacity to manage your order. Also bear in mind that some factories sub-contract work. Do these workshops have the same facilities as the main factory? Do they work to the same standards? This kind of arrangement can be fraught with difficulties and needs careful assessment.

Legislation: Familiarise yourself with Chinese labour legislation and the working conditions of the factory. Your chosen factory must also be prepared to produce goods to European standards.

Getting to know you...

The best business is done with the Chinese when you understand that relationships are paramount.  A good relationship based on mutual respect and trust takes time to develop and can involve more than the odd drink in a local bar.  Social invitations are an important part of the process and will pay dividends in the end, both in terms of securing the best price and achieving your end goal.  Expect long negotiations.  It's part of the culture in China so start early. 

And so on to that tricky subject...

Price.  Once you have their respect and trust, your supplier will pull out all the stops to keep you happy and satisfied, including giving their very best price for the work involved.  However, avoid starting negotiations with a request for their best price - of course they're going to aim high!  Instead, tell them your target price and negotiate from there.  Be wary of factories offering a price that sounds too good to be true.  You may find that this is at the expense of quality.

Once you have agreed a price, obtain a full breakdown of what this provides.  Expect to pay a deposit in the region of 30% and the balance before the containers leave the port of origin.

Because you want the best...

Achieving the quality product you're looking for is more than possible but be clear from the outset what you require in terms of design, materials, parts, dimensions, colour, assembly, packaging, quantities and safety standards.  Provide a quality control checklist so that everybody is clear about what is required and what will be checked during inspection. 

Before full production gets underway, request an initial small sample of your product for inspection and continue to monitor throughout the process.  If there are any defects these can then be picked up in good time which will avoid any nasty last minute headaches.  The final check should take place prior to dispatch while your product is still in the factory.

Good to go...

Sourcing from China isn't the lengthy process it once was...once negotiations are out of the way.  In fact, if you use a sourcing agent with a pre-existing working relationship with suppliers, the negotiation process is much quicker and manufacture can begin much sooner.  

A good experienced factory can usually produce a prototype of your product in 20-30 days.  Full production then takes approximately 30 days depending on the quantity required, with approximately 35 days needed for shipping.  However, it makes good sense to allow a little extra time to manage defects and deal with any transport or shipping delays.

From the start, familiarise yourself with freight options, export formats (known as Incoterms - the two most common being FOB and CIF) and customs requirements to avoid unnecessary delays and ensure the journey from factory to warehouse is a logistical success.

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