5 Tips for Negotiating and Dealing with your Suppliers in China

To kick off this series of interviews with entrepreneurs in China, I begin with an interview with Leonor Estrada, Founder and Director of Dalton Asia Ltd.

Dalton Asia Ltd provides brokering services to companies looking for packaging suppliers in China. Leonor Estrada’s background in purchasing in the electronic industry has helped her understand the supply chain and  her clients’ needs and expectation, and means she is no newcomer to the challenges you face in purchasing negotiations.

Leonor Estrada shared her 5 top tips on topics such as suppliers search, suppliers assessment, negotiation, production processes and quality assurance.

Tip #1. “You need a native speaker in your team (even if it is part-time!)”

You need to look for the information in Chinese! I initially searched the internet looking for suppliers in English, but you miss lots of interesting information. You need somebody who is a native speaker (or can perfectly read and speak) because not only do they find better information, but they also interpret it, they have the “feeling” to be able to assess when a supplier is worth pursuing.

It also comes in very handy during the negotiation process. We usually have in the meetings our suppliers’ sales & production guys. As most products need a bit of customization they are working together on setting a quote for us, so it is good having somebody with you who can capture nuances and what’s going on in general.

It is also cheaper to have your own Chinese interpreter or team member. This is like “World Link”, if you want it in English the suppliers are gonna make you pay a lot for it.”(1)

Tip#2. “ALWAYS visit the factory”

You need to know who they are, to ensure they can actually make the products and that you are not really looking at some intermediary.

I once got samples done by a supplier. I sent them to my client and they got approval and were registered in their systems. I subsequently realized they had been made manually and that the guy couldn’t actually manufacture the product.

My lesson: before you send anything to a client, go to the factory, check what machine is producing the product and make sure it is working. If the machine is not functioning that day I ask them to produce a few samples for me right there. If the manufacturer has goodwill he/she will do it. It may not have your exact specifications, but you will at least know the capability is there.

Tip #3. “Understand perfectly the production process”

Here I’ll tell you one of my horror stories:  A supplier started giving me excuses and delaying production. He claimed he had some issues with his glue supplier and the glue was not reaching him…. Later on, I realized he did not need any glue in the production process! The part for which he claimed he needed glue had to actually be sealed with heat. That time I believed it!

My lesson: You need to absolutely understand the production process. “Here you cut, here you paint, here you glue…and it comes out from that machine over here”. It sometimes helps to “train” yourself with suppliers that are not your main choice. That way you get to see the machinery, understand the processes, and once you sit in front of the one you are really interested in, you have already developed the know-how on that product, can show expertise and build good credibility.

Tip#4. “Always be ready with back up options”

I once had a confirmed order for which all the negotiation and product sampling had been done. It needed to be produced immediately as we had a tight deadline with a shipment the following week. When I arrived to the factory the supplier said he couldn’t start. I never found out what the problem was. “My boss is not here, the price is not right”… all type of excuses, the clock ticking and no production starting….

My lesson: Always have back up options identified. 4 to 5 suppliers that you have already visited and that you have ensured are capable of producing the product.

Tip#5. “Be very strict with your quality control. You will annoy them but the loss is on you if something goes wrong”

I always go to the factory when my products are being made. I don’t tell them what day or what time, I just show up.

When production has finished I personally inspect the product. I randomly inspect 10 to 30% of what has been packed. I make them open the boxes and I check the product is complying with the agreed specifications. I once made them open 300 boxes because I was not completely confident about the supplier.  They obviously don’t love it, it has a cost for them, but I don’t care. The loss is on me if something goes wrong.

I also wait till it has all been packed in pallets just as it will be supplied to the forwarder. Some suppliers don’t understand that the pallet may move 20 meters in the ship. It needs to be absolutely secured.

If you also work with China suppliers, you may want to share your best tips with us….

[1] For those not living in China, World Link is one of the main health care suppliers offering services in English by internationally trained doctors….. And it is really expensive compared to what is available locally.