This is a second post in the series “Tips for Negotiating and Dealing with your Suppliers in China”. You can read the first one here.
Today, I will capture 12 tips shared by businessman “Mike Smith”. This is not his real name… but his company would rather keep a low profile when it comes to their sourcing business in China.
Tip #1 . “Visit the factories”
You must visit the factories yourself. What you see on internet has nothing to do with what you find here. This may sound like a very obvious tip to a lot of people, but I was new to China sourcing when I landed here… and for me it was a big surprise to find out how far from reality what I read on the net was and how many middle men you could end up contacting.
Tip #2. “Be very clear on who is going to be making decisions”
Another beginners tip…Make sure you are talking directly to the decision maker. It will save you a lot of time.
Tip #3. “Good suppliers may be able to help expand your supplier network in non-competing products”
I have managed to develop a good network of suppliers (through trial and error!), and I’m currently finding them a great source of good referral information. My business has a technical side, products need to meet certain standards, and they know who works well in their industry.
Tip #4. “Effective Communication (I): The best way to do business in China is face-to-face”
Technology is great, but I do not think it is the way Chinese people are wired to work. When we are working on projects, I send my regular suppliers technical information, blueprints… I discuss specifications, I explain standards….and I try to assess by fax and phone whether all the information I am sending to them is clear. But it is only when I follow up on the projects with a factory visit that I realize how many questions and issues they may have! And I’m talking here about regular suppliers, so they know me and, supposedly, we have already created good communication channels!
This is why I always ensure regular visits to my suppliers. What really works here is doing business face to face.
Tip #5. “Effective Communication (II): “I can’t” is not in their vocabulary, so be wary if you get silence for an answer…”
They find it really difficult to say they cannot do something. I do not even think they are trying to fool me, I honestly feel they are just ashamed of admitting they cannot do it. So I would advise you to start developing some basic “Chinese non-verbal” communication knowledge. A silence will probably mean “we can’t”.
Tip #6. “Effective Communication (III): Make them recap the agreements, do not assume they understood just because you feel you were clear enough”
Communication can become a real challenge even when you are sitting face to face with your supplier. I have started developing my own “techniques”, so now I always ask them to rephrase themselves each point we agree on. It is a bit like forcing them to do “active listening”! And you would be surprised to hear how different their take on your clear instruction may be!
Tip #7: “Expect Delays in your Supply Schedule”
They just happen, and if you are not their biggest client there is not too much you can do.
In winter, some factories may see their power supply reduced… and they need to close some lines because they don’t have enough power to work full capacity. In summer, again, power shortage problems arrive. Residential housing has priority and AC takes a lot of the power supply, so you may also find they are not working full capacity.
I’m positively sure it is not a tale they’re telling me because I’ve been able to use other sources to verify this information.
Then you obviously have Chinese New Year when everybody goes home and things slow down for a few weeks.
All this is really difficult to deal with, because in our business, as in most cases, we try to work with low stocks and as much “just in time” as possible…
Tip #8. “Payment Terms… Once you build the business relationship things get easier”
This is at least my own experience. I have developed a good network of suppliers and managed to work on the relationship and trust. Right now, none of my suppliers requires me to do advanced payments.
Tip #9. “Pricing: Do not get obsessed with the cheapest deal”
If you need good quality you will need to pay for it. I am now working with reliable suppliers that deliver consistent quality 50% cheaper than what I would get back home. That works for me. I’m sure there may be cheaper options out there… but I think I am following the right strategy for my business.
Tip #10. “The perfect world doesn’t exist. I also have a supplier I would get rid of… if I could”
So, although I’m really happy with the supplier network I’ve built, there are always things you may not be able to control. One of my suppliers is extremely good from a quality and technical perspective, but he believes “a contract can be re-negotiated continuously”. I would love to get rid of him but, for that specific product, I’ve not been able to find anybody good enough to substitute him… He is in my replacement list, though!
Tip #11. “Quality Control: Always, even with good established suppliers”
For some of our products I can make a direct assessment myself. Some others, though, have to go through certain lab tests. In those case, I always courier it back to our head office and await their feedback. It means we need to wait around one week for production approval but we have built that into our timings and processes.
Tip #12. “Problems don’t finish after production. Supervise Logistic Paperwork!”
You do not want your shipment stuck in customs because papers were not filled in properly (which happens quite often!). I always ask for copies of all documentation (BL, packing list, commercial invoice…) and ensure there are no mistakes. My piece of advice here is “Supervise!”