It is a widely held belief today that businesses don’t compete, supply chains do. The role of product procurement in business sustainability and growth has become increasingly significant. Shorter time-to-market, superior product and service quality, and lower operating costs are game-changers for just about anyone that sells on the internet. The jolt from the Novel Coronavirus pandemic to supply chains underscores the importance of making product procurement resilient to risk.
Buyers relying on the tremendous opportunities provided by China – the world’s factory – also need a procurement plan that reduces uncertainty, ambiguity and market volatility. Finding a supplier from a low-cost country may seem straightforward on paper, but it is seldom simple and poor decisions can spoil your chances of building momentum early on. An understanding of what is involved in sourcing from China usually encourages buyers to be more open-minded about engaging an agent that has boots-on-the-ground in major manufacturing zones. Here are some tips on forming relationships with Chinese suppliers and the advantages of going through a China purchasing agent.
Know our options
Alibaba is probably the first place you’ll check for Chinese suppliers or manufacturers. Some of them may be trading companies, so verification is important. Use the detailed supplier information the website provides to conduct due diligence at your end. Call them up. Check their business license. Ask for references. Do a background check. Cover all the bases.
You also want to do a factory visit. Alternatively, you can have a China procurement agent act as your intermediary. Agent services are usually comprehensive, and recommended if you’re new to sourcing from China and navigating unchartered waters.
Buyers who are in it for the long haul and have some import/export experience may be able to connect and work with Chinese manufacturers by themselves. It may involve visiting the Canton Fair and maintaining ongoing relationships with China-based businesses to keep their venture on track. Even if they face a negative experience eventually, they have some sort of fallback by maintaining these relationships.
Adapt to the Chinese way of doing business
There are stark differences in Western and Chinese styles of working and doing business. While companies in Europe and the United States are likely to enforce rigid rules and written principles, China’s businesses emphasize relationship-building and internal cohesion.
Building harmonious relationships with your Chinese supplier from the outset is important. Repeated social interactions can sustain mutual trust and understanding, laying the foundation for a long-term relationship.
Across-cultural comparison will tell you that China’s businesses are restrained about sharing bad news (ex: there may be a production delay) and prefer an indirect style of communication (a nod of the head may mean a ‘yes’ or ‘I get you but I don’t agree’). Figuring out and getting comfortable with such non-verbal cues and indirect language takes time.
Mandarin fluency will obviously work to your advantage but the question to ask is: can you make the time to initiate and coordinate dialogue as and when needed? There may instances other than a dispute where you need to communicate personally with your Chinese manufacturer. Determine the limits of the time and effort you can spend on establishing and maintaining a mutually-beneficial relationship with your Chinese supplier.
Create a strong contract
A well-drafted contract in Mandarin will protect your business interests. It should include a provision for informal negotiations, so you can resolve any dispute via mediation or arbitration. Suing your supplier for breach of contract can be complex and time-consuming not to be mention emotionally overwhelming. Working it out with your manufacturer is a better option as you avoid the costs thereof and don’t have to deal with a case that drags on and on in court.
However, in an instance where your supplier is uncooperative and has acted egregiously, you can consider pursuing legal action. When you do, the legally binding agreement you signed will determine whether the outcome is favorable or against you. If your contract is not specific with regards to the expected quality of goods ora third-party pre-shipment inspection, you may find yourself on the losing side.
Get the quality assurance you need
Quality inspection should invoke the image of an inspector who is physically present on the factory floor and reviewing production and product quality. Ideally, this individual has experience evaluating tooling and capacity, technical standards, R&D, security and working environment. When the raw materials/components have arrived, a second check is done before the materials head for assembly lines. Ongoing monitoring at different production stages offers more encouragement that your products will turn out exactly how you wanted.
Can you inspect the manufacturing process and quality control mechanisms at your Chinese manufacturer? Most probably not. Buyers rely on China procurement agents for factory audits and quality checks at different production stages. This way, any issues or misunderstandings grasping product specifications can be addressed quickly.
