China Supply Chain Management Tip 1: Suppliers are extremely risk averse
I have found that one of the key behavior traits of suppliers in China related to china supply chain management issues is that suppliers are terribly risk-averse. What does this mean? Your supplier will do exactly what you say! Oh great…….right?
Sometimes, but also expect nothing to get done unless you are personally approving every single detail. Your supplier wants to get paid and wants to ensure there are no grounds to penalize his or her factory.If there is a problem, it’s your fault, not his or hers. Therefore, importing from China can become a major management issue. Very mundane details need approval which slows down the whole process.
Recently, we were hired to manage a new arts & crafts product which will be featured in a top arts & crafts retailer in the US. With an initial test-run of approximately 160 stores, we needed to coordinate between two factories (who did not work well together), multiple shipping agents, offices, and various chains of command. With so much riding on one product, naturally, the Chinese suppliers’ first concerns was to ensure that they had as little exposure as possible. This means that our team needed to double confirm dimensions, materials, quantities, etc. with our suppliers. We also needed to triple confirm subcontractors, timelines, and shipping plans. All of this took a lot of time and management oversight. Advice: In the world of China supply chain management, don’t expect your supplier to figure anything out or manage your project. You’ll need
a team leader who can coordinate with the suppliers closely.
China Supply Chain Management Tip 2: Hire Experts
Many US retailers run large risks in acquiring new products. They want large margins to compensate for that risk. New suppliers need experienced China supply chain management teams to coordinate with multiple vendors, translate, manage production, approval, samples, etc. In the long-run this saves a tremendous amount of money and helps avoid a lot of risk.
Case in point, one importer we had been working with did what most people do. They traveled to the Canton fair, interviewed a lot of suppliers, realized they needed someone local to assist in management and found the first person at the show who could do it. However, this is very dangerous!
We were brought in after production timelines were missed and massive mishaps with payment occurred. After a few phone conversations, we found out that the China supply chain management group was weaseling off money through nebulous banking transaction fees, etc. (i.e. the fees were said to be 100USD, but actually were 100RMB ($14USD). This type of behavior is rife in this industry and usually occurs at the smaller level. Expert China supply chain management professionals can ensure you’re working with the best factories and most competent people. This may cost you an extra 5%, but it also means you A) get your product the way you want it B) avoid hidden fees that actually reduce your margin.
Also, disasters happen. We have dealt with dock loader strikes, subcontractor supply shortages, and products damaged in transit. If a large retailer can cancel a purchase order, do you want a team that can quickly adapt and adjust to save your project? If things go smoothly, you are lucky.
Don’t risk your project and your business’s future.
What do you think?
Trey House lives in Shenzhen and
blogs about China trade and entrepreneurship. He can be reached at firstname.lastname@example.org