Save Money in China GUARANTEED!!

Wednesday, September 6, 2006 0:30

In a land where nothing is guaranteed, you are in for a treat!  After reading this blog post, you will have a set of tools where you are not only able to save money… but time too.  GUARANTEED.  

China is a place that should be considered as part of nearly everyone’s strategy now.  That is not to say that everyone will benefit from China, but the ability to find benefits as part of a larger strategy needs to be explored.

For many executives of manufacturing companies, the first strategy that comes to the surface is outsourcing part of the supply chain process to China through contract manufacturing or sourcing.  In the case of many industries, this has been an effective strategy that many of the world’s largest companies have employed successfully.

It starts off with a search of service providers and manufacturers that can assist, progresses to an RFQ, is followed up by the selection of one or two potential providers who to enter final negotiations and possibly site visits with, and hopefully after all that a P.O. is issued.

It is in this process that I GUARANTEE you can save time and money.  EVERY TIME. GUARANTEED!

I know that we are told to believe that there are no free lunches in life, and that if something sounds too good to be true, then it probably isn’t true. 

However, this GUARANTEE comes with a cost.  It will require firms to look at their processes for identifying, selecting, and managing providers and suppliers.  It will require taking the time to learn more about each process and implement more direct strategies.

So, without further adieu, I offer the following steps to GUARANTEED savings:

1) Know what you want to gain by going through this process:
– What is the end game?
– How much money must be saved before moving?
– Should any move involve a gradual shift from current suppliers to new suppliers?
– Is a higher cost acceptable until full volume is moved over?

2) Construct a clear RFQ:
– What are the material specifications?
– What is the usage of the product?
– What is the potential volume?
– What are the order sizes and frequencies expected per the volume expected?

3) Send drawings and samples
If there is one thing that slows down the first processes, it is a supplier that does not have a clear idea of what the product is.  Often clients will send a picture, or point to a website, to give suppliers an idea of the product. THIS IS NOT EFFECTIVE.
Send 2-3 samples to a service provider or 1 to each factory with drawings

4) Specify packaging requirements:
– Does the product need to be shipped in retail packs, or can it be sent bulk?
– What size boxes are your currently using?  How many products can fit into a box?
– Do you prefer palletized or unpalletized?
– Does the product need to be crated or is standard 3 ply corrugated the standard?

5) Send artwork:
While not part of the initial package to be sent (A sample is usually enough to supply first quotation), having your artwork ready to go will significantly improve the efficiency of the process.

6) Be selective in who you send the quotation to:
Most likely as a result of hearing dozens on horror stories, companies will send spam RFQs out in the belief that having 20 quotes is better than 3.  In reality, this will confused the process and significantly slow things down.

Through the internet, one can check the histories of many manufacturers and service providers.  for the cities of Shanghai, Beijing, and Guangzhou one can also check through the various chambers of commerce (Shanghai, Beijing, or Guangzhou) or commercial Services to learn about reputable firms.

7) Check your gut:
With the above steps taking anywhere from 1-6 months, you should have had a significant amount of communication with the other party who is effectively going to become your supply chain partner.
– Do you like this person, or do they just have the best price?
– Would you hire this person in-house under normal conditions?
– Do they respond to your requests for more information?
– Do they understand your concerns and work with you to work through them?
– Can they do what they say they will?

8) Build relationships and trust:
Many buyers will do all they can to drive down prices and will always be looking for a better deal.  this is a strategy that often leads to short term gains and long term pains as relationships are never stable, and both parties are suspicious….  A situation which often leads to supply chain instability and time/ money spent to find new suppliers.

Working with a supplier and developing each other’s businesses is a far more effective strategy that will lead to tighter relationships and long term stability.  With China 101 rule #1 being relationships are everything, the above is the goal.

9) Understand and work with relationships when there are problems: 
Suppliers will always have a learning curve to climb, and understanding that is critical.  No one is perfect, and no process is.  There are bound to be issues in quality, and it is not always because a supplier is trying to use lesser quality materials or processes.  Sometimes, it is a simple mistake, and at other times it is a serious issue that needs to be talked through. however, if at all possible, one should not simply walk away from the relationship as no one gains from that, especially the buyer.

 

Follow the nine steps above, and I GUARANTEE you will save not only money, but your time.  the fact is that there are numerous opportunities for companies large and small in China. Often times though, due to fear of begin cheated, a desire to always get the best price, or a lack of understanding in the process, a lot of time and money is spent unnecessarily.

When going through the process for the first time, it is critical to make sure that you are comfortable with the process and the suppliers assisting you.  Once a history has been established, then relationships and supply chains can be managed as necessary, and hopefully that will mean an expansion of both for all involved.

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2 Responses to “Save Money in China GUARANTEED!!”

  1. chinalawblog says:

    September 6th, 2006 at 3:41 pm

    You are dead on.

  2. Etienne says:

    May 24th, 2007 at 10:45 am

    That is the way it needs to be done, indeed. Everytime we or one of our clients tried to cut the angle and skip one of these steps, we regretted.

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