China direct sourcing – DYI – 2

Last week I wrote a post called “China direct sourcing – Do it yourself”. Most people I work with have extensive China experience and really know their way around the middle kingdom. So I wrote the post assuming people who read the post have sound knowledge about the nuts and bolts of China direct sourcing.
Then I spoke to a very interesting entrepreneur, a really brilliant guy (let’s call him Tom) who came up with an awesome product. He has been developing the product for two years and now finally got a few orders and is ready to go into production. Having almost zero China experience, he called me.
After speaking to Tom, I realized that although the internet is packed with information and tools about sourcing suppliers and setting up quality control function and process, there is one thing, I see very few people talking about.
Unlike last week, if you only started your adventures in China recently – this post is for you.
For all of you China veterans, please bear with me. You just might find here a few gems that will give you another perspective and may even trigger a new action plan.
So before we begin, if you are working with factories in China for a short time, I warmly suggest you read the following few posts:
A simple and straight forward factory sourcing process
5 Issues you must know about China direct sourcing – 1
5 Issues you must know about China direct sourcing – 2
3 Questions you must ask your sourcing agent in China before you hire them

 

How to find A “good” factory

Toms industry is very price sensitive and every cent counts. So when I suggested he will adopt the China direct sourcing strategy he was very excited. I told him how we source suppliers as a service, and then our customers are free to continue working with the suppliers with or without our involvement.
“But what if the factory you find is not good”? – He asked me.
I started telling him how every sourcing professional follows some version of a process that helps them screen out factories that are not capable, not suitable or not motivated to work with their organization.
“No, no, no” he interrupted me, “What if after we’ve gone through the process the factory is still not producing good quality products and doesn’t ship them on time”?

 

What makes a factory, a “good” factory?

“What are you seeing that could cause that to happen”? I asked him instead of answering.
“I don’t know…” – He said.
Tom is not worried for nothing. There are a few pieces missing in his direct sourcing puzzle, and one of the of the reasons he didn’t figure them out yet is his own mindset.
I told him that he should stop thinking in terms of “good” and “bad” and start thinking in terms of “suitable” and “not suitable”.
Many things make a factory suitable for one customer and not suitable for another customer.
A factory that is geared to work with many mass market customers will offer low prices, high capacity and short delivery lead time. That could work well for a low-end wholesaler, but not for a boutique retailer that needs a very service oriented factory that is willing to sell small quantities.
A high precision tooling factory that specializes in small and medium size molds for shells of high-end electronic devices may be too expensive for a company that wants to buy molds for outdoor furniture.

 

How to turn a “potentially suitable” factory into a “suitable” factory?

I asked Tom to remember that a business relationship is like any other relationship. At the beginning, you get to know each other and learn each other’s personality. You learn to like the strengths and accept the weaknesses. But most of all you learn to live and work together.
You want to remember that there will be a learning curve and you want to help your new supplier reach the end of the curve as fast as possible.
The first thing you can do is communicate clearly and consistently send the same messages.
This is not taken for granted when you communicate across cultures, time zones and language gaps. There is A LOT to be said about these 3 issues. For now, let me just say you need to invest a lot of resources (mainly your time and energy) to make sure you are understood correctly and that you understand your supplier.
The more consistent and clear you will be, the faster your new supplier will learn what you want.
The better your management will be, the faster you will have a supplier that can support your business.
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If you would like to share with us your experience in China or have any questions, please feel free to contact us. We would love to talk to you about your projects in China.

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