By Adam Gilbourne
As the founder of Easy Imex – one of the largest China-based, Western-run sourcing companies – I’ve experienced almost every problem imaginable when dealing with Chinese suppliers. So that you can avoid some of the same mistakes that I’ve made along the way, here’s my top 10 list of things I wish I’d known before coming to China.
Yes means maybe, maybe means no, no means no!
In China, especially in the business setting, people don’t like to say no! So when you ask a Chinese factory about whether they can manufacture a product, rarely will you get an answer of no! The Chinese philosophy towards business is to grab the chance while it’s there and give it your best shot.
China manufacturing and poor quality control often go hand in hand
While Chinese manufacturing standards have improved dramatically over the past 10 years, issues with product quality remain a major concern for importers.
As such, coming to China without doing quality control inspections is madness! If your margins are so tight that you can’t afford a $250 pre-shipment inspection – then you’ve either found the wrong product, you’ve failed at price negotiations, or you haven’t budgeted enough in the first place.
Assumption is the mother of all stuff-ups!
One thing I’ve learnt during my time living in China is to NEVER ASSUME ANYTHING. This applies to even the most basic of things.
Whatever your factory tells you, never assume it’s true. Seeing is believing. Don’t assume your factory will do what they say they will do, assume the opposite! (Hence why quality control is so important, more on that later!)
Regions of China
China is a huge country. Looking at a map of the world, China’s landmass basically covers Western Europe. While manufacturing is concentrated on China’s eastern coastline, for various reasons different products are better bought from different regions. If you’re buying your product in the wrong region, there is a high chance you’re at a price or quality disadvantage.
Generally speaking, the south of China (starting from the bottom of the map of China) around Guangdong and Shenzhen is the region of China that specializes in high tech products.
As you move further north, towards Fujian, Shanghai, Hangzhou, then further north after that, Qingdao, Hebei etc., products generally become ‘bigger’. So as a basic guide, just remember small products in the south, big heavy industrial steel fabrication in the north! Read this article for a detailed breakdown of China’s manufacturing geography.
When you’re importing, assuming you’re selling product to make money, staying in stock is important. As simple as this sounds, I’ve seen many importers screw up year after year due to poor management of their supply chains. Consequently, businesses are out of stock during peak season and are overburdened with unsaleable stock during the off season.
There are various holidays in China that will cause delays, the Chinese New Year and May, October holidays being the main ones! You need to plan in advance to get around this!
Capital requirements and order volume
When you’re importing, it’s really a case of Y. Many new importers come to China and want to dip their toe in the water before committing big bucks to a project. This is a flawed strategy. By starting small, you are forced to deal with less professional manufacturers. This makes quality control hard. You are also not a priority for the factory because your order value is small. If a larger customer comes along, expect to be kicked to the back of line. You also have far less leverage with manufacturer with price negotiations and contract negotiations.
How much is it going to cost to import?
Before you buy anything in China, it’s important to understand your LANDED COST. That is, after you pay the factory in China, what is the unit price per product by the time it arrives at your door.
You need to be aware of the sample costs, incoterms, quality control costs, logistics costs, relevant customs duties, and sales taxes (GST, VAT)
My number one tip to any importer is to do some form of quality control. Importing goods from China without doing quality control is like playing Russian roulette! You might get away with it sometimes, but the risk of failure is high! Why people take these risks I will never know!
What you need to remember when it comes to importing from China is this: it’s a one-way street. Meaning, that once your goods have left, they won’t come back (for complex reasons such as the factory won’t accept returned product and government policies to re-import into China make it financially burdensome).
Simple things are very complex
Inexperienced importers often underestimate the technology involved in manufacturing the simplest of products.
Also, don’t assume that your manufacturer understands how your product is used.
On the ground presence
There’s an old saying in China that the mountains are high and the emperor is far away. Essentially it means that local officials will disregard the wishes of the central government in distant Beijing.
The same is true of the relationship between Chinese manufacturers and buyers in the West.
Chinese manufacturers will use this tyranny of distance to distort reality and deceive foreign buyers who don’t have a local presence in China. For instance, they can outsource production to alternative cheaper factories. They can raise prices and blame it on local conditions influencing raw material costs. They can blow out lead times and blame it on the weather, power outages etc.
If your supply chain is complex, there are countless opportunities for the factory to pull the wool over your eyes. The best way to solve this problem is to have a representative acting on your behalf on the ground in China.
Adam Gilbourne is the founder of Easy Imex Ltd and helps importers to source product & manage their supply chain in China. He writes advice for importers on the Easy Imex blog. He lives full time in Shanghai, China. You can contact him at email@example.com.