By David Dayton in "Silk Road International"
"Sorry it is not the same as the sample. We hope that you'll accept it anyway."
"Your QC is too strict. No one can expect to be 100%."
"This is still within tolerance levels." (No tolerance levels were ever given.)
All three of these comments were said to me this last week in discussions about active projects in China. All three of the suppliers then moved to the dreaded show-down level of negotiations: "We won't make it again. You can accept this standard or cancel (part of) your order."
I'm not sure how this type of brinkmanship helps establish long-term relationships or encourages buyer-confidence—which is what every Chinese supplier I've every worked with has told me is their goal. I'm also not sure how anyone would deal with this if they were not in China with the ability to sit down with the factory and have face to face discussions about the issues.
Here's what we did in each of the three cases.
1. "Please accept it any way." This was the weakest of the three positions and really more of a pleading than a demand. The factory knew and admitted that they we wrong and were hopping more than demanding that we would help them out here. Now of course there are some things that we really can do to help out. Sometimes the colors aren't exactly right, sometimes there are other nonessential components that can be less than 100% and the product will be still meet the overall standards demanded. But sometimes, as in this case, the fact that production was significantly different than the sample components was completely unacceptable. This is both a rather important component and a costly piece—I understand why they don't want to do it over again.
So when we didn't agree with their request and rejected the product they had no other option but to force the issue and they went straight to "Fine, if you won't cooperate with us, then we won't do it all. Either accept the product as is or cancel your order."
This is a pretty risky position for them to take, considering that the deposit that we paid does not cover the amount of time/money they've already invested into getting the order to this point. They were banking on us caving in on either quality standards or additional monies to redo it (or both!). They assume that we don't know what their position is. They are also assuming that since we've placed an order with them we're committed to them and only them. They think that now that we've paid we're so involved that a price change, a delay, a change in product standards will result in us freaking out but then eventually agreeing (because, what choice do we have?!).
So we called their bluff. We do indeed have a second factory option, though we'd rather not use them unless we absolutely have too. We do have approved samples from this other supplier too. We just didn't place the order with them (this time it was price, sometimes it's quality, sometimes it's the ability to work/communicate easily). And, mostly likely, if we do have to move it will mean that we would lose our deposit, but that's better than getting crappy product rejected by a client who then wouldn't pay.
So as we assumed, they backed down, and found an excuse for why it was wrong the first time (a manager, whom we never met but was in charge of our project (?!?), has just been fired). They saved face, we get our product (re)done correctly and the exchange was relatively pleasant and not too confrontation, all things considered.
Of course they ended this round of negotiations with "OK, but next time the price has to go up."
I love that cooperation in China means that buyers accept less than what they contracted for. It's never the other way around, though. Factories never add more into their production costs then they originally contracted for. Yes, sometimes you'll get suppliers to agree to do additional things for you. But if they do, then you know that one of two things has already happened. One, they knew the expectations even though it was not spec'd out—remember they do these same things for hundreds of buyers every day. They know what you want, probably more than you do. So they included everything that is usually expected in the bid—then they wait for you to bring up each and every item in your spec list. Or, two, they are adding more to the final price and won't release your goods until you pay up.
2. "We didn't really believe you when you said you were going to be this strict." Yup, we get this all the time. I think that only two times in the last decade have I been out "QC'd" by a factory—I can remember specifically each time too. It almost never happens. This time, we did exactly what we said we would do (use approved samples for production QC) and told them that we expect them to be able to do the same thing (namely, match the sample standards in production).
When we did QC and in all discussions afterward, we stuck to the same position, "match previously approved sample standards." But production was NOT up to snuff and they didn't want to redo it. So they went to "we can't do it any better than this" and "your QC is just too strict."
Whenever we hear this our questions are always the same, 1. If you can't meet this standard in production, why did you sign a contract saying you could (and why did you repeatedly tell us you could)? 2. How come you can do it for a sample but not for production (and if it is a different process, why did you bid on one process but plan on using another)?
Unfortunately, the answers are never what we want to hear. And the bottom line is they either don't think they can do or just flat out don't want to do what they've committed to. This of course, is unacceptable for us. We expect to get what we've contracted out for.
This time we invested in some additional in-line QC, helped them to fix the molds (we brought in an engineer friend from another factory). It will take us at least 2 extra weeks to do this right, but we will do it right and for no more additional cost than our time.
3. "Oh, by the way, our machines/engineers can't physically meet the requirements that we've discussed with you for the last three months and that we agreed to verbally 100 times and that we just signed off on in our contracts." Yea, I figured as much. But, really, if you knew that you had predefined tolerances and you knew that we were going to very strict in QC, why didn't you inform us of your tolerances (and why did you contractually agree to our higher standards)? To me this is actively dishonest—which is significantly different from just honestly finding out about or having issues later on in production.
There are honest physical limitations that can't be exceeded, I know this. I'm thrilled when factories tell us about these limitations too—in fact, we ask for this type of info from each factory before we ever do a project. But before we pay the deposit we usually are just told "no problem." Of course, after we pay the deposit factories usually find "new" limits that apparently didn't exist before.
For this problem there were two solutions left to us. One, we change our standards (not really an option). Two, we switch factories. We picked #2. We had a back up, but our back up couldn't meet the standards either. So we had to find a third, and eventually a fourth factory before we had what we wanted exactly—price, quality, timing, communications, etc.
This time it didn't cost us anything. We got our deposit back and were able to move on. Sometimes this means you sacrifice your deposit if you leave or your standards if you stay (which is the goal of the supplier in the first place). This is bait and switch at it's worst—they know what they can't do but want the order and are banking on the fact that they can either a) get close enough that you won't know or will accept it anyway, b) will get far enough down the road that you can't back out, c) will either get you to agree to lower standards or pay a deposit and then leave without taking product. Few and far between are the factories that admit that they over estimated their abilities and will admit it and give you your money back—if you do find one of these, keep their number handy. You can never know enough honest suppliers.