by Fredrik Grönkvist
Lead times, when outsourcing production to Asia, involves much more than assembly, packing and shipment. Yet, many importers are far too optimistic about the time it actually takes to get from deposit payment to delivered produce.
In this blog post, we guide you through the four phases of production, quality assurance and delivery. We also explain how you by simple measures can reduce the risks for serious delays, and why you need to consider the risk of quality issues.
Custom designed products, and components, often require additional tooling, such as injection molds. Prints, for example logos, may also require additional tooling, which by most manufacturers must be ordered from a subcontractor. Making, and adjusting, a new mold may take anything between 14 to 60 days, depending on its complexity. However, the tooling is usually good for more than one order, sometimes hundreds of thousands of units. In other words, this lead time can be deducted from all future orders.
When a manufacturer states a certain production time, they are not only referring to the time it takes to assemble the items. For some products, the assembly process is very brief, and is counted in days, sometimes even hours, for small quantities. However, production cannot begin the day after you’ve paid the initial deposit.
As Chinese manufacturers maintain a minimum amount of materials and components, purchases must be made from the subcontractors – which in turn may need to start production on their end. This is why manufacturers in most industries hesitate to set a production time shorter than 30 days. Then again, the production time varies greatly depending on the industry, and the volume ordered. However, in most cases, the production time is set somewhere between 30 to 60 days.
Upon completion of mass production, a wise importer assigns a Quality Inspector to check up on the goods, prior to delivery. While an inspection can be scheduled with short notice, often within 72 hours, the QC report and its photos may not be available until a day or two after the occasion. Delivery of reference samples, if required, may take up to a week, sometimes more, to arrive. All in all, it adds up.
Buyers in the United States, Europe and Australia may also be required to submit product samples for compliance testing, which is even more time consuming. In my experience, it can take days before testing companies even issue their invoice, and then another 10 to 14 days before the results are back.
This is the part is what most importers worry about. However, this is the only lead time where you can actually be quite certain to avoid delays. First, the cargo must be transported from the factory to the nearest Port of Loading. This doesn’t take much longer than a few hours, but include scheduling and waiting time, and you’re looking at one to three days.
Upon arrival in the Port of Loading, the cargo is then placed in temporary storage in a warehouse. Depending on the arrival timing, the cargo can usually be loaded on the next container vessel within 2 to 4 days. Obviously, the transit time varies entirely depending on location. Below follows an overview for a a few routes:
As the cargo lands in the Port of Destination, the cargo must first be unloaded and go through customs clearance, all of which adds on another two to three days, before the cargo can be forwarded to the final destination.
|Tooling Production||0 – 60 days|
|General Production Time||30 – 60 days|
|QC & Compliance Testing|
Quality Inspection: 3 – 5 days
Compliance Testing: 7 – 20 days
Inland transportation (China): 1 – 3 days
Transit time (Sea): 7 – 33 days
Transit time (Air): 4 – 10 days
Inland transportation (Local): 1 – 2 days
|Total||46 – 180 days|
As if what you just read wasn’t bad enough, it does get worse. Many Chinese manufacturers are all but masters of time management. Delays during the production is anything but unheard of. Yet, it is possible to at least make sure that its not your order that’s put on hold.
Chinese suppliers rarely hesitate to take accept new orders, even if their production plan is already filled to the brim. After all, once a buyer has wired the deposit payment, they are stuck, and will think twice before taking their business elsewhere. Yet, what you can do is to make sure that it’s the other sucker that gets his or hers patio furniture delivered in late October, rather than you. The solution is something as simple as a late delivery clause in the sales contract, written as follows:
If the entire batch of products is not completely manufactured, packed and made ready for inspection, within XX days (counting from the date of the deposit payment), a deduction of US$XXX shall be made from the balance payment, for each consecutive day, until this requirement is fulfilled.
In all honesty, it is still not an easy task to enforce a breach of the late delivery clause. That said, this has saved our clients from delays for years, and I cannot remember a serious reported delay for at least the last 3 years. Considering the number of clients, and orders, we’ve managed since then, I dare to say that it works quite well. Still, it does make sense, even from the supplier’s perspective.
Imagine that you, as a factory owner, can’t keep your production schedule and must choose between two buyers. The first has no late delivery clause, perhaps not even a sales contract, while the other requires a daily deduction of US$500. I dare to bet you’d prioritize the latter.
A Late delivery clause is likely to make the supplier think a few times before putting your order on hold. However, the more serious delays are often caused by factors, outside of the suppliers (direct) control. A statement I often make while writing for Chinaimportal.com, is that quality issues are certain. The question is not if, but how severe they’ll be.
Serious quality issues, both cosmetic and functional, may sometimes not be discovered until the later stages of production, or even after the entire batch is packed. In a situation where a high number of defects are discovered during the pre-shipment quality inspection, the only wise decision is to start over from scratch and order a remake. Same goes for compliance issues, in case your product fails such testing.
Fredrik Grönkvist is the co-founder of ScandinAsian Enterprise in Shanghai. Since 2010, he and his team have helped hundreds of companies worldwide, primarily in the EU and US, to develop and manufacture products in China. He is also the main contributor on www.chinaimportal.com, a leading knowledge base for small- to medium-sized enterprises importing from Asia. For further questions, you can contact him on www.chinaimportal.com/contact-us/.