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Sourcing from China. I feel happy, Oh so happy.

By Dan Harris in 'China Law Blog'

I admit it. The more depressing and violent and gritty the movie or the TV show, the more I like it.

And as a lawyer, I take perverse pleasure in using gruesome stories to scare people straight. At my last speaking event, I told of how my old law firm had lost its insider standing with a Russian province when our paralegal's father, who up until that time had been a key Vice-Governor in that province, came home to someone who threw acid on him and then killed him with an ax. The moral of that story? Guanxi is usually fleeting.

But for some unknown reason, I am in a light mood right now (maybe it is because I watched the regular version of Law & Order tonight, rather than my usual Special Victims Unit fare) and so I am going to write not on the perils of outsourcing, but on the successes.

And for that I am going to rely on a recent post by Clara Muriel Ruano at The Foreign Entrepreneurs in China Blog, entitled, "Sourcing from China: Who are the Happy Buyers?"

The post starts out referring generally to the litany of China sourcing horror stories and then segues into a conversation with somebody "who is heading a representative office that helps source a number of goods to its headquarter." Okay, I cannot resist with one downer comment. This person with the Rep Office that sources goods to its headquarters. They are operating on borrowed time because this sort of activity is, unless really limited, not appropriate for rep offices any more and since China is cracking down on this sort of thing...

Turns out this Rep Office is doing well with its China outsourcing and that made Ms. Ruono think about the people she has met "that could be (quite simplistically) described as "happy buyers" and realize they share the following characteristics:

1. "Happy Buyers" are into building long term relationships

a) They happen to be genuinely looking for "win-win" situations because they want (and more importantly need) long term suppliers.

b) They focus on strengthening the relationship because they are aware that not having big purchase orders they need to leverage on the relationship -- and with that objective in mind, they make sure that they visit their suppliers very often... because in China things don't get done by fax.

2. "Happy Buyers" approach price negotiation very professionally

a) They understand their supplier's cost structure (how much goes into labor, materials cost...), and

b) They track commodity prices that are involved in their products

So, when a supplier comes back saying "I need to increase the price" they can:

a) Assess if there is a valid reason behind the request

b) Estimate what would be the fair cost impact

c) Objectively decide if they should give in (in future orders... not for this one!)

... All of which will positively help the long term relationship and both sides satisfaction.

And, of course, there are some other very basic things in common like having the right tools in places (contracts, good quality control...)... but for the purpose of this post I wanted to focus on the two I've mentioned above.

I know the above sounds rather simple, but I think it is mostly true. Though the above will not guarantee a happy long term sourcing relationship (free of vendor fade/quality fade), the above usually is in place in most of the long term successful sourcing relationships I have encountered.

For more on what it takes to be happy sourcing from China, check out the following:

What do you think?

Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes as a source of China legal and business information.

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