The Challenge of After-sales Service in Sourcing from China

During the past 3 months, I traveled with a few clients to visit some Chinese suppliers of motors, pumps, valves and other industry supplies. As usual, we recommended the best local Chinese producers – their pricing levels were normally between Chinese-foreign joint ventures and local middle-sized and smaller producers, but their quality was acceptable for our clients.

Although the manufacturing technology for some of the products was not on the international level, the quality of most products exceeded my clients' expectations. From manufacturing machinery, i.e. widely-used CNCs, to every step of the manufacturing process, casting, machining, welding, surface treatment and packaging - all of these met my clients' criteria for qualified suppliers. The previous biggest problem affecting my clients' China sourcing strategy, QUALITY, seems now to have been effectively solved. Chinese suppliers' price and delivery, moreover, is usually comparatively better than competitors from other countries.

So what else is the problem then? The biggest problem arose afterwards. Most of the suppliers we visited did not have any agencies in any of my clients' countries, which, incidentally, made it easy to talk to the supplier directly and get lower prices. But for those products frequently requiring maintenance, it is simply not possible to rely only on the suppliers.

Let's take the procurement of pumps for mining industries as an example. The pumps are usually used in tough (i.e. high pressure and corrosive) conditions. The lifespan of the key parts will be short, sometimes 20 days to 1 month. The buyer can save 1/3 of the total purchase value by sourcing pumps from China. But for maintenance, the buyer will have to keep enough stock for the key parts. If there is not enough stock and the buyer has to order parts from the Chinese supplier, it requires lead time of at least 1 month, plus shipping time. To set up a solid agency overseas is a large investment for many Chinese suppliers, so after-sales service is not an obstacle that can easily be overcome. Yet as long as they are fully aware of the problem, with thorough communication, Chinese suppliers and overseas buyers can come up with solutions, such as

• Sourcing some general-use parts (i.e. seal parts) locally with the assistance of other Chinese suppliers
• Negotiating with Chinese suppliers to have a 'green channel' to shorten lead times
• Setting up a stock level system with supply chain management knowledge

As another example of problematic after-sales service, I can relate the following example. A South African client recently bought an engineering machine from a Chinese producer. The drive, which carried an international well-known brand produced in Germany, turned out to be faulty. The German brand, however, has an agency in South Africa, and so the client was expecting the agency would easily be able to solve the problem. Yet the client was told that it could take 3 months to get a new drive and that this was the normal lead time. The client then came back to the Chinese supplier directly and finally got a new one within 15 days.

From this perspective, the fact that Chinese companies do not have agencies overseas is not reason enough to dismiss their after-sales service completely. Indeed, for international companies who have agencies anywhere else, rigid systems and other factors can sometimes form stumbling blocks of their own. Sourcing managers will still need to invest a lot of time to conduct thorough research before they can decide where to source most profitably.

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The China Sourcing Blog is THE BEIJING AXIS online media platform to track the latest trends on sourcing and the Chinese economy. Taking on a multi-faceted, dynamic subject and carefully scanning everything from the mainstream media to the distant corners of the Internet, CSB strives to get to the bottom of all the best bits and pieces on China sourcing.

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