Identifying a Manufacturing Partner in China

Chinese NegotiatorsOne of the most crucial decisions you will ever make in China is deciding which company you wish to work with. Get it right, and you will have a loyal long term constructive partner – get it wrong and you will suffer from months or years of frustration. Here is what we do it and why:

The research phase that we offer will help to identify potential suppliers, but it will not tell you which supplier is right for your business.
The first crucial part of the equation is to understand that desk research can only achieve a limited amount, and is only the initial part of the process – 2 crucial factors are:
•  Don’t make a decision based on price alone.
•  Don’t make a decision based on website.

Initial quotations can be very misleading and a true judgement can only be made on the validity of the quotation when there is a full understanding of their resources and their ability to deliver to the quality standards that you need. The product standards you expect might be very different to the standard products they produce regardless of whether they have an export portfolio to European and US markets. Don’t assume anything. As such, initial quotations should only be considered as guide prices.
Equally crucial is making a decision based on a website – a flashy website can impress, but that could be the only impressive asset the factory has. Whilst in our experience most websites can be reasonably accurate on the equipment that they have – there can be a huge difference between the ‘new’ photographs shown on the website and the actual state of maintenance and calibration. By the same argument, you should not dismiss a factory because of its poor website.
Our aim will be to use our Research Phase to try and use our judgement to reduce the potential supplier list from typically 20-50 factories to between 3-7 options, but the only true way to assess compatibility is to make the time to visit all of the options and asses them first hand.
It is our firm belief that visiting potential suppliers together provides the only effective method of assessing suppliers – combining your knowledge of your product and industry, and our ability to assess whether the manufacturer can be a reliable and trusted long term partner.
Visits provide 4 important parts to the equation:
1.  Allows us time to work with you first hand to build an understanding of your needs.
2.  Compare and contrast the suppliers.
3.  Assess the ability of suppliers to make to the standards you need.
4.  Assess the character of the supplier and their commitment to the project.

The visit will allow us to work constructively together to conclude whether a factory has the potential to fulfil your needs – you understand your product and what it takes to make it, we understand the factors involved in long term supply management, and whether we believe the factory is sincere in its interest in working with you, and whether they can be trusted.

Trust becomes a significant part of moving any production overseas – can you trust a factory to respect your patents and intellectual property, and have the appropriate safe guards to ensure that your product designs are protected? If the largest companies in the world suffer from ‘fake’ products on sale in the markets, how would a small company protect against copies being made. Whilst we utilise contracts as part of our business process, the reality is the contracts are only as effective as the amount of money you can allocate to defend your position. The key is to find the right supplier with the right ethics and a proven track record of supplying – this is very hard for a foreign company to assess.

In our experience, formal audits done by larger companies tend to be focused on form filling and fail to take into account any of the realities associated with a long term business relationship – companies are not all the same, and their management styles vary massively, and it is vital to focus on what is actually happening, and what controls you can witness that are relevant to your specific requirements. As such, we recommend a combination of experience in engineering and business management support for the first visit – throw away the audit form and use our translation support to talk to managers and shop floor workers.

Doing business in China is about relationships – don’t forget; the Chinese make friends first, and do business later. As such, it is important to allow time to get to know your potential supplier in a more relaxed environment – Chinese will expect to entertain you, and you should allow time to be entertained. This can involve a lot of eating and drinking, and the visitors should be prepared for ‘Ganbei’ which literally means ‘drying the cup.’ Whilst your host will be happy to see you get drunk, be very careful of the local alcohol or ‘baijiu’ which we find tends to catch out even the most hardened drinkers!

If business is to be successful in China, it is vital that ‘Guanxi’ is formed – this is the relationship from which every business decision flows. Without such a relationship, you will not have a successful time in China, and it is important to understand that time must be spent to develop such a position. We can work with both parties to develop this relationship on your behalf, and once the necessary good will is in place with a factory, everything becomes possible, and there is the opportunity to develop successful business over the long term.