International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Selecting the Correct Chinese Supplier By Jeffrey Plitt Supplier selection and maintaining healthy relationships with suppliers is a critical issue in doing business in China. Proper selection and supportive ongoing relationships with suppliers provides competitive advantage and reduces financial risk associated with international trade. A proper supplier selection process reduces the risk of late shipments, low-quality products and off spec items. Delivery of improper goods will damage credibility and lead to loss of revenue. The most critical aspect of long-term supplier selection is face-to-face meetings with the factory owners. Touring the factories and seeing firsthand the operating practices and current projects provides invaluable information regarding how that factory will relate to clients needs. An important issue in the factory selection process is the physical location of the factory. That location can influence shipping costs, import/export regulations, duties, project oversight and legal issues relating to the rights of a purchaser. For these reasons selected factories should be, at a minimum: located in mainland China or Hong Kong; not located in the special administrative district of Macau; not located in the western region of China (provinces of Tibet, Sinkiang, or Qinghai); and located within 50 miles of a port of entry, major rail hub, barge port or major highway. Considerations for the supplier selection Due diligence is required in selecting the correct supplier for each particular product line or venture. Companies should be evaluated as a whole and different weight given to listed attributes depending on a client’s needs and desires. Following is a list of concerns to evaluate when selecting a Chinese business partner. Employees How many are there? Where are they based? What is the experience of those working on your project? Are critical employees fluent in English? Geography How widespread are the offices (head office, local, national, regional, global)? What is the nature of the offices (sales, development, implementation, support)? Credibility Reputation in the market Main competitors? Identification of industry trends? Innovation leader or follower? Will they feed clients new products to market? Is the factory state owned or privately held? Are they ISO certified? Years in business? Gross annual sales? Export/import experience and capability? Partners Do they have partners to subcontract overflow work? What is their history with these subcontractors? What are the capabilities of these subcontractors? What quality control methods are in place to ensure on spec goods? Delivery Capability Services Can the supplier provide the complete range of services required for completing the project? Technical capabilities – design drawings, materials documentation? Typical turnaround time for this scale project? Project management? Support – follow up Graphic design – embroidery, screen print, deboss or emboss? Quality Can they produce evidence of good quality work? Does it comply with their standards? Pre-production samples – exact representation or doctored for approval? Art – clear, “would I be proud to give this to a customer?” Reject rate of like product? Resources Are there enough raw materials on hand to execute the work? What is the lead time for needed raw materials? How is the quality of the raw material verified? What is the plant capacity for this project? What is the capacity of individual production lines? What percent of current capacity is the factory operating If needed, is additional skilled labor available? Is there a contingency plan in place for resource planning? Would they be able to deal with the unexpected? Transportation availability to factory location? Processes Project management Do they recognize the proposed work’s value? Is one person responsible for the project? Project tracking and progress reporting procedures? Do they fit with your project control procedures, or can they be modified to do so? Account Management How is the relationship managed outside the context of specific projects (e.g., where a long-term partnership exists or is proposed). How are projects planned within a portfolio (client specific, repeat order, modification of reorder)? How can you take advantage of economies of scale across projects? How do you ensure reuse of technology (molds, dies, patterns)? What complaints/problem escalation procedures exist? How willing are they to invest in a long-term relationship? Are your projects kept confidential from their other clients? Are they a low-maintenance supplier? Technical Status Infrastructure Do they have the necessary infrastructure to produce the product? Are new processes needed for this project? Is new equipment needed for this project? Security If proprietary products are manufactured, what safeguards are in place to prevent theft of the intellectual property? What safeguards are in place to prevent black market enterprising? Manufacturer culture Professionalism How honest are they about problems faced and overcome? Are they suitably discrete about their other clients? Do they appear to communicate openly and freely? Flexibility and commitment How well will they handle schedule upsets, changes in requirements, etc? Integrity Do they stand by their offerings? Are they consistent in what they say? Do they stand behind any poor quality issues? Financial/commercial Ownership structure/history How new are they? Who owns them? Intellectual property Is there a clear agreement about the ownership of any deliverables? Non-disclosure Is an appropriate security agreement in place to protect the interests of clients? Competitive pricing Are their prices too far below industry standards for the project? Is pricing guaranteed for a period of time or length of project run? Schedule compliance Do they have the ability to execute within the project time frame? What concessions are in place for missing product due dates? Availability Work hours (for international support – time zones) Holidays Response times After hours emergency contacts. Jeff and Cheryl Plitt operate Plitt International, LLC, a professional firm specializing in business relations with China. Plitt International’s focus is to bring competitive advantage to small and midsize U.S. companies through international trade with China. This competitive advantage is gained through importing, exporting, and the formation of joint ventures. Plitt International has developed its reputation through the successful implementation of programs across a broad range of industry segments. Phone: 920-205-4658. Web. E-mail. Advertise on this site Put your company on this site!