15

WAYS TO AVOID PROBLEMS

WITH YOUR SUPPLIERS

How to structure your buying and QA processes,

and how to communicate with Chinese suppliers


Wri;en by Renaud Anjoran
Founder and General Manager, Sofeast Quality Assurance
Editor, Quality InspecEon Tips


15 WAYS TO AVOID PROBLEMS

Problems with your Chinese suppliers can quickly lead to a disrup8on of your business. Here is a list of 15
strategies to avoid this situa8on:


Goal Quality control CommunicaCon Buying process


Select a reliable supplier Keep wriKen records Beware of subcontracCng
1- Preven)ng
problems
Visit the factory oOen Use P-P samples wisely Protect your IP


Check the materials Avoid too many emails Dont pay too early
2- Solving problems
as soon as they appear
Inspect early in the cycle Be polite at all Cme Use a real contract


3- Limi)ng the Sort defects out Never say never again Have a backup ready
impact of problems

The format of this table was inspired by a framework called the Haddon Matrix (commonly use in the eld of injury preven8on).
2
PREVENTING PROBLEMS

1. Select capable and reliable suppliers 2. Beware of subcontracCng

Many importers select a supplier on the basis of a You might be developing a product with a supplier
sample, a price, and a personal feeling. This is a who does not know where to manufacture it yet.
mistake, because these aLributes are not indica8ve They will not tell you about it, of course. But it is your
of good manufacturing skills. interest to ensure that it does not happen.
Poten8al suppliers should go through a rigorous Even if you have conrmed that you work directly
screening process. The longer you expect to work with a manufacturer (with a background check), your
with them, the more you should invest at this stage. order might be subcontracted to a small workshop
First you should look for suppliers that will be a either because they run out of capacity, or because
good t for you: the right size, the right type of they want to widen their prot margin. When this
customers, the right focus (low cost vs. high happens, you run high chances of a quality disaster.
quality), sucient development capabili8es, etc. So, what can you do to prevent it?
Second, you should check what they claim, by Make it very clear to your supplier that
running background checks on their company produc8on is to take place in the approved
and by calling two of their long-8me customers. factory only, unless they get your wriLen
Third, you should visit the factory and/or pay for authoriza8on to do otherwise for a par8cular
a capacity audit performed by a third-party order. Get a wriLen commitment and/or place
quality assurance (QA) rm. this term on your purchase orders.
At the end of this process, if all runs smoothly, you Observe the produc8on process if you can be
will have one best candidateto use for a trial order there physically, especially for the rst run. You
and a few others to keep aside (see part 14). can also send an inspector who will report on
Even if you place one-shot orders, you should spend the loca8on of produc8on (see point 8).
a liLle 8me to check if a poten8al supplier is Try to avoid your suppliers peak season, as well
legi8mate and experienced. as the month before Chinese New Year.
3
PREVENTING PROBLEMS (conCnued)

3. Keep wriKen records of all promises 4. How to use pre-producCon samples

Few Chinese salespeople will take the 8me to clarify Descrip8ons and photos only go so far. You will want
what exactly you are paying for. They are oben a perfect sample before produc8on starts.
reluctant to do it in a detailed manner. So this is How to communicate during development?
something either you (or your QA rm) must do. When you receive development samples that
Here are a few 8ps to do this the right way: are not sa8sfactory, take clear photos of the
When you have a mee8ng or a phone problems. Then place them in a document along
conversa8on, take notes of all the important with arrows poin8ng at the problems. Even
points. Then send it by email for conrma8on. beLer, write OK or NO. This way, all the
Ask many ques8ons about topics you are not factory technicians can understand it.
familiar with. If you do not know what type of Once you approve a perfect sample, make sure
packaging is appropriate, ask your supplier for the factory also has at least one for their
sugges8ons and photos of similar orders. reference, and send one to the third-party QA
Before you issue the order, organize your notes rm if appropriate.
in a logical manner (materials, product specs, How to set the standard for touch & feel?
prices, payment terms, 8ming). Put it all in a You should try to dene your quality standard as
Microsob Word document and have your precisely as possible in wriLen (see point 3),
supplier chop it and fax it back to you. including the photos of defects that you have taken
Once the salesperson gets your master document, on development samples.
she will (hopefully) translate it for the factorys But the touch & feel of the product is oben dicult
technicians. Use as many photos as possible, to avoid to describe. The solu8on is to write produc8on
misunderstandings. should be conform to the approved reference
Your quality standard should never be nego8able. If sample and to get a wriLen conrma8on of this
you accept substandard quality once, the factory will point before you authorize produc8on.
remember it and will see it as your real standard! 4
PREVENTING PROBLEMS (conCnued)

5. Visit the factory frequently 6. Dont put all your IP in one companys hands
In China, face-to-face mee8ngs are much more Importers are oben afraid of a Chinese manufacturer
produc8ve than emails or phone calls, especially if reverse-engineering and copying their products. But
you can be in front of the right people. most cases of IP infringement involve the original
You are probably in contact with a salesperson, who supplier himself. It is not surprising, since they
has a limited inuence in the organiza8on. If you can, already went through the hard work of product
come regularly to China and talk to the middle development and they have a sense of their buyers
managers (who allocate capacity and set priori8es) business model.
and/or the technicians working on your orders. If you do not want your supplier to turn into your
You should set the right tone from the beginning: compe8tor, you should take a few precau8ons.
Show that you care about your supplier. Ask First, be aware of common legal strategies. You
ques8ons to understand their situa8on, and try should register your trademark in China before
to take it into account in your decisions. This will produc8on starts. And you can have your supplier
help you be categorized as a good buyer. sign a non-disclosure/non-use/non-circumven8on
More and more Chinese suppliers have realized agreement agreement. (See point 12).
that they need to cul8vate a certain number of Second, use non-legal strategies. If you are ready to
good buyers and treat them well. It does not pay a liLle more to reduce IP risks, you should
take much to achieve this status. structure your supply chain yourself and place a
Do not let the supplier make you feel obliged. rewall between its major elements:
Many purchasers get invited to lavish dinners, Find and qualify the components suppliers,
massage sessions, karaoke nights and more. This Distribute the processing across several
is a trap! If you accept anything over the top, factories (located in dierent ci8es),
you will not be able to do business in a normal Give the nal step (assembly & packing) to a
way (e.g. sending an inspector, enforcing manufacturer that does not know the other
penal8es for late shipment). factories involved. 5
SOLVING PROBLEMS FAST

7. Check materials before nal assembly starts 8. Check quality early in the manufacturing cycle
There are two major risks with materials and If you wait un8l the whole produc8on is completed
components: and you nd quality issues at that point, it might be
1. The factory might deliberately purchase too late. Some8mes re-working the defec8ve goods
substandard components to save money; takes weeks. And they might all need to be
2. Chinese factories seldom check the quality of reproduced, which takes even longer.
the components delivered by their own So you should send an inspector as soon as some
suppliers. The main reason is that personal nished products get o the lines. This way, issues
connec8ons are oben involved, and the act of are no8ced early, the factory can implement
checking quality would hurt some feelings. correc8ve ac8ons, and you can adapt your planning.
It means your product might not be up to specs, or it The inspector will use the specica8ons you have
might contain unsafe (and prohibited) substances. wriLen (see point 3) as a checklist, and if possible an
approved sample (see point 4) for reference.
What can importers do to avoid these risks?
An inspec8on during produc8on is also an easy way
If possible, nd the sub-suppliers yourself. The
to draw a few samples from produc8on and to send
safest method is to place orders directly with
them to a tes8ng laboratoryunless you have
them, but it will take you some 8me and will
certainly be more expensive than lemng your already done so when you checked the materials.
supplier source the components by himself. The most important is to perform quality inspec8ons
Another solu8on is to catch it early by sending on every produc8on batch. Chinese factories are
famous for cheapening the product when the buyer
an inspector when the main materials are
starts feeling more condent.
delivered, and before produc8on starts. If you
control this point aber the components are If you can only perform one quality check, do it when
embedded in the nal product, it might be too all is packed (it is a nal random inspec8on)
late. because the factory cannot hide any defec8ve goods.
6
SOLVING PROBLEMS FAST (conCnued)

9. Communicate mostly in person / over the phone 10. Be polite at all Cme
So you, or your inspector, has found a problem. Some buyers are disrespecoul towards their Chinese
What should you do? suppliers, par8cularly when problems pop up. It is
If you are there yourself, everything is easier. You very ineec8ve. Be asser8ve, but be polite.
can give them immediate feedback about what is You should also avoid asking tough ques8ons in a
acceptable and what is not (and you should take direct manner. I remember one of my clients who,
photos and write a note about it). aber being shown a factorys mistakes, placed some
If you are not on site, you should send emails to samples on a table and asked why did this
convey informa8on (photos, lists of problems) and happen?, didnt you control the inputs, as you
to ask for a response. Then you can call your contact promised us?, why didnt the line operators catch
person and ask them when they will respond. it?, and so on. Big mistake. My client alienated all
Do not send and re-send long emails. If you apply too the key people working on his project.
much pressure, you will probably not get a response In such cases, the supplier quits. He might not walk
to the point. Similarly, be careful not to place blame out of the door, but he shuts up and waits for the
on any par8cular person. end of the mee8ng. Much worse, he will not give the
The natural tendency of Chinese suppliers will be to same aLen8on and the same priority to your orders
any more, because you personally oended him.
jus8fy themselves and nd an excuse (which might
not be true). But the most important is to get them If the factory is clearly at fault, you can request
to formulate their next correc8ve ac8ons and to correc8ve ac8ons and check their progress. Business
commit to a 8me frame. is business, and you should defend your interests.
If the factory did not respect something they But keep in mind that Chinese people tend to mix
promised (see points 3 & 4), you are en8tled to call professional and personal rela8onships.
for a re-inspec8on. That extra cost can be re-invoiced Note: more and more exporters have goLen used to
to your supplier. It is usual prac8ce. foreign buyers behaviors and dont get oended
easily.
7
SOLVING PROBLEMS FAST (conCnued)

11. Release payments aOer milestones are reached 12. Sign an enforceable contract
The main payment methods are TT and LC. Your purchase order protects your supplier more
Payments by bank wire (TT) usually involve a than you. If you want a contract (also called OEM
30% deposit before the materials are ordered, agreement) that you can enforce in a Chinese court
and the transfer of the balance aber shipment. of law, it should be drabed by a specialized lawyer.
The most important is that the nal payment Most of the terms are fairly standard, but they
takes place aber product quality was conrmed. should be customized to your situa8on:
Payments by leLer of credit (LC) are more The wriLen descrip8on of the product (see
complex but more protec8ve of the buyer. You point 3) will be aLached in appendix;
should include a cer8cate of quality control by Subcontrac8ng (see point 2) can be forbidden;
[your nominated QA rm] among the Payment terms (see point 11) can be formalized;
documents to be provided by the supplier.
IP non disclosure (see point 6) can be requested.
Payment terms are customized to each transac8on.
For example, a payment before development, for The major benet of having a contract is the leverage
it gives you in front of your supplier. This is a great
opening special molds, is common.
tool to avoid the common situa8on where the
However, the principle is that you should keep some supplier waits un8l the customer has no choice but
leverage in your hands as long as possible. authorize shipment to deliver to his own customers.
In prac8cal terms, this means you owe some money Of course, clarifying your product requirements and
to your supplier un8l shipment (for TT payments), or gemng your suppliers chop on the contract has to be
you set strict condi8ons (under LCs). done before you wire a deposit (or open an LC).
A couple more 8ps about payments: Drabing and transla8ng a contract is not cheap, but
Never transfer money to a private account; it is usually a one-8me fee. It should be structured so
If the account name is dierent from your that only the exhibits (product specs, purchase
supplier name, ask for a wriLen explana8on. order) need to be changed from one order to
another. 8
REDUCING THE IMPACT OF PROBLEMS

13. Sort defecCve goods with a 100% check 14. Line up a backup factory
Lets say you found that 40% of produc8on samples Some regular suppliers will prove to be
are defec8ve. At this point, you have three op8ons: untrustworthy: drop them as soon as possible
1. Cancel the order and lose your deposit; because they will probably do it again. In this case,
2. Count on the factory to do the right things (sort you will need a backup factory.
out and rework/reproduce defec8ve goods If you followed the recommenda8ons of point 1, you
correctly); have studied several suppliers in depth. These data
3. Take the maLer in your own hands and have are very valuable, because down the road you might
third-party inspectors do the sor8ng, and later need some of these 2nd choice factories.
monitor the repairing process. For important projects (e.g. if you pre-sold the goods
If you are in a hurry and if you cannot count on the to an important customers of yours), you should go
one step furtherby working on product
manufacturer to do a good jobor on the
development with two factories. Depending on their
intermediary to transmit your instruc8ons clearly
performances, you will select one of them. And the
there is one solu8on: bring in several inspectors to
other will be ready to hit the ground running if
check 100% of produc8on.
necessary.
Then you will know precisely what can be shipped
immediately, what can be repaired, and what cannot Similarly, if you keep re-ordering the same products,
be repaired. you will need a safety stock. How much exactly? It
depends on the 8me it will take you to launch
This solu8on is generally much more expensive than produc8on in another factory. If you have no backup
a random inspec8on (as described in points 7 & 8), solu8on and if it takes 6 months to bring a new
though. It is only a solu8on of last resort.
manufacturer up to speed, you will need a lot of
stock. Or maybe a good manufacturer in your own
country

9
REDUCING THE IMPACT OF PROBLEMS (conCnued)

15. Never say never again

Most Chinese factories have a hard 8me There are 2 reasons why you should care about your
implemen8ng a good quality system and them image:
following it. A good produc8on manager can be the 1. If you purchase only a certain type of product,
dierence between sa8sfactory shipments and late chances are that your suppliers know each
deliveries of substandard products. Do not draw other. They share the names of customers to
deni8ve conclusions about a supplier. avoid. Dont be on that list!
If you experience quality issues or delays, it makes 2. When your best suppliers raise their prices
sense to stop working with that factory. But dont above what you can aord to pay, or when their
burn the bridges. Dont cancel orders or refuse reliability suddenly deteriorates, you might be
payments simply to give them a lesson. happy to work again with an old supplier.

10
CONTACT ME

I love gemng feedback and ques8ons from readers. Dont hesitate to contact me!

Renaud Anjoran
Email: ra (at) sofeast.com
Tel: +852 8175 8177

You can get more ar8cles about quality assurance in China at www.qualityinspecCon.org.

For more resources (infographics, ebooks, ar8cles) about quality assurance for importers, you can go to:
www.sofeast.com/resources.

11