Elksourcing：Questions You Must Answer to Win the Deal

China Sourcing Agent

Elksourcing：Questions You Must Answer to Win the Deal

Apr 6, 2021 by 露露

I’m constantly thinking about how few sales people really understand what their customers are buying. They know what they are selling, but they can’t explain what they are selling it for-that is why the customer is considering buying the solution and the value it creates for them.

There are a few fundamental questions the sales person must be able to answer if they want to present their offerings in a way that is compelling and connects with customers:

1) How does it help them grow their business? That is how will they increase revenues/sales, how will it help them enter new markets, regions or acquire new customers?

2) How will it help them increase their profitability? Growing revenues or cutting expenses or both increase profitability, if the sales person can’t demonstrate this, then there is no justification for the solution-why should the customer buy it, how will they get their management to approve something that has no business justification?

3) How will it help them increase the satisfaction of their customers? Creating satisfied customers helps grow the business. Creating satisfied customers helps retain and grow current customers and acquire new customers.

4) How does it help the customer increase the quality of their products or services? Increased quality drives increased satisfaction, increased efficiency and effectiveness. These all contribute the other items.

5) How does it help the customer become more effective and/or more efficient? Effectiveness has to do with doing the right things, efficiency has to do with doing them in as short a time/expense as possible. These contribute to increasing productivity and driving revenue growth or expense reduction.

6) What may impair the customer’s ability to implement the solution, take ownership, assure internal alignment, and manage all the change issues internally? Sales is about change management, while we might have the most compelling solutions from a business justification point of view, if we can’t help our customers understand and manage the change issues, both we and they will be unsuccessful.

7) Why is this important to your customers (both the enterprise and individuals) now?

These issues are important, at whatever level you are selling. The mistake many sales people make is they think, “my product is only a small component in the overall scheme of things that my customer is facing.” However, the best sales people think in terms of “for the lack of a horseshoe, a kingdom was lost.” Just think, a small part or design flaw in the Toyota gas pedal is contributing to the loss of $ millions in sales, as well as reputation. Everything we sell won’t have that kind of impact on our customers, but everything contributes in some, even small way, to the attainment of the customer’s business objectives. Understanding this, communicating it to the customer-who often may not have a clear idea themselves about their contribution to the business-will set you apart from your competitors and help you create a tight, value based relationship with your customers.

The process of being able to answer these questions requires you to understand your customers’ businesses, markets, customers, opportunities, strategies and priorities at a deep level. The process of being able to answer these questions requires you to engage your customers in a deep discussion about what they are trying to achieve.You may not be able to answer all these questions, but the more you can answer, improves your competitiveness and the value you bring to your customers. If you can’t answer any of these, then you are not creating value for your customer, you are just a “live” product catalog.

How To Import From China

Elksourcing：12 Common Mistakes of Importing from China

Apr 6, 2021 , by 露露

During the daily practice of importing from China, I’ve learned 12 common mistakes from various clients I dealt with. Here are the details:

1. Looking for the lowest price

If you purchase something below market price, you are taking very high risks. Either quality will not be up to your standard, or you are about to get scammed.

2. Letting the supplier ship without checking product quality

Once a production batch is on a boat, it’s too late. Verify quality yourself, or pay for quality inspection services. And do it systematically, at least for the first 5 shipments (after that, you can do random skip-lot QC).

3. Failing to realize that pre-production samples are selling tools

Many buyers who are surprised that samples are not representative of bulk production. But getting an order and a cash deposit is one thing, and manufacturing the goods is another thing! Your job is to check whether production is up to the pre-production sample.

4. Displaying obvious distrust towards one’s suppliers

One of my clients does this. Her suppliers hate her, and they often get into arguments. You need your suppliers (1) to have a good image of you, and (2) to know that you care about them. If not, nobody will look after your production in the factory.

5. Not keeping two weeks of padding in the shipment schedule

There will be delays, with a certainty comprised between 30% and 90%. So plan for it. Bonus: even worse than failing to plan for delays, is pushing the factory to reduce production time.

6. Paying everything in full while one still needs leverage

Some purchasers get a really good feeling about a supplier, and agree to wire 100% of the order amount in advance. Then the manufacturer has no incentive to hurry up or to produce up to the standard. If quality issues are uncovered (and that’s only if they allow for an inspection), the factory might refuse to rework the goods.

7. Accepting to be left in the dark regarding your own supply chain

Do not rely on a middleman, upon which your whole company’s success rests. Qualify the factory, if possible get to know/approve the sub-suppliers. You will make it up many times in the long run. It is so basic, but so many people get this wrong.

8. Forgetting to describe an essential product attribute, or even the entire packaging

If you don’t specify your expectations in detail, a factory technician will take the decision for you, based (most probably) on cost savings. And you will not even be able to protest when you notice it.

9. Hoping that an unsatisfactory manufacturer will get better over time

Per my experiences, it is a bad idea to give a second order to a factory that just produced substandard quality. Rather than rolling the dice (when the odds are 90% against you), nurture a backup manufacturer.

10. Not registering one’s trademark when buying from China

Do you want a competitor to force your manufacturer to stop production? Do you want a supplier to sell your goods on the local market? If not, pls register your IP.

11. Not having a contract

A contract that can be enforced locally is important. There are various strategies to adopt in “non-cooperative” situations, and you can adopt them. For example: “take little steps” (issue small orders at beginning), “verify constantly” (quality inspections) and “use a third-party” (for example, to use a verified sourcing company to monitor your suppliers).

12. Trying to manufacture small quantities in China

It will usually push you in the arms of small trading firms that deal with small workshops. The result in 90% of cases: quality disasters and/or long delays. But there is a solution, if you can purchase non-customized items: produce them in coordination with a non-competing importer. Hard to pull off, I admit, but worth giving a shot!

How To Import From China

Elksourcing：How to Enforce Your Quality Standards in China?

Apr 6, 2021 , by 露露

How can importers establish a quality standard, and then enforce it? Here are 4 proven ways to handle your suppliers in China.

1. Insist on getting a “perfect” sample

Whenever possible, you should have a perfect sample (i.e. a prototype that is conform in all points to what you want to receive) in your hands before production is launched. The best practice is to get at least two samples, and send one back to the factory with your signature/stamp on it.

This is the most basic way to establish your quality standard. The difficulty will be in the enforcement.

In China, in General, factories know that sending very nice samples is what helps them get orders. These perfect samples (prepared by experimented technicians who take their time) are usually better than what can be made in mass production.

Suppliers simply assume that the buyers know it. And in any case, a buyer who has wired a 30% deposit and is in a hurry to ship usually accepts this situation. Many factories count on it.

How not to fall in that trap?

1. You should avoid at all cost to settle the payment before the quality of bulk production is approved (either by yourself of by an inspection company).

2. You should write a note about what has to be EXACTLY similar to the perfect sample (e.g. the overall outlook, the color, the function, etc.) and get your supplier to sign it.

3. You should make a list of the differences that you can live with (see next part).

4. Check early in the production cycle. If you can afford it, send either one of your technicians or a third-party inspector in the factory. When? During production, as soon as finished products get off the lines.

This way, you will notice if the factory is not respecting your quality standard. And you will have time to negotiate a solution with your supplier.

If possible, the factory can avoid the same problems on the products that are not in the process yet. And they can rework (or reproduce) the output that you have rejected.

2. Define tolerances wherever applicable

Sometimes it is not realistic to expect a very precise result. For example, garments are generally made by hand, so there has to be a tolerance for measurements (example: 15cm in S size, +/-1cm). In this case, the objective is the comfort of the garment.

Another example: for juvenile products (toys, children clothes…), it should be impossible to pull small accessories off with a force of 90 Newton of less. If you have no idea about the safety issues surrounding your products, you can get in touch with a quality control firm.

Once you have approved some tolerances, put all your specifications on paper and get your supplier’s signature on them. You have already done half the work to establish and enforce a relevant quality standard.

These specifications will naturally become the inspection checklist when time comes to verify quality.

Sometimes it makes no sense to give a tolerance, of course. Here are two examples: “hard disk drive should be 120 GB in capacity”; “red color is Pantone 1664”. In these cases, your specification is clear and precise, and the supplier should follow it.

3. Set a limit on the proportion of defects

A defect is an issue that you cannot accept on all products.

In the aeronautics industry, manufacturers have to guarantee near-defect-free products. But for consumer goods such as toys or apparel, such a high quality standard is neither realistic not necessary.

The different types of defects

Some defects are worse than others:

Critical defects might hurt the user;

Major defects are not acceptable by most buyers in stores (e.g. large stains) or might cause problems in the supply chain (e.g. unreadable carton barcodes);

Minor defects can be tolerated by most buyers, but only in small quantity.

How to set a limit on the proportion of defects?

The quality control industry uses the same statistics (derived from a US army standard), when it comes to checking consumer goods.

All inspectors, and virtually all factories and traders, are familiar with the contact of AQL (Acceptance Quality Limits). In clear, the AQL is the highest proportion of defects that you can accept.

For most product categories, the AQL limits are usually the following:

0% for critical defects

2.5% for major defects (or 1.5% for relatively valuable goods)

4.0% for minor defects (or 2.5% for relatively valuable goods)

As a buyer, you have total freedom in setting these limits. But you are advised to discuss this from the beginning with your supplier, and to get their written agreement.

4. A quality standard suffers no exception

Let’s say a supplier is late, you negotiate a delay with your customers, and before shipment you notice that quality is less than desirable. You still prefer delivering the products, rather than cancelling the order. So you tell your supplier that he can ship out and next time should be better.

The problem is, the “exceptional tolerance” may become a “hint” for the factory. Count on them to remember that you can accept less-than-perfect products.

Chinese manufacturers tend to have a “can’t do” attitude after an order production has started. Two of their favorite expressions are “cha bu duo” (it’s off, but not by much, so you should accept it as is) and “mei ban fa” (there is nothing we can do about it now, no need to keep pressing this issue).

You should fight their natural inclination. Ask for re-work and re-inspections, even if it costs you 10 days. This type of efforts pay off handsomely in the long term, as long as the factory can reasonable achieve your quality standard (you will have clarified this if you follow the steps I listed above).

If in very special case you have to deliver the products, you must talk with factory people in very serious manner, so they understand you do not accept any repeated problems, if it happens again, you will leave this factory.

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Elksourcing：Cheap Prices Mean Low Quality Products

Apr 6, 2021 , by 露露

Sourcing in China is the focus when western businessmen look for importing. The quest for ‘Cheap’ products seems to be a common one judging from the enquiries I receive, but I need to re-iterate:

CHEAP PRICES MEAN LOW QUALITY PRODUCTS.

A few days ago I received an email from an American importer asking if I knew of a manufacturer in China that could supply him with cheap USB sticks. I asked them for more information on specifications they required and they replied simply, “It doesn’t matter, as long as they are cheap”.

NO!

This is quite simply a recipe for disaster, and it is interesting that most people with this approach are new to importing. Most will not venture into importing again once if they receive their goods, which without doubt will be a pile of crap.

China is a manufacturing haven. You can pretty much order anything you want and you can be sure that there will be many suppliers providing exactly the same products, so you can go to an extent haggle over prices, but you must do it the right way.

The first question you should be asking a potential supplier is ‘can you provide this product to this specification?’ It even helps to add that you are looking for good quality. At this stage, price should be way down on your priority list.  

Margins in the main are tight in China. It is not unheard of for a manufacturer to be working on a 1-2% margin. However, as soon as you say you want a cheap product, one of two things will happen:  They will either dismiss you, advising you that they are not interested as in their eyes you are an obvious timewaster; or their eyes will light up. They will look at the product that you want for cheap, and strip whatever quality it may have had out of it, using the cheapest components, quickest manufacturing processes and absolutely zero quality control. They may however well end up making much more of a profit margin than they would have normally. Can you blame them?

Manufacturers need to make a decent profit to survive, and to invest in the next generation of product. Trends run like wildfire – As soon as a product looks to be ending its feasible life span, they will move on to the next product. The factory’s next door will probably be doing exactly the same thing, with the exact same product.

So, once your supplier advises they can supply the widget you are after, at your specification, that’s when you can start talking about price. Just be reasonable when coming to an agreement and bear in mind the margin the manufacturer is probably working to. At end of day, you get what you pay for.

How To Import From China

Elksourcing：Types of Supplier and Types of Product in China

Apr 6, 2021 , , by 露露

During my daily work of helping western businessmen purchasing goods from China, I’ve seen many back and forth negotiations between supplier and buyer. But in fact, much negotiation time could be saved and the process could be less frustrating if the buyer could perhaps understand things from the supplier’s point of view before you start contacting them.

Types of supplier

In China as with the rest of the world, this can vary hugely. One supplier might be a factory with thousands of staff and at the other end of the scale you might have a mother of one working from home to try and pay the bills, along with many middle men in between. The difference in China is that it might not always be that clear exactly who you are dealing with. The mother is as likely to tell you that she is a factory as the factory itself.

The truth is that they could all offer as good a service as the other. The crucial thing as far as the buyer is concerned is that this will affect what you can buy and at what prices.

Types of product

This will also have a bearing on who you can buy from and at what unit prices. There are obviously thousands of various permutations, but to keep it simple I see that there are three main product ‘types’ if you like.

1) Off the shelf. These are made in quantity to the same design and as such reasonably easy to source. Many suppliers will sell the exact same product.

2) Off the shelf with own branding. Also made in quantity, these products might require specific branding to be added to the basic model, so will involve extra printing, design, at an extra cost.

3) Bespoke products. These are manufactured to a specific design of the buyer and as such can be harder to obtain and more expensive.

Why do I need to consider this?

If you ask a large scale factory to make you 250 small widgets, they simply won’t deal with you as it’s not worth their while. Yes, they want to make money, but they won’t make much from that order.

Should you ask the ‘mother of one’ to get these for you, chances are she will have the necessary contacts, perhaps on the back of another larger order of say 2000 widgets that she sells on in smaller batches.

Obviously once it comes down to own brand and bespoke products, there is additional design and manufacturing involved which will have a bearing on who you can buy from.

In summary

A supplier will only be desperate to sell to you if they feel it is worth their while doing so. They want to make money, which they are unlikely to do if they are manufacturing small one off orders. If you prove to them you are serious, they will respond accordingly and want to create a long term relationship with your company.

If you haggle on price so much that the base line profit they are making is very poor, it’s likely that both the product quality and the level of customer service will suffer too.

Finally, most buyers are wary of being scammed. Don’t forget this works both ways. More than likely the supplier themselves will have been scammed in the past or suffered at the hands of time wasters. Treat them as if you would treat your own customers, create a business relationship and reap the benefits of a successful long-term partnership.

How To Import From China

Elksourcing：What to Do if Your China Factory is Low Standard?

Apr 6, 2021 , by 露露

Do you work with a factory in China, and wish their quality standard were a bit higher? You are not alone.

What to Do if Your China Factory is Low Standard? Here are six pieces of advice you can follow in this case.

1. Say it, and write it, to your factory

If you don’t communicate your dissatisfaction, nothing will happen. Here is an example of message you can send:

“The customers who shop in our stores expect a relatively high quality (higher than average). We don’t want them to think, ‘Oh, these products are also made in China’. Either we keep our quality standard up, or we will need to stop purchasing from your company.”

2. Give early feedback

It is the whole purpose of inspections during production: give a warning if the average quality is too low, while the manufacturer still has time to do corrections.

If you only perform final inspections (before shipment), you are taking risks. At that stage it might be too late to rework the goods, you might be in a hurry to ship them out, and the supplier might simply wait until you release the batch.

3. Do not accept low quality “exceptionally”

I have seen this mistake over and over again. Quality issues are only caught before shipment. As noted above, no good solution is found. The buyer lets the factory ship the products, even though they are not satisfactory.

What message does it send to the factory? Will they take your quality standard seriously in the future? Of course not.

A very serious discussion needs to follow. And the following order should be watched extremely carefully. If you don’t do this, you will be disappointed again and again.

4. Define what is a major defect, what is a minor defect, and what is not a defect

It is hard to think of every possible defect. But, for most product categories, defining the 10 most frequent types of defects goes a long way.

Some importers are very organized and write a clear QC checklist. The best practice is to show a lot of photos. For each potential defect, show one photo on the left (photo of the defect), and another one on the right (photo of what is acceptable).

It is quite helpful to inspectors, but make sure they don’t need 1 hour to read this manual! A good target is 5 min.

By the way, this document is also useful to the supplier and the factory technicians. Write “NO” in red or “OK” in green, on the photos.

5. Set the AQL limits (i.e. tolerances for defects) that correspond to your quality standard

Maybe you started with the “standard” AQL limits, and you noticed that too many defects are tolerated? You wish inspectors rejected a batch with a lower proportion of defects?

For example, instead of authorizing 2.5% (for major defects) and 4.0% (for minor defects), you can tolerate only 1.5% and 2.5% respectively. There is no science about how to choose an AQL limit, mostly based on industrial practice.

The drawback is that suppliers generally protest. They argue that 2.5 and 4.0 is the “standard” in China’s export business (which is true), and that tighter limits will be hard to achieve. But after negotiations, it’s very possible that the supplier agrees with you at a middle line: 1.5% (for major defects) and 4.0% (for minor defects).

6. Go and find another manufacturer!

That’s the solution of last resort, in case your manufacturer shows no improvement (which, unfortunately, is likely to happen).

How To Import From China

Elksourcing：How to Evaluate China Suppliers?

Apr 5, 2021 , by 露露

Whether sourcing from China or elsewhere, one of the most important things you as a buyer need to do is to make sure you are working with the right supplier. So where do you start?

Define your ideal supplier. Buyers should first define their “ideal supplier.” This is unique to each buyer and depends on a number of factors, including price, quality, order QTY and lead time.

Define your location. Where factories are based should also play a role in supplier evaluation. While factories in China‘s northern and western provinces have lower manufacturing costs, the quality is often lower, also, they are far from port so domestic logistics costs and lead time could be concerns. Those located along the coast and in the southern region have higher production outlay but the quality is generally better, plus close to port.

Look in the right places. Although nowadays leading B2B websites can help buyers easily find suppliers, many of them offer services to reduce transaction risk as well. But it’s recommended meeting suppliers face to face. Further, always do your due diligence and verify suppliers before working with them.

Do your homework. To find the right suppliers and coordinate production, the best way is to visit the factory yourself. Spend more time on the production floor than anywhere else.

Pick a factory that is the right size for your order. If you are a small buyer at a large factory, you will find it hard to keep their attention.

Make sure you communicate with the suppliers on a regular basis. If you do not ask for updates, you are unlikely to receive them. Be in contact when there is good news to share so that you do not become the “headache client” who contacts the factory only when things are bad.

Build into your budget the costs of a few international trips to the China factory to keep an eye on things and build a good working relationship with your supplier. If you cannot afford to travel on your own or do not want to make the trip, then get an agent to represent you.

How To Import From China

Elksourcing：China Quality Control Reminders

Apr 5, 2021 , by 露露

While China quality control is no longer a nightmare, there is still a lot of “hand holding” required to ensure suppliers fully understand your specs and have the ability to maintain quality.

Only through physical inspection of the facilities and review of actual production samples will you gain a true understanding of your supplier’s ability. If you are unable to make the trip yourself, there are independent QC agents that can assist with this qualification and analysis process.

Always see an actual production sample from the actual supplier. It may sound simple, but you would be surprised at the number of so-called suppliers who actual trading companies that farm things out to sub-suppliers without full disclosure to the buyer. This creates an additional level of margins. More importantly, should a problem in quality arise, the lines of communication are complicated by middlemen.

Ask the supplier to provide their internal QC documentation. For example, stipulating that the supplier’s testing and inspection data must accompany the shipment will let them know you are serious about quality.

Employ local Quality Assurance inspectors and independent laboratories. Not realizing that companies provide independent inspection services at affordable rates, some buyers wait until the goods arrive at the destination to perform an inspection, but if any problems are found, it’s too late.

Even if your payment terms are structured to limit your financial exposure in that final payment is made after inspection, should you run into a QC issue after the goods have arrived at the destination, you still have the headaches associated with missed delivery dates, negotiations of corrective action, and costs of scraping or returning the goods to China. It is always a good idea to inspect the goods before they leave China.

Almost every buyer is concerned with how to ensure blueprints, design specs, tooling and brand names are protected during the quotation and production phases. Here are some tips:

Do not disclose the product’s final use and remove confidential information from prints and samples.

Consider dividing your product into individual components to conceal “the big picture” during the request for quotation stage and perhaps for production.

If possible, do not disclose the buyer’s identity. Let the supplier quote based on the product and order size, not based on how much money they think may be in your pockets.

Sign a letter of confidentiality. However, even with such a document, confirmation of wrongdoing and enforcement is difficult. Therefore, you should own the tooling out right. Any funny business and tooling is extracted from vendor.

Even if you have no plans to sell your products in the China, you should consider registering your trademarks and designs in China. Having done this, the court system is on your side should you face infringement by a supplier. Luckily, registration is inexpensive and straightforward. Costs are under 2000USD in most cases.