When importers decide to source from China, they must invest in developing good relationships with potential and existing Chinese suppliers.
Three aspects are essential to implement a good supplier management strategy in China:
(1) Know your suppliers inside out.
Identifying and knowing your suppliers is important for building an enduring relationship. There are no shortcuts in this kind of relationship building.
Visit suppliers and see their technical capabilities and capacity with your own eyes. This includes their machinery and equipment, their process technologies, the number and qualifications of their employees, and the like.
A bid is no guarantee of a supplier’s willingness and ability to meet your volume and quality requirements or future competitiveness.
(2) Develop strong relationships with fewer suppliers.
Identify a few suppliers that are willing to commit to a long-term relationship and to jointly creating a competitive advantage.
To avoid fragmentation of the supply base, stop bidding out each part and dropping suppliers anytime another company offers a better deal.
The dangers include shifts in the supplier’s strategy or customer base, and deteriorating performance.
These problems could go unnoticed until crucial shipments are missed, costs mysteriously escalate, or quality suddenly nose-dives.
(3) Work jointly with your suppliers on continuous improvement.
Focus on developing suppliers’ capabilities and advancing their competitiveness over time. Set ambitious but realistic targets for better performance in cost, quality, delivery, or innovation, and work with your suppliers, not against them, in achieving those goals.
Successful continuous improvement requires agreed-on objectives, transparency of current and anticipated costs and processes, and the sharing of improvement ideas.
Large customers often have internal knowledge about advanced concepts such as lean manufacturing that many low-cost suppliers have not yet developed.