Managing a China supply chain
As the China-based partner responsible for managing suppliers and supply chains on behalf of our clients, getting to the bottom of what is really going on at the factory is a key part of our job. It’s very common for suppliers to say one thing and mean another.
Whether you outsource your China project to PassageMaker, or manage things on your own, here are some tips, tools and strategies learned the hard way during my past 20 years in Asia.
How PassageMaker gets to the truth when talking to suppliers
In the earlier article entitled “Tips for managing a supply chain in China: Secrets of the Gantt chart” we talked about the excess suppliers come up with when target dates and goals are not achieved. It can be hard to know if the excuse is real or just BS. So here are some tools we use at PassageMaker to learn what is really going on at the factory.
Soft questions to get suppliers talking
These are ideal to ask during a factory tour or at the dinner/lunch following the tour, to get the supplier talking. When they are comfortable and at ease, they may go off-script and give you some juicy information.
“What are your plans for the future?”
Most factory staff are proud of their business and want to tell you all their hopes and aspirations. If they have their eyes set on becoming China’s #1 toilet brush maker and you are asking them for help with toothbrushes…you may have an issue.
“What are your biggest headaches?”
You may hear about trouble with staff, or rolling black outs, or that their rent keeps going up or that they hate small orders…watch out if any of these issues impact you the buyer! This is a great question to ask because they simply don’t put this stuff in their websites or on their brochures!
How to ask the tough questions about ownership, size and scope of business
It may be uncomfortable to ask for sensitive information like ownership papers, business licenses and client references. Certainly you don’t want to come across as being rude and letting the supplier feel they are guilty until proven innocent, but this is something you have to do to be safe!
I have found that playing good-cop, bad-cop is an effective solution to this dilemma; usually by saying something like this:
“Mr. Factory Manager, you run a nice shop and I am impressed with you and your team. I want to go home and tell my team about what a great supplier you will be, but my boss is a real stickler for detail and he is making me fill out this check list. I could care less about the following, but under our company’s Standard Operating Procedure (SOP) for conducting a supplier audit, I need to get a copy of the following documents….thanks for your understanding and sorry to trouble you”.
If the supplier still tries to wiggle out of giving you the information, it should be a red flag.
Why the supplier doesn’t want you to see their business license?
Perhaps the factory history, ownership, scope of business is very different from the story they have presented you. Here are the common excuses you will hear:
“Our business license is at another location.”
This is highly unlikely as all businesses in China are required by law to have their business license framed and posted on the wall or other highly visible place in the office.
“Our business license if getting updated and is not available now.”
Highly unlikely as to operate without a pre-approved business license is illegal.
“Here is the license of our parent company (in HK or Taiwan for example).”
This is not a PRC license.
Closing remarks about communications and managing China-based entities
In short, it is sad but true- in China, the wise business person assumes the worst until proven otherwise. Ask the same question 10 different ways to ensure the answer comes back the same, if the item is important to you. It takes skill to learn how to interpret what is really going on at the factory. Visit PassageMaker to learn how you can outsource the project management and supplier communications to our team in China.
I’m going to leave you with some more valuable resources to read up on should you want to dive in a little deeper: