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Great China sourcing content worth reading from December 2012

Great China sourcing content worth reading

Here is a list of the most popular pieces of content from the China Sourcing Information Center. Much of the content below was created by PassageMaker staff who volunteer at the CSIC.

 

“ask the experts”

 

VAT Smoke and Mirrors.

 

My Goods Are Stuck in China Customs.

 

Who Owns the IP? Is it Safe to Buy From China?

 

Selling to China. Negotiations and VAT.

 

Chinese Line Workers Expect OT.

 

Tools to Confirm Legitimacy of Supplier

 

How Can We Get the Credit Report of a Chinese Exporter?

 

Can a small buyer get 90 day credit?

 

“Is a Trading Company the Same as an Import Export Company?”

 

Is This Supplier Still in Business?

 

Mike’s China Sourcing Blog

 

Factory email hacked. 29K USD stolen from buyer. How to avoid it happening to you.

 

Reports of China’s death as a sourcing destination are still highly exaggerated

 

CSIC team in Johannesburg to help buyers

 

Who gets the VAT rebate?

 

S. Asian Factory Fire’s impact on Sourcing

 

Articles

China Sourcing to Middle Eastern Countries

Great China sourcing content worth reading from November 2012

Great China sourcing content worth reading

Here is a list of the most popular pieces of content from the China Sourcing Information Center. Much of the content below was created by PassageMaker staff who volunteer at the CSIC.

“ask the experts”

Shipping Cost Responsibility and Sampling Fees.

PayPal? How to Protect Myself as a Buyer?

Yet Another Victim of Small Order Scams

I Want to Represent Chinese Factories in my Home Market

Setting Up a JV with Partners That Can’t Communicate. (Bad Idea!)

Mike’s China Sourcing Blog

China city on the verge of bankruptcy. – Good or bad news?

Articles

The World’s Biggest Electronics Event

Great China sourcing content worth reading from October 2012

Great China sourcing content worth reading

Here is a list of the most popular pieces of content from the China Sourcing Information Center. Much of the content below was created by PassageMaker staff who volunteer at the CSIC.

“ask the experts”

I Want to Represent Chinese Factories in my Home Market

Setting Up a JV with Partners That Can’t Communicate. (Bad Idea!)

Mike’s China Sourcing Blog

China Sourcing Trends: The Big Picture 2010-2013

How much have margins come down in the past ten years?

Selling to China. Push vs. Pull strategies

Next (safe) step for your idea on a napkin

Great China sourcing content worth reading from September 2012

Great China sourcing content worth reading

Here is a list of the most popular pieces of content from the China Sourcing Information Center. Much of the content below was created by PassageMaker staff who volunteer at the CSIC.

“ask the experts”

Negotiation of Sample Price vs. Production Price

Am I Dealing with a Real Supplier?

Is the payment of t/t after a copy of the bill of lading has been provided safe?

Supplier stole 42500 USD from me. What to do?

Book reviews

Book Review: The essential reference guide to China sourcing

General Blog

International Trade and Customs Q & A with Jennifer Diaz of Becker & Poliacoff (Part 2)

International Trade and Customs Q & A with Jennifer Diaz of Becker & Poliacoff (Part 1)

Mike’s China Sourcing Blog

Vendor Code of Conduct (part 5 of 5)

Vendor Code of Conduct (part 4)

Vendor Code of Conduct (part 3)

Vendor Code of Conduct (part 2)

Vendor Code of Conduct (part 1)

Sophie’s China Law Blog

The Effect of Acceptance ….With A Dash of MATERIAL CHANGE…

A Good Practice…Summarize the Conversation.

What If This Happened To You? Evaluating Liability at the Nth degree.

Contracts or Relationships? A Concoction of West and East May Be Best

What to expect from the courts when things go bad

China sourcing: Using online supplier directories

China sourcing Using online supplier directories

Most of you already know that at GlobalSources.com you will find long lists of potential suppliers for just about any product. And in videos produced by PassageMaker entitled “Finding Suppliers” and the video called “Evaluating Suppliers ” we talk about how to narrow down that long list of potential suppliers to the best supplier for your particular order.

But for today’s post, I was asked to offer some other tips about using the Global Sources website.

Keep in mind that the following tools are all free!

1. If you want to stay in touch with the latest trends in sourcing, you would be wise to sign up or RSS the following websites that are in the Global Sources family.

At Global Sources’ sister site, www.SmartChinaSourcing.com you will find a lot of great content from sourcing professionals covering topics ranging from paying suppliers to managing QC.

At GlobalSources.com at the bottom of each product category home page — “Electronics” for example — you will find free resources such as industry news, surveys and a showcase called “What every buyer needs to know”.

2. There is also a free “Ask the experts” service where you can send in your specific questions and people like myself will provide feedback and get you pointed in the right direction on issues of China sourcing.

3. I highly recommend the 18 Global Sources e-magazines that come out each month, each covering a different industry. Each one is a good tool to get a feel for what products are available in a given industry. The magazine is pretty thick with a lot of content, but I like to flip through to keep an eye on trends and see which suppliers are making which products.

4. It is always a good idea to come to China to hit a trade show and visit suppliers face-to-face, ideally at their factory. But if you are not quite ready to make the flight over, you may be interested to know that Global Sources now hosts a virtual trade show online. At recent trade shows, Global Sources staff went around to each booth and took pictures for the virtual trade shows online.

5. Speaking of trade shows, on Global Sources.com you will also find a comprehensive list of trade shows broken down by industry and location. Not only does Global Sources list their own trade shows, but they also list all the other trade shows. If you do come and check out any of the Global Sources trade shows in person, make sure to attend the China sourcing seminar series. It’s free as well.

6. I’d also like to address the term “verified supplier” which you will find online at GlobalSources.com. In my opinion, Global Sources goes out of their way to ensure the suppliers on their website are professional. Global Sources staff even visits some of the factories. But, China is a massive market and things at the factory level can change suddenly.

So just because a factory has a high ranking in the star system today, it is not a guarantee that they will be professional tomorrow. But, having said that, if the factory has high ranking with Global Sources, and if they have maintained a booth at the trade show for many years and if they advertise in the Global Sources e-magazines, then there is a much higher likelihood that they will be good suppliers for you.

As I said, because things can change so quickly, a key manager leaves, the factory moves, staff don’t return from Chinese New Year holiday, raw material pricing goes up, quality goes down. A great supplier today is not a guarantee they will be a great supplier tomorrow. So as buyers, it is our responsibility to conduct due diligence and qualify our vendors. The Global Sources verified supplier ranking is an excellent start. But it is just the start of the process. Check out the videos called finding and evaluating suppliers if you want to learn tips for checking out a factory.

Wishing you successful China sourcing!

China sourcing: Resources if you can’t make the big trade show

China sourcing Resources if you cant make the big trade show

The China trade season comes twice per year in April and October. If you want to refresh yourself on what you saw during your trip, or if you couldn’t make the trip in the first place, know that Global Sources has created a virtual trade show by taking a picture of every single exhibitor’s booth and posting the images of staff, products and additional information to the Global Sources website.

But in order to make room for the next round of shows, after 4 months, the online fair comes down and a new one goes up.

I’m also happy to report that Global Sources has included the video tape of the China Sourcing Seminar Series, hosted by PassageMaker Staff on their virtual trade show platform.

How to find trustworthy suppliers in China

How to find trustworthy suppliers in China

The single most important factor in determining the success or failure of your sourcing program will be finding the right supplier. It sounds obvious, but making apples‐to‐apples comparisons of vendors at a national level can be daunting. The following article is a behind the scenes look at a how PassageMaker assists its clients find vendors in China. This system outlined below is based on the company’s 10 years of experience in China and 1000’s of sourcing programs. Having outlined how to conduct a professional supplier identification program, the second half of the article will focus on the costs involved and options for conducting such a program.

I. How to find trustworthy suppliers in China

Your sourcing feasibility study / supplier identification research should have a clear methodology for defining and measuring the desired attributes of the ideal supplier.

Step One “Defining”: The “right supplier” is unique to each buyer, as the relative weight placed on price, quality, lead time and other attributes differs from project to project. Below is an attribute survey template used to transfer this information from buyer to research team. A sample project is attached at the end of this article for reference.

Step Two “Measuring”: At PassageMaker a typical supplier identification research project takes 30‐45 working days assuming multiple components and production methods need to be explored, at a national level. The process is as follows:

Initial research generates a list of 50‐100 potential suppliers using web directories like www.GlobalSources.com and industry/trade show directories. At PassageMaker, the Approved Vendor List (AVL) can be consulted to see if any known suppliers should be added to the list.

Insider Tips:

  • Assume the vendor is a middleman until proven otherwise, not the other way around.
  • Avoid factories that refuse to list the name or location of the production facility. If they only show a HK, Taiwan or other non‐PRC address, then they probably don’t own the PRC factory and are a middleman of some sort.
  • Focus on those factories that can clearly show production experience with your particular product or production method.
  • Be aware that polished English skills do not reflect production skills. Often the most polished websites are set up by trading companies.
  • Look for clear information about operation size, equipment and staffing.

(Visit http://www.psschina.com/articles.htm  for related articles
on avoiding middlemen in China.)

Review the 50‐100 candidates’ websites and brochures against client’s desired attribute list and narrow the field down to 15 to 20 candidates. At this point, “first contact” is initiated in the follow ways:

  • Send an e‐mail or make a phone call to ask for initial product‐specific information (price, minimum order size, lead time).
  • Are samples available? If they don’t have samples readily available, they probably don’t deal in your product on a regular basis.
  • Granted the sales team will be the most polished in terms of English skills, but how is their understanding of your basic requests? If you ask for information on a red umbrella and get sent a sample of a blue shoe, you are going to have problems with communication down the road!
  • Confirm the actual production location and ask for ownership papers of the factory. Be explicit that the production location may be audited and that this location can not be changed w/out approval of buyer. (You would be surprised at the number of middlemen who will take the buyer on a visit of a factory only to change the location to a less expensive and poorer quality option after the buyer leaves).

The above research should narrow the field down to about 5 highly qualified candidates. At this stage, PassageMaker QC engineers and Sourcing Managers (joined by the client when possible) visit the factories in person to review quality systems, confirm production methods, negotiate pricing and look for any red flags. In other words, visit the production facility to confirm the information given during the initial research was accurate and truthful. This is an essential yet often overlooked step by those looking to cut corners during research. Unfortunately, due to the massive number of trading companies and aggressive China sales staff who will say almost anything to get your business, visiting the production line in person (or via your appointed representative) is the only way to confirm the real situation.

Based on the results of the factory visits, the next phase is sampling, trial order or even Purchase Order placement with the top vendor or two.

(Visit http://www.psschina.com/articles.htm  for related articles
on Negotiation and Vendor Coordination)

II. Options/Costs for Conducting Supplier Research

How to Find Trustworthy Suppliers in China OptionsCosts for Conducting Supplier Research

When looking to source in China, you have a number of options with various costs involved at your disposal. Below is a behind the scenes look at the pros and cons of each option.

Do it yourself

Thanks to free and easy‐to‐use websites like Global Sources, generating a list of potential vendors has never been easier. But make sure you have the time, engineering and China sourcing experience to narrow a massive pool of vendors down to a handful of highly qualified vendors. Simply picking the first 3 vendors that come up on an internet search is highly unlikely to uncover the best match for your particular requirements. If for budgetary reasons you are forced to DIY, we hope the above outline and tips will get you pointed in the right direction.

Engage an intermediary (trading company, sourcing agent or factory representative…) to conduct this research on your behalf.

It is worth paying for professional research if you don’t have the time and China experience to conduct the supplier identification research on your own. There are 3 common methods used in China to invoice for the initial supplier research:

ONE: Charge a % of the future PO value. Generally 5 to 15%. While this is an easy to calculate figure, unfortunately there is no incentive for the research partner to keep costs low. Actually the incentive is to steer the buyer toward the most expensive sourcing option.

TWO: Invoice a set research fee. At PassageMaker for example, a fee of a few thousand USD is charged per production classification researched. This fee is refunded to clients should they utilize PassageMaker for on‐going services such as vendor coordination or inspection services (visit www.psschina.com for details).

THREE: “For Free”. Some companies will offer to conduct the initial supplier identification for free. However, while it sounds the most attractive at first, nothing is done for free in China and quite often the “for free” model is the most expensive in the long run. As mentioned above, our team of experienced sourcing engineers will require 30‐45 days and spend 100’s of man hours, leveraging years of China sourcing experience to narrow this list from 100’s of choices down to the top candidates. If somebody offers to “do it for free” this is what may be really happening:

    • They will decide which sub‐suppliers to use. That means they may select the supplier which is best for them, not best for you. Perhaps where they have a relative, kickback or commission. In effect the buyer is getting steered towards a supplier which may not be the best match for the buyer’s specific requirements.
    • “You get what you pay for”. They don’t plan to conduct in‐depth research on a national level. If someone is providing research for free, they may not be as conscientious about understanding your goals and helping to find the right supplier. Keep in mind that finding the right supplier is the single most important factor in determining if your project will succeed or fail.
    • They plan to cover the internal costs of the initial research by charging you an inflated per‐unit cost once production starts. In the long run, the buyer pays too much.

Insider Tips:

  • If your “partner” is unwilling to state the name of the subsuppliers and give the pricing points, then you are certainly paying too much. Furthermore, if they do not disclose the actual manufacturer, then you have no way to validate the quality process in place and you have lost control over who has access to your intellectual property.
  • Unfortunately, even if you pay a company in China to conduct this supplier research you can’t automatically assume they are looking out for your best interests.

(Visit Common Pricing Scams for more information.)

It is common in China for trading companies to milk both ends, in other words charge the buyer for a research fee or commission while getting a kick back or other commission from the supplier. Therefore, you must perform due diligence on your research partners as well.

When considering a research partner in China, make sure you ask about ownership, compensation structure, client references, non‐compete clauses, research methodology, full disclosure of sub‐supplier pricing and identity, company history, warranty terms and the plan for protecting your intellectual property. At PassageMaker for example, by paying a research fee you can rest assured that we take the project seriously and will review each and every detail to ensure your goals are met.

We fully understand the importance of trust and transparency, and when we are hired for supplier identification research we offer total disclosure of the above information in our contract, so it’s absolutely clear where compensation comes from and that our interests are 100% aligned with the buyer. Should you pay for research in China, make sure you have such a contract in place. If your “partner” is doing the research for free, then they are not obligated to do a professional job.

How to go about vetting suppliers in China

How to go about vetting suppliers in China

Here is a question from PassageMaker’s mailbag typical of what you may be facing when you source from China.

I am looking for reliable manufacturers for XYZ. I have detailed specifications but all contacts from Alibaba claimed to be manufacturers. I cannot possibly busy myself with vetting suppliers in China from all of these contacts. How do I find the real and reliable manufacturers? And China is huge, where do I start?

Here is how we replied:

I think the following blog post will help answer your question:

CHINA SOURCING SUCCESS/FAILURE FACTORS

You are correct to assume the companies on Alibaba are trading companies, unless they can prove they are real factories. I have found the suppliers on www.GlobalSources.com are more professional and that directory has a better ratio of real factories vs trading companies. But regardless of which directory you use, do your due diligence.

Contract manufacturing in China: The brand is the hard part

I suck at blogging. Dan Harris does it better. Renaud Anjoran does it better. Tom Lasseter does it better. If you have not already done so, subscribe to those blogs. Today.

I have not done much blogging this year, as the news has been so universally awful that I’ve been unable to summon the enthusiasm to comment. Short version, it is ugly out there and it will only get worse before it gets better. Plan accordingly.

However, as someone who works with entrepreneurs and inventors on a daily basis, there is reason for hope. People keep coming up with cool new ideas they want to bring to market, and they ask for our help. PassageMaker had a solid growth year in a bad economy, so I guess I should be Chatty Cathy these days, but a combination of so much work and so little global good news as dampened my blogging spirit.

My one comment for the day deals with bringing a new product to market. Our contributions to the value chain – sourcing, supply chain management, contract assembly, logistics – are really the easy parts. The hard work is building a brand and getting it recognized in the marketplace.

If you are thinking about launching a new product, PassageMaker can take the headaches out of the production process. But we don’t (and can’t) help you sell it.

Too often in the last few years, I’ve seen clients invest thousands in engineering, patents, sourcing, tooling, etc., with little thought given to how to get the product in front of buyers. If you are planning a new product launch, assume that you are the only one who thinks it is the greatest idea since the wheel and focus on how you are going to convince the rest of the world. And budget accordingly.

My advice:

1 – The internet is great, but not everyone knows how to use it. If your plan is social media and SEO, make sure you are really the expert you think you are. Or have the money to hire that expert.

2 – If you are going Big Box, understand what that means. A PO from a major retailer can be a million bucks on paper and negative income in reality when you consider the lead-times, warranty agreements, performance penalties, etc.

3 – Advertise if you can. Twenty-some years ago, Coca-Cola assumed that their brand was so strong that they could stop advertising. They ultimately lost market share to Pepsi and had to spend a fortune to get back in the game. If you are launching a new product, nobody knows who you are, so you have to get the word out.

4 – If you can’t do it yourself, bring in investors who can help. I’ve seen businesses with ridiculous numbers of investors, none of whom contributed to making the business a success other than providing short-term financing. If you are going to add an owner to the mix, make sure they have skills to make the company a success long-term.

Basically, setting up a solid China supply chain is an important step, but that pipeline only has value if you can move product through it. We’ll help you deliver, but nothing happens until you sell something. Worth keeping in mind in this tenuous world we live in.

China sourcing: Contract Engineering Services

China sourcing Contract Engineering Services

When we had the idea for an Endorsed Service Provider network several years ago, the first company I approached was Contract Engineering Services (CES). Over the last 6-7 years I’ve worked with CES on dozens of projects and cannot recommend their work highly enough.

The one mistake I see clients make over and over (twice today so far as it happens) is trying to get ANYTHING made without a complete design database. This never works, and is of course also always my fault somehow. This in large part is why I formulated Kelly’s 1st & 2nd Laws of China Sourcing.

CES just updated their website, so go take a look!