Project Management, Third Party Inspection and QC in China

Chinese New Year has just finished and we a want to wish you a happy and fruitful Year of the Ox. According to Chinese legend, the Ox represents Ambition, Prosperity, and Strength.

In 2009 both the buyer and the factory will need to adopt the characteristics of the Ox. There is no mistaking that everyone is faced with a huge challenge of how to pull ourselves out of this world recession. Customers and clients all over seem to be saying the same. They are unsure of what is going to happen so they are proceeding with caution.

If you are importing goods that are made in China then you are probably aware of the need for QC, Project Management, and Third Party Inspection. I have listed several techniques and ideas to keep in mind when talking to a potential new supplier or your existing ones:

1. Push for price discounts from your current suppliers. For example, steel prices have dropped by 20% from Sept 08 to Jan 09. There is talk that some raw material prices will start coming back up in February 09, but until that starts happening keep asking for discounts.

2. Because of the huge growth many Chinese factories have seen in recent times, most do not know how to react to a recession. They have become too heavy and complacent. They now face a big problem and some struggling. They have become more attentive to customer needs than just a few short years ago. Ask them to reduce their Minimum Order Quantities (MOQs) to help you deal with slower inventory turns.

3. Talk to and persuade the factories you are buying from to be proactive and efficient. Ask them to develop new product and capitalize on their competitive advantages. Share your manufacturing experience with them.

4. All buyers are trying to reduce the amount of cash tied up in inventory, so they are pushing for better payment terms. Unless you have a long standing, strong relationship with your supplier or suppliers, I don’t see many Chinese factories giving better payment terms. Especially now with lenders not lending as much money, the supply of money is tight. If anything factories might start pushing for larger deposits and quicker payments. This could be a sign they have financial problems, they are questioning your financial strength, or they are just being very conservative. None-the-less, ask for improved payment terms and see how they react.

5. When talking to your suppliers about finances make sure you are asking many questions and getting the whole picture. Visiting the factory, doing inspection, and seeing their current production line will give you a good idea of their volume of business and is a good indicator of financial strength. Ask harmless questions to line supervisors and assistants (not the boss or the sales staff) like have they been working a lot of overtime, are they loading a lot of containers each day or week, are they buying raw material from the same suppliers they used in 2007 and 2008, etc. These are simple questions that a non-suspecting person will answer honestly while the salesperson or boss might give you a different answer. Be diligent and don’t get caught holding a worthless PO.

6. Using less expensive raw material is one way for a factory to save money. Make sure they dont change materials on you unless you test and approve the new material

7. Negotiate the best prices you can, but do not do it at the expense of the factory because you think they are desperate. If they agree to ridiculously low prices, they are putting their whole business at risk and your supply chain that you have worked hard to get right. Take a partnership attitude and work together.

8. Make sure your suppliers know and understand the status of your market. If they understand your situation, they will feel more relaxed about the slower/smaller orders and will be more responsive to your needs when you ask for help.

As the year of the Ox begins with the worlds back against the wall, we must all be determined that survival and prosperity are possible through strong thinking and ambitious and dedicated actions. 2009 is the equivalent of Mother Nature’s natural selection where the strongest survive and thrive. Providing great service to your existing customers, taking market share from your competitors, and controlling/improving your supply chain through the proper use of Project Management and Third Party Inspection will put you on the strong side of this natural business selection process.

Regards,

Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com