[vc_row][vc_column][vc_single_image image=”9865″ img_size=”full” onclick=”custom_link” link=”https://www.sofeast.com/knowledgebase/disputes-with-chinese-suppliers-qa-volume-3/”][vc_column_text]In this volume, we discuss an unfortunate situation – what happens when your Chinese supplier disappears with tooling or inventory belonging to you! 😱
Continue reading “Disputes With Chinese Suppliers: Q&A (Volume 3)”
Do you wonder why you still suffer from quality issues, even though the process is quite mature and seems to be well understood?
Or are you preparing to launch the production of a new product… or production of an existing product in a new factory? And you want to plan ahead to avoid missteps that might be quite costly?
There are 3 key process improvement tools that you can use:
And there is a logical order that you can follow. Let’s go through these documents one by one…
This is simply the mapping of the process steps. There are many templates you can follow, and here is an example of a process flowchart:
Take a step back and look at this process. What steps can be combined (less picking & stacking, fewer mistakes, higher productivity)? Are there ways to eliminate one step (e.g. by clipping rather than positioning and then screwing)?
With the process map in hand, walk on the factory floor and observe each step. for each process, make a list of things that might go wrong (the “failure modes”). Bring in people from different teams and backgrounds if possible.
The FMEA is a great way to assess the risks and to rank them. The 3 components of risk in this form are:
And then, for each failure mode, it drives an action plan. It is a living document and should be updated often.
👉 Read more about the Process FMEA, when to use it, and get a FREE template
A word of caution. It is not an easy exercise. Don’t expect a production supervisor or a quality auditor to do it nicely without prior training and experience.
In theory, it is a tool to think of issues that might come up in the future. But an easier way to start is to include the issues that came up in the past… if that process has been in place for some time.
Based on the above documents, you have:
This the basis for a good process control plan — the central document that the factory should use to drive the process’ capability up (in other words, improve process controls so as to get better product quality).
A good control plan includes:
Based on the control plan, proper work instructions can be given to the main interested parties:
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I made this whole approach look very linear, but often those process improvement tools are developed at the same time. Each document feeds the other two.
Our consultants have developed these documents in a number of projects, with good results. They are quite powerful.
What do you think? Do you, or your suppliers, use these process improvement tools?
This FREE eBook starts from the beginning, discussing whether you need to hire a sourcing agent, and follows the sourcing process right through to developing a trusted supplier’s quality and productivity.
There are 15 chapters over 80+ pages to explore, providing exhaustive guidance on the entire sourcing and supplier development process from start to finish, including:
Just hit the button below to request and download your free copy:
![Ultimate Guide To Sourcing From China And Developing Your Suppliers [eBook]](https://artbyraksha.sofeast.com/wp-content/uploads/2019/03/UltimateGuideToSourcingFromChinaAndDevelopingYourSupplierseBook1200x628px-300x157-1.jpg "Ultimate Guide To Sourcing From China And Developing Your Suppliers [eBook]")
Is there ever a situation where you’d want your product inspection to be performed away from your Chinese supplier’s factory? Yes! We’ll explain your options in Off-Site QC VS In-Factory QC.
Clients come to us with needs. Some of them know exactly what they need (such and such service) and how to get the most of our work. But most of them don’t, and instead they communicate their challenges.
As we recognized that fact, we have strived to offer full solutions to our clients needs, rather than an a-la-carte assortment of services. They might still look like a collection of individual services on our website, but we try to focus on our clients’ needs as much as our internal capabilities.
We collected a few examples to drive this point home.
In our view, there are 2 ways to conduct a product inspection.
As an importer, you’ve got a big problem if defects are found, certainly if they’re severe. So isn’t a QC inspection service provider leaving you high-and-dry if they simply provide a report showing what the problems are without helping you devise a roadmap to solve them?
At Sofeast, we aim to be in the 1% and will typically add value by doing the following to help you solve the QC issues we find by offering the experience that we have on our staff:
Factory auditors can often be accused of simply verifying that a standard is being complied with by providing a list of points that do not comply.
While understanding the status of the systems being audited is helpful for the client, wouldn’t it be great if the auditor could somehow help to improve them, too?
For second-party factory audits (for the client, using their own checklist), the auditor can add value without causing conflicts of interest. Here’s an example:
(Note: We don’t do this systematically at Sofeast, but we are more than happy to do it when a client specifically requests it.)
Some of the businesses being audited have no experience in improving the systems where they have problems, so a well-timed suggestion from an auditor can give them a tangible way to drive improvement.
This doesn’t mean that an auditor’s role changes to becoming some kind of consultant, however, they add a lot of extra value to your factory audit if they’re able to provide a suggestion to your supplier, such as: “I have seen other companies avoid or reduce this issue by doing XYZ,” which they can then explore and work on.
A new product development project is fraught with dangers.
Of course, most importers who are launching a new product have gaps in their knowledge and experience. For instance, you may not be an industrial design expert; and that’s fine.
In this position, bringing in a local project manager who can fill in some of the gaps in your knowledge and provide ‘boots on the ground,’ makes absolute sense and is worth paying for.
But it’s amazing how many service providers sell the service of a project manager without explaining how valuable this really is (if they’re good). If clients don’t understand the capabilities of their project manager, they won’t see the value in paying for them, potentially muddling along and getting into trouble down the line.
Our in-house R&D team have decades of experience working on products of all kinds (predominantly mechanical and electronic, but not limited to them), so we will be keeping DFM (Design For Manufacturing) in mind throughout your product development process in order to assure that you end up with a very ‘manufacturable’ product which you can get to market quickly.
That’s why we show why a good local project manager can help you enormously and add a lot of value:
If your PM isn’t providing the above, then maybe you’ll be paying a low fee, but are they really contributing the support that you need, or are they just sending some messages now and again?
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Does this make sense? Does your provider simply offer services, or do they go further and provide a solution which offers lasting value? Let us know about your experiences, please.
This FREE eBook starts from the beginning, discussing whether you need to hire a sourcing agent, and follows the sourcing process right through to developing a trusted supplier’s quality and productivity.
There are 15 chapters over 80+ pages to explore, providing exhaustive guidance on the entire sourcing and supplier development process from start to finish, including:
Just hit the button below to request your free copy:
Some Chinese factories have suffered serious blows recently.
Large American companies are moving manufacturing outside of China, often abruptly. Many manufacturers were hit in 2020 by very soft demand and cancelled orders. Their government is becoming more serious in getting taxes paid and regulations complied with. And so forth.
The logical conclusion? Many factory owners who have accumulated debt and don’t see the light at the end of the tunnel are tempted to go out of business.
If you rely on a few key suppliers, will you be impacted if one of them goes bankrupt? It is not just a matter of getting a deposit back. It might threaten the continuity of supply to your customers!
Are there ways for you to monitor the situation and assess whether there is high risk so that you start relying on a backup instead and building up more inventory?
The good news is, yes, there are often signs you can probably pick up.
Here are my tips for assessing your Chinese supplier’s financial health:
Certain elements of risk may be available as public records. They can point to a degrading financial situation if they appeared recently. Here is a non-exhaustive list:
Other information of public record can also give an idea of the situation. If the supplier has added a shareholder recently, that may be part of a refinancing effort?
You are probably unable to visit your key suppliers these days. Maybe you should still have someone (typically, an auditor, or a project manager) pay them a visit.
Counting the number of operators who are busy, and comparing that to the number last year at the same period, would bring good insights.
Are they shrinking? Maybe they have gathered all their operations on one floor when they used to occupy 4 floors? They certainly lost considerable business. If they weren’t paid on the last shipments to those lost customers, it might be a matter of weeks before they are officially bankrupt.
Is the owner in a good mood, and is happy to take you to a nice dinner? Or does it seem to be hiding and avoid public places (which might indicate he contracted ‘shark loans’ and has trouble repaying them)?
You might also pick up some good signs. Do they still spend time on tasks and projects that bring dividends in the mid- to long-term? For instance, preventive maintenance, office renovations, keeping up quality systems, sending staff to training, etc. It can be hard to assess these points from a distance.
Better yet, have they invested in new equipment, or are they planning to?
Have they asked for advance payments from your side? That usually means they are in a very tight cash situation.
Have they started to be much more rigid? For example, refusing to rework some issues? That’s a sign of a company that is scraping by, day by day.
If you present them with a contract to sign, do they just refuse to even read it, or do they sign it without any comments? That’s also not the sign of a company projecting itself 10 years from now.
Are they putting an order on hold? Maybe that’s because they don’t have the cash to give a deposit to a key supplier?
Have they had repeated issues due to their own suppliers? It might be due to the fact that they owe a lot of money to those suppliers, who are not happy and not making efforts.
Is there any equipment they had to dispose of? (Maybe in order to get a fresh infusion of cash?)
Visiting them, counting the number of operators who are busy, and comparing that to the number last year at the same period, would bring good insights.
There are several ways in which we can help assess suppliers on the ground here in China for you.
A credit check might detect some elements of risk.
In it we’ll be checking points like:
We send you an easy-to-read English report that includes a risk evaluation.
The credit check price is 199 USD for 1 company – contact us to request this.
Maybe they lost in a court of justice because they didn’t pay certain things? Maybe they have added a shareholder recently, as part of a refinancing effort? We could check those things in a Legal Records Check (99 USD for 1 company).
Especially this year (2020), clients are unable to visit China due to the closed borders thanks to the coronavirus pandemic. So, in order to observe the supplier and examine for some of the telltale signs as mentioned in the section before this above, you can consider sending in an auditor.
Aside from examining your supplier’s production capability and reliability (always good to keep tabs on this eve with existing suppliers), your auditor will also be able to check the state of the manufacturer, see if there are any red flags, and ask probing questions that can shed light on how the business is doing (we discussed these kinds of on-site supplier evaluations in this podcast episode).
Factory audits start from 279 USD per man-day in major areas of China.
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If you have never had the experience of a factory closing its doors forever, I can assure you it’s not fun. Several of our clients have been in that case. I hope the little checklist I put together in this article will be useful. Do you have any experiences or points to add? Let me know in the comments, please.
If uncovering and dealing with supply chain risk (such as losing a key supplier) is important for your business (it should be!), take a look at my series of blog posts on Supply Chain Risk Management over on QualityInspection.org.
This guide has been written specifically for entrepreneurs, hardware startups, and SMEs and gives you advance warning about the 3 most common pitfalls that can catch you out, and the best practices that the ‘large companies’ follow that YOU can adopt for a successful project.
It includes:
Just hit the image below to get your copy
Michael Michelini wrote about Amazon packaging, and he mentioned the FBA prep services. I discovered a whole industry popped up and is probably growing fast.
What do they do? In Mike’s words:
Basically, a third-party prep service does everything on your behalf, including:
Inspect your items to ensure there is no damage, especially if you’re selling “new” products.
Carefully remove any stickers from the products, if there are any.
Prepare the inventory according to Amazon’s requirements.
Pack and provide box content information.
Get the package ready for dispatch.
Inform you through email when the package was shipped.
Track your packages as they are in transit to the designated Amazon fulfilment center.
And, I was thinking, most (probably 80%+) of the goods that go through these prep centers are made in China!
Some might not have been packed the right way (e.g. multipacks, bubble wrap, etc.) by the manufacturer and mistakes might have been detected too late. Yes, I am sure that happens.
But I’d guess some FBA sellers plan to import the goods from China and then use one of these prep service centers in, say, the USA to prepare their products, packaging, and orders for shipping. Wow…what a waste!
All of this can be done in China, before shipment, for a lower cost.
If you’re using a local FBA prep provider, quite simply, they’re doing something that can be done in China at a lower cost. Here are 2 China-based alternatives that will save money:
Your supplier likely has the ability to handle the packaging and labelling for your products in-house. The costs of them using their local Chinese staff to do so are also going to be far lower than for a similar Western staff member to do the same! In addition, they should be able to keep the proportion of defective products down to a level acceptable on Amazon (and consistent with the product category and positioning).
I wrote about this before in How Amazon FBA Sellers Should Control Quality in China and in Quality Control of Products Shipped Directly to Amazon.
Second, if this is not realistic, you need to take another route.
A number of contract manufacturers in China have the ability to provide packaging, labeling, fulfillment, assembly, rework and even quality inspections. Better still, despite being in China, a number of them are Western-owned and managed, therefore using one comes with four very important benefits over local providers in your country:
Now, one issue with this setup is, the Chinese supplier probably won’t agree to deliver the goods to another location without having been paid in full. They might agree to extend a rebate for the defective goods they receive, but that only works when it is only 2% of the order quantity… If it is 50%, they are not likely to honor their word.
However, this happens when their customer is an overseas company. They are more prone to extend credit when their direct customer is another China-based manufacturer (who won’t disappear overnight). In many cases, we have been able to negotiate with suppliers and pay them 15 or even 30 days after the products are delivered in our facility.
In that situation, if it turns out that 30% of the goods have a serious issue, they can simply all be returned to the supplier, and payment can be done for the good pieces only. This a much better setup than finding out about quality issues in Los Angeles or New York City!
Yes, we have a lot of experience of working with FBA vendors with Chinese suppliers.
You may find these solutions helpful:
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Have I got it wrong? Does a Western FBA prep service do a stellar job for you that you find invaluable? Perhaps your Chinese supplier is supporting you already? Let me know about your experiences in the comments.
In this free eBook, we share the 10 verification steps we developed to help you find the right manufacturer.
It covers:
Just hit the button below to get your copy now:
