In this next post from our Q&A series on disputes with Chinese suppliers, we explore another tricky situation. This time, the issue revolves around a supplier manufacturing a specialty product with design improvements, but failing to deliver a key promised feature which damaged the customer’s business.* Let’s examine it and see what lessons can be learned…
*We omit any specific information that might be used to identify the customer or the product.
We found this interesting story posted on LinkedIn recently, in which product founder Daniel Rees shared his unfortunate experience with a Chinese supplier who was producing his company’s products, helmets.
The supplier, knowing that they relied on him for production, took the opportunity to pressure them to pay him more over a longer period or risk him pulling the plug on their project, leaving them in real trouble.
It serves as a cautionary tale, so we reproduce it here with thanks and provide our comments.
Continue reading “Our Supplier Blackmailed Us! | Disputes With Chinese Suppliers Q&A (Volume 26)”
Working with a sourcing agent in China can be great for overseas importers as you get to tap into their knowledge of local markets and their established relationships with (hopefully) suitable suppliers, as well as saving the time and effort which can be better spent on building your business of trying to deal with suppliers with an unfamiliar language and culture.
However, working with a sourcing agent isn’t without its risks, and this case demonstrates that an agent who appears trustworthy can suddenly go rogue with very damaging consequences for your business…
A customer came to us because they have had a BIG disagreement with a Chinese supplier and want to remove their tooling to go to a new manufacturer…what could go wrong?
Sometimes your Chinese supplier will use various dirty tricks to push you into accepting products that don’t reach your quality standard. Why could this happen and what can you do about it? Find out here with a helpful example and some tips…
Unfortunately, the Covid-19 pandemic is still with us here in summer 2021 and so there’s still a great interest in purchasing medical devices such as medical-grade nitrile gloves, gowns, and surgical masks from China for use in hospitals and other healthcare settings. I’ve already written a number of posts about medical devices and PPE and the risks you face, such as this one, but if you really need to source and purchase medical supplies I’ll share some steps you can take to stay safe here.
Q: We use a manufacturer in China for our products and packaging and have had a good relationship for years, but recently product and packaging quality has gone downhill. What can we do?We’re supplied by a Hong Kong company that has their factory across the border in Shenzhen.
Overall we’ve had a good relationship for the past couple of years, but the last order was terrible as product quality had really suffered and it’s almost like they didn’t perform QC at all.
To make matters worse, they’re also using thin and flimsy cardboard for the product’s outer packages and we’re getting a lot of damage to the products by the time we receive them, too. This is unacceptable as we’ve requested them to stop doing this and use more suitable packaging on a number of occasions.
In addition, even our logistics company is making mistakes when shipping the products, too.
I know the owner and have spoken directly with him and have placed a new order in the hope that they now start getting it right.
What should we be doing to improve the situation?
Yes, poor product quality and bad packaging that ruins the products is a major source of frustration for many importers!
Here are a couple of questions:
Project Management
Sending someone in to manage your project on the ground in Shenzhen will help find, analyze, and correct the issues.
How Sofeast can help 👉 Supplier Management:
We can have one of our supply chain management technicians communicate directly with the people at the factory, repeat your requirements, request photos in order to ensure things are well addressed, etc. We invoice 38 USD per hour for that (consumed in small increments, but invoiced in blocks of a minimum of 5 hours).
Product Inspections
To take control of the product and packaging quality problems it’s wise to send in a quality inspector when production is well underway or products are being packed before shipping. The inspector will alert you as to whether it is not good before it’s too late to make changes, and you can request improvements to the product quality or new outer cartons (which should be both strong and dry).
How Sofeast can help 👉 Product Inspections:
In Shenzhen, the price is 299 USD for 1 man-day of work for product inspections.
Off-Site QC and Fulfilment
Another approach to solve all of the issues would be to send your products to a separate 3rd party facility, where the QC, packing, and fulfilment are managed by specialists without the involvement of your suppliers. Your supplier often wants to ship ASAP to get payment, whereas a third party is being paid to get the packing and fulfilment right and doesn’t have external pressures to skip the time it takes to be extra careful.
How Sofeast can help 👉 100% inspection, repacking, and shipping:
Your supplier delivers products (usually without final packing) to our facility, we check these products and sort out the ‘bad ones’, we pack them, and we ship them to you.
We can also kit or assemble several components together. We provide a quote based on your specific situation.
Other services from our China 3PL may also be suitable here, for instance, if you do not need to perform 100% inspections, but do want co-packing of your products at our 3rd party facility.
Sofeast has created An Importer’s Guide to New Product Manufacturing in China for entrepreneurs, hardware startups, and SMEs which 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 button below to get your copy:
Answer:
There are legal and non-legal approaches here.
1. The most important action is to avoid giving too much information to one given supplier. If they see what the end product is, and if they think there is plenty of margin to grab, they might add 50% (or more!) to their price. Or they might give a low price, in the hope of being selected and with the purpose of competing with you later, and that’s probably even worse.
2. The second most important action you can take is avoiding sending sensitive information to multiple suppliers or simplifying the tender to remove the most confidential parts.
Note: When working with Sofeast on sourcing, in some cases we know a supplier that is already qualified and is probably a good fit. In many other cases, we involve other suppliers but do some screening first. It is usually possible to ask them to provide information based on a similar component, or at least a part that requires similar processing when doing that screening.
If we do a good job of restricting both the information sent and the number of suppliers we need to send it to, the risk is already lower. As Steve Dickinson wrote last week in China Law Blog, there are many ways information can leak, and you want to minimize that.
The next step is figuring out whether each component supplier needs to sign a non-disclosure, non-use, and non-circumvention (NNN) agreement.
Read more about manufacturing contracts here 👉 How To Create A Valid Manufacturing Contract In China To Protect Your IP
We usually discuss this with our client, to make sure we are aligned. There are several cases:
(Note: each project is unique in its own ways, so there are many special cases. For example, if we need to use a piece of technology developed by an OEM supplier, the approach is necessarily different, since they might have more confidential information to protect than our client.)
If you want to learn even more about legal options and China manufacturing contracts, listen to this episode of our podcast:
Sofeast has created An Importer’s Guide to New Product Manufacturing in China for entrepreneurs, hardware startups, and SMEs which 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 button below to get your copy:
[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)”
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In this volume we will address the concerns of importers who are using a Chinese OEM to add a logo to existing products that will then be sold abroad.
Continue reading “Disputes With Chinese Suppliers: Q&A (Volume 2)”
