In the first part of this article I discussed several principles of doing business in China: working through cultural differences and getting all your key people involved. I would like to mention several other lessons I have learned over years of doing international business in China.
Sweat The Details With Your Partner
Producing in China proves the old saying: “the squeaky wheel gets the grease”. Chinese factories pay the most attention to customers who spend the most time working closely with them - on issues ranging from sample making, purchase order placement, production planning and scheduling, quality control and shipping performance. Since the success of your company’s business is directly tied to the performance of the factory, it is incumbent upon you to be as close a relationship as possible.
In my experience having a team of at least three people working directly with the factory on a daily basis provided a good snapshot of performance issues:
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A logistics person focusing on purchase orders and shipments
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A product person focused on the design of the product and packaging requirements
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A quality control person making sure that the product was being produced to proper standards
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The three people above were managed by a senior person.
If you get your top team closely involved, you will be much more in control - and won’t be inclined to blame the factory when the finished product isn’t on the retailer’s shelves. As far as your customer is concerned, you are the factory. If you invest time and commitment and find that the factory is not as cooperative as you would like, proceed with caution. You need to understand why they are not willing to be as transparent as you require. You might then look for a new production source. You do not have the luxury to risk business with suppliers that aren’t “all in”.
Overcoming Problems
Even with all the cultural understanding and time and financial commitment, there will be problems to be dealt with. While in the sporting goods business one of our primary factories had a major fire that shut down the facility at the height of the production season for our fall products. We had a couple million dollars worth of product that we were going to have to move to other factories and we had very little time to execute. Our primary objective was to maximize the retail sales planned by our customers and we were going to need to use all the equity we had built with our factories to make this happen. Because we had built long term relationships with our entire supply base, we were able to recover almost all of the business that was in jeopardy, Without our team and a group of dedicated factory partners we never would have been successful.
The bottom line is: your sincere commitment to work respectfully with your Chinese suppliers as a trusted partner - not as a disposable source of low cost labor - will help you identify and solve problems. Remember, in China anything is possible but nothing is easy.
For more information on how to get your company focused on the right priorities, request a complimentary diagnostic from Newport.
Jack is an executive with 30 years of experience in consumer products, in both private equity-backed middle market companies and large multinational corporations. Learn more about Jack or contact him here.
