The City of *#$&ing Yes.

Posted on October 15th, 2009 by david

Questions from Buyers at the Global Sources Electronics Show in Hong Kong this past week.

1. Buyer Question: So where do you live in Cina?

My Answer: Shenzhen.

Buyer Response: “Ah… the (beeping) city of  (beeping) ‘Yes.’  To bad I’ve never found a (beeping) factory that can actually do what they (beeping) say they can.”  (No exaggeration, he really said this.  Actually, I probably left out a couple of bleeps.)

Following up on this—just this AM—in the office we’re talking about a shipping schedule that is later than we’d like due to the recent holiday.  The question in point isn’t the date, it’s the way the dates were communicated.  I was told “usually the closing date is Wednesday each week.”  But the reality is, because of the holiday, there were two weeks that this was not the case.  Specifically, we were supposed to ship sometime during those two week, but didn’t because what was “usual” and what was really happening was not the same.

Maybe this seams like a trivial point.  “Of course you can’t expect things to work the same on holidays” you may be saying.  But that is the point—I don’t expect things to work the same on holiday, but I do expect those differences to be clearly detailed when I ask for them.  I don’t want to hear “Yes” now only to find out later that “Yes” really meant, “Yes, but not this time.”  As the buyer had already experienced, this is way to common in China.

2. Buyer Question:  Where do I go to find out what is legal and illegal to export from China and into my home country?

My Answer: First talk with your customs broker.  Their job is to be up to date on these specific things.  Other resources would included your freight forwarder, local government offices.  Be warned, I’ve never heard of or found a really user-friendly website for Chinese customs.  You’re going to need someone that can deal with customs in Chinese to find out exactly what the domestic requirements are.

3. Buyer Question: What language should I use when I’m contracting with my Chinese supplier?

My Answer: See China Law Blog’s answer to this very question—just this week!  In brief, it’s Chinese by default unless your Chinese contract specifically says (in Chinese) that it’s the other language.

4. Buyer Question: Is there anything else that you think that we need to know about working in China?

My Short Answer: Tons!  How many years to you have?

My Long Answer (you knew I couldn’t just have a short answer): Going to China from western Europe or the US is not the same as going from Chicago to LA on a business trip—the sights and accents are different, but it’s basically the same.  China is not the same.  You need to have both a product/industry expert (usually you) and a China expert to work effectively in China.  Remember, language, logistics, negotiations, banking, legal management and cultural processes are all significantly different.  Even many Overseas Chinese have difficulties here because it’s structurally and culturally so different.

Basically, Register your product/brand, Research your potential suppliers, Visit production sites, Contract all specs and details, QC every order multiple times, and Confirm everything over and over again.  Do these things for every supplier and every product, every time.

Here is a list of (my) Rules for Working in China.

  1. The number of factory visits you make before and during production directly equals the quality of the product you’ll actually export.
  2. No one cares about your product as much as you do—don’t expect them to.
  3. You will never guilt a Chinese factory into “doing the right thing” if it costs them money.
  4. If you don’t do QC you might as well take your money to Macao (or Vegas or Monaco).  You’ll get about the same odds and have a much better time losing your money.
  5. Never pay any money without doing some (a lot) due diligence first.
  6. Always pull your own samples for QC and testing.
  7. Technology is great, but fax, phone and email are not enough to manage production in China from thousands of miles away.
  8. You can’t do QC via Skype video conference.
  9. If you didn’t record it and can’t reproduce it then it never happened.
  10. What you see online and what really exists can be two completely different things.
  11. Quality issues are really money issues.  Every time.  Without exception.
  12. On a good day you can have any two, but not three, of the following: quality product, low prices, quick production turnaround.
  13. K.I.S.S. your communications over and over again..  Keep It Simple, Stupid.  Remember while English may be your second or third language it’s definitely your supplier’s second or third language.  So be VERY clear in everything you say.
  14. The more customization your product requires the more problems you’ll have and the more time you’ll need to get it done right.
  15. Sometimes paying more to get only what you originally contracted for is the best option.
  16. The more time you have to ship your product the lower the cost will be.
  17. Payment terms (Net 30, for example) and Incoterms (FOB, DDP) are not the same thing.
  18. Unless you’re using prison labor, you should always be able to go into the factory and do your own QC.  And even if you are using prison labor, you can still hire local Chinese QC to go in and represent you. Trust me on this one.
  19. Factory MNC or ISO certification means nothing.  You can buy the wall plaques and paper work, and at best, it’s a double-edged sword.  Yes, it can give you an idea of the capabilities of the factory.  But do not assume that because they’ve met this standard once for an audit that they meet these standards or use these processes in production every time.  Yes, certification means that they’ve been, to some degree, tutored and managed (at least once) by an international team.  But each MNC’s standards are very different.  And an “audit” my have been a 30 minute visit designed to pass rather than to critique.  Again, trust me on this one.
  20. Over-promise under-deliver has not made it to China yet.  So the samples you get are always going to be better than production—expect this or learn to live with disappointment.
  21. Much of what you cut out when you go factory direct has value—you must make up that value on your own.  QC is the most obvious piece, but there are others too—auditing, social compliance, printing, packaging, licensing, exporting, international shipping, customs clearance, etc.  These things will cost you time and money.  If you work for free and have no deadlines then you should do everything yourself.
  22. Suppliers will NEVER offer to pay for the cost of missed delivery dates.  And they’ll only pay for anything if they are either contractually forced to or if you have the cash leverage that allows you to withhold payment.
  23. Bad product will NEVER be returned to China for repair/replacement.