In this mini-series of podcast episodes, we will explore the process of what it means to work with the right Chinese supplier and how to qualify them effectively, screening out the bad options and focusing only on the one or two best choices.

You can read more about this topic in the series of blog posts on QualityInspection.org which we refer to throughout - read all of those posts here.

When starting to source new suppliers, you need to be aware of the risks, and these bad behaviours are what we focus on in this episode - the 7 ways Chinese suppliers cheat or cause trouble for customers.

Show Notes

Why is vetting new Chinese suppliers so important? (Start to 1:45) - the topic is drawn from this blog post which you can read for extra information.

Introduction to the components of trust between supplier and client - firstly, do you trust them their character and truthfulness and secondly, do you trust them to be able to actually fulfil your orders correctly? The need to be careful not to put yourself in a situation where you rely too much on one supplier who may not have your best interests in mind. (1:45 to 7:38)

7 ways Chinese suppliers can cheat you!

The 5 bad behaviours

1. The supplier disappears after a deposit, or a fee for samples is wired. (7:38 to 11:25)

2. Price increases unexpectedly after a deposit is transferred and you're 'hooked.' (11:25 to 16:33)

3. Price increases from one order to the next, without relation to production cost increases. (16:33 to 18:55)

4. Lack of respect of IP rights (selling the buyer’s design to other customers). (18:55 to 25:05) - you may also enjoy this blog post related to IP theft in China, too.

5. Lack of transparency (subcontracting outside of an approved facility, changing a component without notice, etc.) includes a discussion about how face is gained when you get away with things and also the concept of chabuduo (more or less). (25:05 to 31:24)

2 lacks of competency/experience

6. Lack of reliability: late deliveries, inconsistent communication…why over-promising and underdelivering has become common among Chinese manufacturers. (31:24 to 34:50)

7. Inability/unwillingness to reach the desired quality standard. At what point do you 'pull the plug' on a supplier who is unable or unwilling to produce goods at the quality standard you are expecting? (34:50 to 37:55)

Previewing the next episode  

In part 2 of this series, we will move on to discuss how to screen out the 'bad' suppliers who are likely to cause you the problems discussed in this episode? This will include tips for better vetting, such as background checks and smart questions to ask that will help you quickly identify which candidates aren't right for your needs. (37:55 to END) 


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In episode 9 of the podcast, Adrian and Renaud discuss the different types of suppliers you may encounter in China (and Asia in general), their pros & cons, and what to look out for when sourcing suppliers.

Show Notes

We react to the worrying news coming out of Beijing about new clusters of coronavirus infections. How could this affect manufacturing in China? (Start to 3:45)

As the disputes and rancour between China and the USA rumble on, how are the trade war and the recent push to 'reshore' manufacturing going? (3:45 to 7:10)

Moving onto the episode's main topic, Renaud defines OEM and ODM - what these suppliers are, their features, and pros and cons of working with them. Factory audits are a useful tool here to help assess if the supplier is right for your needs. (7:10 to 23:50)

ODM - Expanding on some of the benefits and possible risks of working with an ODM specifically, such as their failure to alert you about who really owns the IP of the products they're suggesting they can produce for you, and also the need for a watertight Chinese manufacturing contract. (23:50 to 25:45)

OEM - Similarly expanding on OEMs. What are some of the key benefits (fast to market) and risks for importers when working with these suppliers? Such as being locked in with a supplier who won't produce the quality you need or the risk of losing your IP to them and finding your products on the market later on at a much lower cost! (25:45 to 32:56)

How to keep an OEM in line when working with them? Including arranging a suitable agreement with your lawyer and what it must contain in order to hold sway over the supplier. (32:56 to 36:05)

The rules of thumb for choosing suppliers - What production volume of yours would be best served by hiring an OEM, ODM, or CM (or even setting up your own manufacturing facility)? (36:05 to 37:25)

CM - What are contract manufacturers in more detail. Benefits of working with them and a number of best practices to make sure the production runs smoothly. Why CMs are less likely to play tricks than OEMs and ODMs and want to get to mass production and for it to run very smoothly. (37:25 to 45:10)

"Famous CMs produce products for HP, Apple, etc, so if I work with them I'll be guaranteed great quality products, too, right?"  Why this is not necessarily the case.
We also mentioned our own Contract Manufacturing subsidiary, Agilian Technology, at this point, which is one of the 'smaller alternatives' mentioned that will provide a better service for buyers who don't bring enormous orders to the table. (45:10 to 50:00)

The dangers of dealing with trading companies who may be leading you to believe that they are a manufacturer or who cannot handle the manufacturing project as capably as you need (due to not being particularly involved with the factory amongst other reasons).
In this section, we also mentioned due diligence and how we provide solutions like an affordable legal records check to help weed out trading companies or bad apples when sourcing suppliers. (50:00 to END)


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In episode 8 of the podcast, Adrian dials in with Renaud to discuss supply chain risk, how to manage it, and some of the tools that can really help make a difference for importers.

 

Section 1: Supply chain risk, Black swan events, & VUCA (Start to 25:00)

  • What is supply chain risk
  • Real-life instances where this has negatively affected businesses
  • Black swan (unpredictable) events
  • VUCA (Volatility, uncertainty, complexity and ambiguity) and some examples
  • Performing due diligence on suppliers (Sofeast can help with this)

We follow the topics of this blog post: Supply Chain Risk Management, Part 1: What are VUCA and Black Swans?

 

Section 2: The Business Continuity Plan (25:00 to 37:00)

  • Explaining what a BCP is and its benefits
  • The dangers of 'swimming naked'
  • How to build and complete the plan (including Issues/Risk dimensions/Action plan)
  • The role of planning in an organisation that wants to take action to reduce risks

This section focuses on the topic of this blog post: Supply Chain Risk Management, Part 2: The Business Continuity Plan

As promised, you can get Renaud's BCP template and configure it for your own needs should you wish to undertake your risk analysis for your own business here: https://bit.ly/BCPTemplate

 

Section 3: The Supply Chain KPI Scorecard (37:00 to End)

  • Why most purchasers pay too much attention to the price of what they buy but fail to take risks into account such as too much complexity, unreliable suppliers, etc
  • Examples of the negative consequences of focusing primarily on price
  • How completing a supply chain KPI scorecard can help reduce risks and the key KPIs to include (such as quality, cost, on-time delivery, and certain risks, too)
  • Summing up and closing remarks from Renaud

This section draws on this blog post: Supply Chain Risk Management, Part 3: A Purchaser Supply Chain KPI Scorecard’s Benefits

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If you have any questions about the topics discussed in this episode you can get in touch with us and we'll do our best to answer them and also remember to subscribe to Renaud's blog at QualityInspection.org and visit Sofeast if you need assistance on the ground in China or SE Asia with your supply chain, quality, product development, and much, much more.

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