The 3 Questions People Forget to Ask – Product Purchasing in China!
The short term impact of the Coronavirus have been devastating for many companies with the toxic impact of high costs and a business environment showing as much life as a Monty Python parrot.
Difficult times indeed, but business has no choice but to move forward and find a way to survive. With this in mind it’s important to ask yourselves these 3 important questions:
1. Do I trust my Supplier?
Taking time and doing research. Needing a manufacturing partner that a businesses can trust – one that has sufficient knowledge and experience of a market and the ability to meet quality standards.
Understanding who the partner is can be another key consideration – are they who they claim to be or not? This decision is not only crucial, but particularly difficult when there is limited international travel. Is anyone going to be comfortable transferring money to an unknown company, and do they have the confidence that long term objectives are being met?
Many companies have fallen for the ‘supplier switch’ after the 3rd good order, and cannot understand why there is a sudden drop off in quality.
Focusing not only on the company that businesses are trying to deal with, but being clear on the sub-contactors involved and whether these are fixed or flexible are key.
2. Can We Afford For It To Go Wrong?
Outsourcing provides three main points to consider
a. Do you own the latest capital equipment to make your products?
No – then getting access to them by specifically looking for those with exiting equipment and spare capacity can be helpful. This will be a significantly easier exercise than offering up your house and children as security on your bank loan to buy the equipment whilst your customers are not buying anything.
b. Labour cost in China have hit a plateau with the virus taking its toll. Inflationary pressures are much lower than in previous years with unemployment reaching 6% in March. The industrial sector has been hit with the impact of EHS audits, US trade war as well as the virus lock down within China – they now face the prospect of low order books with European companies assessing what is left of their economies.
c. Product development in the UK is expensive, and great ideas often flounder given the high upfront costs. At a time when finances are tight, but innovation essential, outsourcing can provide the difference that allows businesses to thrive in a recovering market.
3. Do We Understand Chinese?
There are of course risks to be managed over the long term, but that needs to be addressed from the start. Being clear about what you expect in advance is helpful – being clear what is and is not acceptable to you, and then checking whether what you are asking for is understood by your chosen partner is important.
Communication can make or break your project – starting by thinking of long term partnership, and avoiding the ‘supplier bashing’ mentality. Small businesses need to use their charm and good will to establish themselves and develop the ‘guanxi’ that will support them over the long term. Thinking carefully who will manage this relationship for you is key.
Ambiguity generally results in failure – being as precise as possible reaps benefits, using a technical team to support the project as much as possible puts you at an advantage.
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