Recently I had interesting conversations with a few buyers, who work in Chinese companies, and who need to buy local products that satisfy a high standard.
How do they do Are personal relationships (“guanxi”) key Absolutely not.
Here are two examples.
1. A Chinese trading company that arranges manufacturing of phone accessories, as a licensee, for a VERY high-end British company.
How high is their standard No defect must be visible — it’s as simple as that.
So, how does that trading company find manufacturers
- They start with about 30 potential manufacturers that might be able to raise their quality standard up to the right level.
- They work on a first prototype, give feedback, and eliminate 10-15 candidates.
- They work on a pilot run of 100 pieces, give feedback, and only 1-3 potential suppliers stay in the race.
- Then the British company is shown the pilot run, and they might choose to approve none of the candidates. Hopefully 1 or 2 are approved.
- During production, an inspector is stationed full time in the factory.
The pilot run is the time the factory really understands how high the buyer’s requirements really are. At that time, many factories drop the ball.
Another interesting fact: contracts are very important (IP rights ownership, NDA, and so on). But one could say that, to a large extent, the need for contracts is driven by the British licensor.
2. Foxconn (actually a taiwanese company, but is it that different ) purchases components in China
One of Foxconn’s employees explained to me that they want to avoid discussions when a problem is found. They don’t want suppliers to look for a loophole and escape their responsibilities.
As a result, many factories don’t want to work with Foxconn. They are aware that they will get in trouble if they fail to meet the specs. At least Chinese suppliers are not always over-optimistic!
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by Renaud Anjoran on 14 August 2013