Many clients of the past few years have just needed to get over the proverbial hump with China sourcing. They know that they will have product manufactured in China, they may even know what supplier they want to use. Most have used trade websites like Alibaba.com , many have even stayed up nights talking on MSN to the potential factories. Most are overwhelmed with info and a little confused.
Thats when we start talking about TRAILBLAZER service. This is when we schedule 8-10 days on the ground in China. We visit factories, talk to suppliers , see samples and try to gather a true understanding of what is really going on. A typical week is about 7 factory visits. Spending time in the factories is essential to really understanding who is who. Doing business in China is a constant battle of trying to deal with the right people. The only way really to get to the source is to understand the players. Spending just 1 day in a factory will tell you more about the future of your relationship with that supplier than 1000 emails.
Just the logistics involved in seeing 7-10 are incredible. We spend nights on trains, hours on buses and what seems like lifetimes on airplanes.
Sunday, January 4, 2009
Thursday, January 1, 2009
Trading Trailblazer
As I work everyday I think about how to summarize what my specialty is. Simply put, I am a trailblazer. I even took time to look it up :
trail⋅blaz⋅er
–noun| 1. | a person who blazes a trail for others to follow through unsettled country or wilderness; pathfinder. |
Tuesday, December 2, 2008
Should I buy from the same place as everyone else ?
So it seems easy, just get to the factory that is producing the products for your wholesaler or competitor , right ?
No so fast....this may be the easy choice of factories for you, but you may be leaving alot on the table. What I have learned over the years is that the first choice is not always the best. You begin to see that all fac may have factory # offer is a good sales person ....they may not be the best fit for exactly what you need.
Lets talk about some examples during the scooter project. My first containers came from the factory that was already making them for the domestic supplier (factory # 1) I was buying from, so I simply cut out the middle man. But, after visiting 5 other factories making basically the same product I discovered that the first factory really wasn't the best long term choice. The price the offered was much better that the price I was getting in the USA, but it was not the best price out there. More importantly than price, I found a factory that was really much better to deal with. We were eventually able to make changes, order parts , and redesign packaging. These may seem like simple things, but due to the discovery process of a variety of factories I better understood what was actually available. Once you see something being done one way at factory # 1, you are far better able to explain to factory # 2 that it is possible.
I am going to show some pictures of some of the problems/solutions that were addressed during the scooter project.
These were some of the first bikes I ordered. notice the metal frame for packing. We would have to take the box in the USA and attach it to a shipping pallet so the freight company did not damage it during delivery to the end user.
In later orders, I discovered that the bikes could be packed in an all reinforced cardboard/styrofoam pack with holes for forklifs built right into the pack. The packaging actually cost less than the steel, was lighter, and worked better. Just by changing the packaging I saved almost $50 per bike in the end. I saved about $5 from the factory, and about $35 per bike from the freight company that delivered the bikes across the USA for me because the weight was so much less. I also did not have to pay for a pallet or the cost to have someone pack it for shipping.
This packaging example shows how the China price is made up of many things. In the case, my net cost of delivering product was reduced by more than 10% without actually changing the FOB CHINA PRICE
No so fast....this may be the easy choice of factories for you, but you may be leaving alot on the table. What I have learned over the years is that the first choice is not always the best. You begin to see that all fac may have factory # offer is a good sales person ....they may not be the best fit for exactly what you need.
Lets talk about some examples during the scooter project. My first containers came from the factory that was already making them for the domestic supplier (factory # 1) I was buying from, so I simply cut out the middle man. But, after visiting 5 other factories making basically the same product I discovered that the first factory really wasn't the best long term choice. The price the offered was much better that the price I was getting in the USA, but it was not the best price out there. More importantly than price, I found a factory that was really much better to deal with. We were eventually able to make changes, order parts , and redesign packaging. These may seem like simple things, but due to the discovery process of a variety of factories I better understood what was actually available. Once you see something being done one way at factory # 1, you are far better able to explain to factory # 2 that it is possible.
I am going to show some pictures of some of the problems/solutions that were addressed during the scooter project.
These were some of the first bikes I ordered. notice the metal frame for packing. We would have to take the box in the USA and attach it to a shipping pallet so the freight company did not damage it during delivery to the end user.
In later orders, I discovered that the bikes could be packed in an all reinforced cardboard/styrofoam pack with holes for forklifs built right into the pack. The packaging actually cost less than the steel, was lighter, and worked better. Just by changing the packaging I saved almost $50 per bike in the end. I saved about $5 from the factory, and about $35 per bike from the freight company that delivered the bikes across the USA for me because the weight was so much less. I also did not have to pay for a pallet or the cost to have someone pack it for shipping.
This packaging example shows how the China price is made up of many things. In the case, my net cost of delivering product was reduced by more than 10% without actually changing the FOB CHINA PRICE
Monday, December 1, 2008
Where do you start ?
To really successfully begin sourcing in China, you really need to understand the strategy. I am going to try and explain my methodology of how to be successful. I think pictures really help explain things. I have taken thousands of pictures in the factories over the years and I will try to show many of them. I think it is best to start, where I started. My first sourcing project was to import a private brand of 50cc motor scooters. I had been searching the web via sites like alibaba.com and finding suppliers to sell me a container of 50cc scooters. I had been using a drop shipper in the USA and been having all kids of problems. I decided it was time to start buying direct. I had seen all kinds of quotes from factories and saw all types of great products. I was using $50,000 of my own money and really couldn't find anyone I trusted to do business with. I had some airline miles, so I set up meetings with 8 different factories that seemed capable. I hired a translator and off I went....
In the 6 years since I have visited well over 100 different factories that produce virtually every type of product being exported to the USA. I am a full time China sourcing consultant with a broad understanding of not only sourcing, but overall product development. I plan to blog about past projects, without violating any confidentiality agreements.
My consulting theory hasn't changed must since I first started. In virtually every startup souring project, there is a major point where everyone decides to go to China. Visiting factories is an essential part of what I do. I think that it is impossible to really craft a sourcing strategy without going to visit the factories. It is not only to see who is doing what, but it gives you the opportunity to develop your own business plan based on what they are doing there. You need to leverage all of the resources of the factory to make your China price really work. There are a number of reasons to begin sourcing in China, but to really understand what your options are you need to spend some time on the ground.
All of the factory visit trips are basically the same. You reach out to a number of suppliers ( I'll go into how I find them later ) and qualify them. Once I decide on maybe 10 good places we try and set up face to face meetings with them. Normally in a week trip we actually visit 6-8 different places. Every factory is different, but you need to approach them each the same. Go into each one with an open mind and see what they have to offer. Once you see all of them, you will have some clear cut leaders. After you are back home you decide which factory you will actually work with.
I am going to add a number of pictures of my first factory visits in 2002.
This is really your standard factory. Small office building and the production facility , along with the dormitory in the back
This picture of boxes is the reason you do to the factory visits. These boxes were branded for the supplier I was buying from in the USA. By dealing with the factory direct, I was able to buy the exact bike, off the same line, with my own brand for less money.
Inside the factory you were able to deal directly with the management, and even better, the engineers. I was able to fix some of the problems I had been having and make some much needed changes.
This picture is what really helped me understand sourcing. The picture is of all of the different stickers for all of the different brands being sold in the USA. I discovered not only would the factory sell directly to me, but the also sold to most of my suppliers competition. I learned that this one factory was making bikes for 4 or 5 of the other major brands in the USA.
Successful China Sourcing for Small and Medium-sized Enterprises
The Problem:
In order to compete in today’s global economy, companies must be able to source their products or parts at internationally competitive prices without sacrificing quality. For many, the most cost-efficient, high-quality producers are now located in China. Successful Small and Medium-sized Enterprises (SMEs) must now include China as part of their supply-base strategies.
The problem, however, is that many Small and Medium-sized Enterprises (SMEs) do not have the international purchasing experience and resources to locate, qualify and negotiate with Chinese suppliers.
In order to compete in today’s global economy, companies must be able to source their products or parts at internationally competitive prices without sacrificing quality. For many, the most cost-efficient, high-quality producers are now located in China. Successful Small and Medium-sized Enterprises (SMEs) must now include China as part of their supply-base strategies.
The problem, however, is that many Small and Medium-sized Enterprises (SMEs) do not have the international purchasing experience and resources to locate, qualify and negotiate with Chinese suppliers.
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