Suggestion for Negotiating-production to shipments

NEGOTIATING WITH YOUR SELECTED SUPPLIERS If you are not a fluent Chinese speaker, bring a native Chinese speaker to the negotiation- he/she will be a valuable support Understand perfectly the production process Be very clear on who is going to be making decisions The best way to do business in China is face-to-face Technology is great, but I do not think it is the way Chinese people are wired to work I cant is not in their vocabulary, so be wary if you get silence for an answer Make them recap the agreements, do not assume they understood just because you feel you were clear enough Give realistic purchase estimates. If you promise 10 more times than you are planning to buy, they will cut corners to meet their profit so it will hit you back with poor quality (they work on small margins) Expect long negotiations: even points that have already been agreed will be raised again in the future Pricing: Do not get obsessed with the cheapest deal. Quality has a price and you should also consider that. Track commodity prices used in your products Learn about your suppliers cost structure (how much goes into labor, materials cost) If your IP is involved, make sure they agree to sign a good non disclosure agreement, with non use / non circumvention provisions (I read this one at the China Law Blogworth reading the whole post about it) Make sure you have good contracts in place. It will be a good use of your money to get a China knowledgeable lawyer to draft them (so that the terms are enforceable and it covers all the points you need to cover- IP, stocks, product quality, product specifications, penalties, etc) Ensure they have the machinery & capability to produce your product. Ask them to produce a few samples in front of you, even if they dont match your exact specifications.

PRODUCTION & SHIPMEN

Make sure you visit the factory during product development. It will speed the process, as nobody will tell you on the phone when theyve got stuck with something (especially if the product is technically sophisticated) Visit the factory during production & for quality control If you cant visit factory send an inspection company or somebody you trust (and is qualified for the job)

Dont pay till you are sure all the product is in good condition (make sure the contract is draft that way) Never relax! Even with good suppliers. Quality Control: Always, even with good established suppliers Always be ready with back up options- you would be surprised about how many last minutes surprises happen Expect Delays in your Supply Schedule (power shortages are common, national holidays) Problems dont finish after production. Supervise Logistic Paperwork! There are often mistakes that will get your shipment stuck

ON-GOING RELATIONSHIP Payment Terms Some buyers feel that, once you build the business relationship, things get easier (ex. Not requiring advanced payments) Get rid of unreliable suppliers A.S.A.P. If they trick you once, it will happen again Take care of good suppliers, they are not easy to find. Look for win-win when problems come up. Renegotiating conditions is quite common. Your Chinese supplier sees the contract as the beginning of the relationship. If you follow tips 20 & 21 (track commodity prices & know suppliers cost structure) you will be able to assess if there is a fair reason to give in (hopefully in future productions)