Something you need to know when you work with a manufacturer directly in China

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Something you need to know when you work with a manufacturer directly in China

You need to be very clear in your requirements.

Always ensure your technical packages are accurate. 

There must be no room for assumptions in them or any grey areas.

Chinese manufacturers tend to look for grey areas as a form of leverage.

Probably it will happen if you’re a foreigner

– Prices tend to be fifteen to twenty percent inflated. 

So you should be prepared for tough negotiating. 

Keep meticulous records of any negotiation with them. 

Ensure that after any negotiation you send them an email of what was discussed, and ensure you get them to confirm the email in writing.

They will always push for concessions. Don’t let them.

– Have a list of your non-negotiable business terms ready

(payment terms, incoterm, quality levels, inspection requirements, lead times, no sub-contracting, etc.)

Send to them in the first contact.

If they can’t meet your terms move on. 

If they can, again ensure you get this in writing and confirmation that they fully understand your terms.

Often manufacturers will not agree to your terms but come back to you a week or two later, agreeing to them.

This is a classic example of what I mean about concessions above.

– Don’t expect them not to share your product or IP with other buyers.

Even if they sign a non-disclosure agreement.

These are extremely difficult to enforce in China if you’re a foreign company overseas, and can cost millions in litigation.

Essentially they are not worth the paper they are written on.

– You need to visit the manufacturer when you place the order as well as during any production cycle.

They often sub-contract without telling you, that you need to watch your product in the workshop.

You need to personally account for all your production.

You need to police them hard from the start.

Once they see you are serious and experienced, things tend to smooth out.

And always have a backup supplier to your primary one.

– Another point, is to always use letters of credit as payment.

Never pay a deposit to the manufacturer directly, as this is often used as leverage.

Escrow is another safe option.

– Never place your orders for delivery a month before or after Chinese New Year.

This is always a disaster and busy period.

Even though the Chinese New Year is officially a few days, it is essentially a month of no production.

The problem you’re experiencing is that some Chinese manufacturers are far better oriented to working with foreigners directly than other countries (they thought foreigners are naive and easy to cheat).

But there can be a major language barrier as well as cultural barriers.

The most difficult one is the Chinese manufacturer wants to tell you what they think you want to hear.

It’s a well-intentioned thing.

But the result is seldom positive.

“You want to know what the problem is, what the limitations are, etc. “

You don’t want positive spin or sugarcoated answers.

This can be lethal when dealing with products manufactured to specific requirements.

It’s not nearly as challenging as it was in the sort of Wild West days of early offshoring to China (early people are purer than now), but issues still exist.

You need to find a factory with minimal language barriers and a good reputation.

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