Over the last 15 years
imports from China have grown over 600% and more and more Indian traders are
rushing to but cheap and often poorly made products from the thousands of
manufacturers in China. Despite the current mood in India which is against
Chinese made goods, the trade with China cannot be curtailed nor will it ever
disappear. Caution needs to be exercised by Indian importers when importing
goods from China.
I first travelled to
Beijing in 1989 and have travelled on an average of 3 times a year to various
parts of the country.
I have worked with very
good suppliers and very poor suppliers. I have seen very ethical manufacturers
and I have burnt severely my hands with very shoddy goods received from
unethical suppliers.
My learning in sourcing
from China has been as follows.
1.
Talk to at least six suppliers before you take
a decision on who to source from. This is often quite easy since Chinese
manufacturers are clustered together in and around one area in most provinces.
You will be surprised at the significant price differential across suppliers
for the same product.
2. Do not get taken in by the certificates issued
by major buyers that most manufacturers will show you. Every manufacturer
claims to be a preferred supplier to the major retail chains in North America
and Europe. If you have a direct contact with any of these American or European
buyers, do a quick reference check on the manufacturer you want to select as
your supplier.
3.
Negotiate long and hard before you make a
commitment. The Chinese love a good bargain and they love to play the game of
brinkmanship even for a small value. Keep threatening to walk away from the
deal and the supplier will keep calling you back. When you reach a price that
is unacceptable, he will walk away and not call you back. This is when you know
that you have reached his lowest bargaining position. Use this price as the
base to close the deal with the next supplier.
4.
Chinese businessmen will pretend not to speak
English though most of them know the language well. They will never speak to
one another in any language other than Mandarin. I used to give myself an
advantage as well and talk in Hindi or your local language with your
colleagues. When the Chinese manufacturers realized that we were playing their
own game, they switched to communicating in English!
5.
Never put all your cards on the table with a
Chinese manufacturer. He will spring many surprises in the negotiation and
therefore you must be well armed with your own set of surprises. Good poker players
will be great bargainers with a Chinese manufacturer / supplier.
6.
Always remember that you are the buyer and that
he needs you more than you need him. The moment you show the slightest weakness
with your Chinese supplier, you would have lost the advantage that a buyer
should normally have. Do not get taken in by his claims of “getting killed
because of high input costs.” Always remember that the Chinese manufacturer
will not show any mercy or compassion with you.
7.
The only hold you as the buyer will have on a
Chinese manufacturer is your money, your payment, for the current shipment. As
long you owe him money, he will do your bidding. Once the deal is done, you
will become a fresh order for him. I have seldom come across a Chinese supplier
who is willing to invest for the long term in a buyer – seller relationship.
8.
You must never expect to receive any settlement
for damaged or sub-standard goods that may have received in your shipment.
Claims are hardly ever settled. You will always be given a plausible excuse
that you have no choice but to accept and if you push very hard you will be
told that they will give you a discount in the next shipment. Walk away from
such suppliers with your losses because your claims are bound to double with
the second shipment.
9.
Agree on your pack designs and quality
standards in writing. Once you open your letter of credit and before you give
your go ahead to manufacture ask for a signed test pack of your order for
approval and record this carefully in your documentation. Do not accept any
deviation in the specifications or the quality of the sample which must be in
accordance with your order. If you accept a deviation in the sample, forget any
compliance of the specifications in the final shipment!
10.
Ensure that you conduct a pre-shipment quality
examination before the goods leave the factory. You will never be able to
recover a claim for faulty / defective goods later.
11.
Always ask your supplier to deliver your goods
to your nominated clearing and forwarding agent at your designated port in
China. Don’t ask for delivery to India. A Chinese manufacturer has no interest
in the goods manufactured by him once he has shipped them out of his factory.
Outside his factory, the goods are the buyer’s problem.
The moment the export
shipment leaves his factory gate, your supplier shall encash your letter of
credit and move on to the next order. Whatever you choose to buy, be very
careful.
There is little or no
recourse to law in China if you run into trouble.
*******************
The author is the founder Chairman of
Guardian Pharmacies and the author of the best-selling books, Reboot. Reinvent.
Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for
an Eye and The Buck Stops Here - Learnings of a #Startup Entrepreneur.
Twitter: @gargashutosh
Instagram: ashutoshgarg56
Blog: ashutoshgargin.wordpress.com |
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