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Common Mistakes when outsourcing manufacturing and sourcing from China

By Jesus David Cano Romano
June 8, 2015
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No doubts China is an excellent option when outsourcing manufacturing and sourcing parts for your products, but the massive amount of options and suppliers in the Chinese market can seem overwhelming and if not taken all the needed cautions when choosing the best option some pitfalls can occur during the manufacturing or sourcing process.

Since our inception in 2005 we have seen and heard literally 100s of China horror stories and manufacturing nightmares, most of the occasions could have had been avoided if a proper planification and management of the manufacture and sourcing processes had been set on time. Below we’ll share some of the most common pitfalls, that happen during manufacturing in China, for you to avoid in the future.

 

Have low or null caution measures nor strict controls

 

Majority of the companies or individuals whose are keen to manufacture or sourcing from China don’t perform a deep analysis to the potential suppliers.

This can be a really pricey mistake. We ought to know that Trade shows, emails and phone calls don’t represent the full picture of the reality of the supplier’s factory conditions and capabilities, in this step is needed to perform several audits and visits to the manufacturing facilities prior the setting the PO.

Is important to say that having a previous check on the potential supplier capabilities and actual conditions not only form the facilities but also from the Social related issues should represent a must when buying from China, as it will avoid any kind of problems not only in the production by assuring that the supplier is capable to deliver the best outputs, but also for complying social and environmental standards.

By filling a check list during our visit to the supplier facility which might include a quick review to:

• Production Capability

• Machinery and Equipment

• Management and Quality Procedures

• Manufacturing Processes

• In-house Quality Control, Testing and Inspection

• Raw Material Management

• Semi-finished and Finished Product Management (Shop floor and general inventory handling processes)

Or in case of not being able to be at China at the moment on the of the Audit contract an experienced unbiased 3rd Party to do it for you.

 

Be centred only in the price

 

Most of the people would get excited when hearing about a low price from the manufacturer. As we all know the lower the purchase price the higher will be the profit when selling the product on the market. Obviously the price can be a first filter when selecting the supplier, but basing the decision solely on it can be a long term mistake.

Most of the times cheap prices come along with quality issues, reliability, defficient flow of communication between the parts and even other bigger issues such as hazardous materials, inefficient productive processes,  deficient work conditions, just to mention a few.

Is important to be aware of the price when manufacturing or sourcing from China but use it as the only criteria on the supplier selection process can ruin our production and purchase strategy of goods from China.

Extremely low prices can be an alarm signal for avoiding a supplier. If the price is so low that seems to be surreal then surely will be.

 

Do not predefine specifications

 

This can seem an obvious task, but having set clearly your specifications prior the production process is key to have a successfully manufactured product.

Clear, easily comprehensive and uniform instructions are the first step to ensure that the product will be produced as envisioned and is also important for developing a strong relation with your supplier. As more detailed and organized are the instructions we give to the supplier, more accurate will be he final output, so as the quotations and estimate lead times.

 

Not having a local contact

 

Making business across the borders is an exciting journey, and in the globalised world that we live in, is major factor for boosting our business success. Nevertheless we ought to take in consideration, that is not an easy journey and can turn into a potential disaster if we don’t have a clear and predefined route to make business in another culture.

Having an experienced partner (local or foreigner with broad understanding of the local business culture) will be helpful for avoiding pitfalls in the process.

This partner should be able, just to name a few qualities to speak Mandarin, and being able to perform or at least be present during the QC inspections and other potential scenarios that can arise related to the logistics or production.

A lot of CEOs and managers think that they can have full control of the operations from their HQ, with the aim to increase their markup, but the need of having eyes and ears onsite cannot be forgotten if want to succeed in the adventure of manufacturing in the Far East.

 

Not Creating solid agreements

 

Base your production on oral agreements is a very risky way to make business. When purchasing and manufacturing in China, is primordial to create written contracts that will legit the process within the parts involved.

An standard contract will include, just naming a few key aspects: rights and obligations of the parts, clear specifications of the products to be manufactured, this will ensure all requirements are full filed, and will give you as a purchaser certainty of the transaction. But above all  will give legal background to the process. For signing the contract is important to know all the regulations and possible legal implications of the same, for which out local contact will be important as he has broad understanding of the local legislation and rules applied.

Being mentioned this, a contract will be a solid way to legitimate the purchase and backup yourself upfront any potential issue related to the manufacturing process.

 

Final word

 

Using Common sense, and with broad vision towards the culture and knowing that we’re trying to avoid the mistakes previously mentioned, we’ll be able to take advantage from the massive amount of opportunities that are offered to us from Sourcing and Manufacturing from China, and ensuring success and win win relationship within the parts.