Happy Chinese New Year! The year of the Ox officially began on January 26th and this year promises to be a challenge for everyone. The Ox is one of 12 animals that represent the Chinese Lunar Calendar. The Ox symbolizes prosperity, strength and ambition.
In 2009 both the buyer and the factory will need to adopt the characteristics of the Ox. There is no mistaking that everyone is faced with a huge challenge of how to pull ourselves out of this world recession. Customers and clients all over seem to be saying the same. They are unsure of what is going to happen so they are proceeding with caution.
As someone that is buying in China and then selling to your customers in another country, here are some tips (besides paying attentions to Project Management, Third Party Inspection and QC) when talking to your existing or new Chinese factories and suppliers:
1. Ask your current suppliers for a price decrease because of raw material prices have gone down. You can use web sites that track world wide commodity prices as a reference and reason for asking for the discount. The price of steel is a good example because recently from September 08 to till now, it is down about 20%).
2. Push for lower Minimum Order Quantities (MOQs). The factories are more willing to reduce their MOQs now than they were before 2008. Use this to your advantage to lower your inventory dollars.
3. Talk to and persuade the factories you are buying from to be proactive and efficient. Ask them to develop new product and capitalize on their competitive advantages. Share your manufacturing experience with them.
4. All buyers are trying to reduce the amount of cash tied up in inventory, so they are pushing for better payment terms. Unless you have a long standing, strong relationship with your supplier or suppliers, I don't see many Chinese factories giving better payment terms. Especially now with lenders not lending as much money, the supply of money is tight. If anything factories might start pushing for larger deposits and quicker payments. This could be a sign they have financial problems, they are questioning your financial strength, or they are just being very conservative. None-the-less, ask for improved payment terms and see how they react.
5. Visit your suppliers, do inspections, check out their production line and ask a lot of questions to confirm their financial strength is good. This will give you an idea of how their overall business is going. Ask simple, small talk questions to middle managers and below who you think will answer you honestly. Asking things like how is overtime work been compared to last year, have you had a lot of containers ship this week, etc are good ways to get a true feel of what is happening at the factory
6. Using less expensive raw material is one way for a factory to save money. Make sure they dont change materials on you unless you test and approve the new material
7. Negotiate the best prices you can, but do not do it at the expense of the factory because you think they are desperate. If they agree to ridiculously low prices, they are putting their whole business at risk and your supply chain that you have worked hard to get right. Take a partnership attitude and work together.
8. Keep your suppliers clued in to the current state of your business and market. They too are nervous about the slow down in the economy, so if you share with them what you are experiencing they will be less stressed about your recent reduced orders and more willing to quickly react to your needs when the time arises.
Be like the Ox in 2009. Use quality Project Management and Third Party Inspection to prosper and take market share in these challenging times. With the right approach and attitude this year can be more than just surviving, but actually THRIVING!
Sincerely,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com - 15246
In 2009 both the buyer and the factory will need to adopt the characteristics of the Ox. There is no mistaking that everyone is faced with a huge challenge of how to pull ourselves out of this world recession. Customers and clients all over seem to be saying the same. They are unsure of what is going to happen so they are proceeding with caution.
As someone that is buying in China and then selling to your customers in another country, here are some tips (besides paying attentions to Project Management, Third Party Inspection and QC) when talking to your existing or new Chinese factories and suppliers:
1. Ask your current suppliers for a price decrease because of raw material prices have gone down. You can use web sites that track world wide commodity prices as a reference and reason for asking for the discount. The price of steel is a good example because recently from September 08 to till now, it is down about 20%).
2. Push for lower Minimum Order Quantities (MOQs). The factories are more willing to reduce their MOQs now than they were before 2008. Use this to your advantage to lower your inventory dollars.
3. Talk to and persuade the factories you are buying from to be proactive and efficient. Ask them to develop new product and capitalize on their competitive advantages. Share your manufacturing experience with them.
4. All buyers are trying to reduce the amount of cash tied up in inventory, so they are pushing for better payment terms. Unless you have a long standing, strong relationship with your supplier or suppliers, I don't see many Chinese factories giving better payment terms. Especially now with lenders not lending as much money, the supply of money is tight. If anything factories might start pushing for larger deposits and quicker payments. This could be a sign they have financial problems, they are questioning your financial strength, or they are just being very conservative. None-the-less, ask for improved payment terms and see how they react.
5. Visit your suppliers, do inspections, check out their production line and ask a lot of questions to confirm their financial strength is good. This will give you an idea of how their overall business is going. Ask simple, small talk questions to middle managers and below who you think will answer you honestly. Asking things like how is overtime work been compared to last year, have you had a lot of containers ship this week, etc are good ways to get a true feel of what is happening at the factory
6. Using less expensive raw material is one way for a factory to save money. Make sure they dont change materials on you unless you test and approve the new material
7. Negotiate the best prices you can, but do not do it at the expense of the factory because you think they are desperate. If they agree to ridiculously low prices, they are putting their whole business at risk and your supply chain that you have worked hard to get right. Take a partnership attitude and work together.
8. Keep your suppliers clued in to the current state of your business and market. They too are nervous about the slow down in the economy, so if you share with them what you are experiencing they will be less stressed about your recent reduced orders and more willing to quickly react to your needs when the time arises.
Be like the Ox in 2009. Use quality Project Management and Third Party Inspection to prosper and take market share in these challenging times. With the right approach and attitude this year can be more than just surviving, but actually THRIVING!
Sincerely,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com - 15246
About the Author:
Greg Schultheis has been living in China for more than 6 years. He is American born and living in China full time has allowed him to learn Chinese. He has been hired by companies all over the world, big and small, to do consultant work. For a limited time, you can get a free consultation on Project Management and Third Party Inspection in China by emailing us at info@amrosia.com.
