Housekeeping notes from show management Introduction to speaker Managing expectations
description
Transcript of Housekeeping notes from show management Introduction to speaker Managing expectations
What new buyers need to know Mike BellamyCSIC & PassageMaker
I. Housekeeping notes from show management
II. Introduction to speaker III.Managing expectations
• Culture notes• Sourcing expectations
– Domestic vs. international sourcing• Note on Intellectual Property (IP)• Types of suppliers• Quality Control (QC) overview• Logistics overview• Payments
IV. Q & A
What new buyers need to know Mike BellamyCSIC & PassageMaker
Supply Chains Serviced
Our clients are direct suppliers to
the following retailers and corporations:
www.PSSchina.com
What new buyers need to know Mike BellamyCSIC & PassageMaker
Intro to the CSIC
» China Sourcer e-Magazine» Video Tutorials» Ask-the-Experts Service» Buyer Blogs» White Papers» Endorsed Service Providers NEW: Supplier Blacklist
CSIC is a not-for-profit organization that exists to help educate, develop, and advance the China sourcing professional. The following resources are available free of charge to the public:
What new buyers need to know Mike BellamyCSIC & PassageMaker
No need to spend a lot of time on cultural differences Your cultural understanding is not a pre-requisite for success
Very forgiving of cultural mistakesSo many examples
…But there are a few things to be aware of
What new buyers need to know Mike BellamyCSIC & PassageMaker
• Culture• Communication
– time and language, spoken vs. written
• Travel• Due diligence• Contracts / PO’s• Quality• Product design (Harley
example)• Order quantities
Sourcing expectations: Domestic vs. international
sourcing
What new buyers need to know Mike BellamyCSIC & PassageMaker
• Lead times – custom production = 30 + 30 +30
• Packaging– air vs. sea, container, spell it out
down to BOM and confirm it… “put it in a box” is not the way to leave it
• Sampling – if not off shelf, may not be easy or
free… short term thinking… relative value
Sourcing expectations: Domestic vs. international
sourcing
What new buyers need to know Mike BellamyCSIC & PassageMaker
• Payment• Shipping/logistics• Duties/tariffs• Customs clearance• Returns (build it into contract,
order extra…)• Servicing• IP protection
Sourcing expectations: Domestic vs. international
sourcing
What new buyers need to know Mike BellamyCSIC & PassageMaker
• Legal exposure – Importer of record, who is to
confirm conformance, why not let the supplier determine conformance
• No “common knowledge”– If you can’t write it down and
scientifically confirm it, you can’t expect it… example: color conformation
Sourcing expectations: Domestic vs. international
sourcing
What new buyers need to know Mike BellamyCSIC & PassageMaker
Lots of challenges, but the payoff in savings is worth the effort
“everything is possible, nothing is easy”
What new buyers need to know Mike BellamyCSIC & PassageMaker
Disclaimer on China Intellectual Property
Vast majority of suppliers are honest and a pleasure to deal with. Unfortunately in a market as massive and competitive as China, IP is often a casualty.IP protection will be a key part of “Part 2” later in the week.
What new buyers need to know Mike BellamyCSIC & PassageMaker
Types of suppliers (vs. a “vendor”)
Pros & cons• “Chinese Chinese” factory• “FIE” Chinese factory• WOFE• JV (CJV, EJV, Fabricated JV)• SOE
What new buyers need to know Mike BellamyCSIC & PassageMaker
Excerpts from White Paper “Avoiding Middlemen – what most China sourcing agents, trading companies and brokers don’t want you to know!”
Testing a theorytrade show in Mainland China stood in the main hallcomplex productsaid in English “can anybody here make this item”
Result: 15 “mei wenti” (“no problem”), factory direct connections and great pricing.
Today, the amount of money involved in the China Sourcing game is so large …..BUYER BEWARE.
What new buyers need to know Mike BellamyCSIC & PassageMaker
Factory Direct or Not? (Good vs. bad middlemen)
1. Costs2. Quality3. Plan for IP4. Project Management5. Communications
“Check list of Red Flags” available via emailExample #1: Two Faced Cards
Example #2: Bait n SwitchAsk for copy of license
What new buyers need to know Mike BellamyCSIC & PassageMaker
China QC Overview Why are China Quality issues always in the news?
Recent and Rapid growth of Production Base
Global Interaction made easy thanks to the Internet
“know our limits and don’t rely solely on the suppliers”Let’s explore some of the key terms.
What new buyers need to know Mike BellamyCSIC & PassageMaker
Testing vs. Inspection vs. Audit
Testing: In a lab. Lead Test for example.
Inspection: Pulling a random sample from production line, warehouse or market place, to compare against agreed standards
Audit: Two Main Kinds 1. Factory Audit= technically assessment of
people, skills, process and equipment2. Social Audit = child labor, min wage, OT,
insurance, work place safety
What new buyers need to know Mike BellamyCSIC & PassageMaker
Golden Sample vs. Production Sample (how dangerous to ask “just give me a sample”)
ISO: family of standards and guidelines for measuring quality in the manufacturing and service industries from the International Organization for Standardization (ISO).
BUT ISO 9000 certification does not guarantee product quality. It ensures that the processes that develop the product are documented and performed in a quality manner. “ concrete life jackets”
What new buyers need to know Mike BellamyCSIC & PassageMaker
Quality Control: A system that is put in place by a manufacturer to monitor and maintain quality as goods flow from raw materials (IQC) into semi-finished goods (IPQC) into finished goods ready and packaged for shipment (FQC).
QA or 3PQC: Outside party that reviews the QC system of the factory and provides testing, inspection and/or audit services
Minor vs. Major vs. Critical Defects Critical= could hurt somebodyMajor= ability to sell the product is compromisedMinor= temporarily acceptable defect
What new buyers need to know Mike BellamyCSIC & PassageMaker
QC Fundamentals
As we advance from Concept to Production to Delivery, the cost associated with testing and fixing any problems increase exponentially.
You will see that a few simple steps, early on, not only are inexpensive, but very effective in reducing the exposure to non-confirming products.
What new buyers need to know Mike BellamyCSIC & PassageMaker
The QC toolboxFREE Tools1. Do they have a Quality Manual?
“PQM” template available at www.PSSchina.com
2. Ask for references
INEXPENSIVE Tools
1. Factory Audit Few 100 USD if using a 3rd party specialist like www.AsiaQualityFocus.com
2. Consider verification & investigation by specialist like www.CBIconsulting.com.cn
What new buyers need to know Mike BellamyCSIC & PassageMaker
What new buyers need to know Mike BellamyCSIC & PassageMaker
1. Shipping department at factory declares cargo ready
2. Engages export customs broker in China for clearance and inspection
3. China Customs allows export (based on license held by factory)
4. Chinese trucking company picks up cargo carries to HK border
5. Customs cleared for export into HK 6. Delivery to Port or Airport (CFS) 7. Export clearance of HK and booking with
Airline / Shipping Line
What new buyers need to know Mike BellamyCSIC & PassageMaker
8. Arrival at destination port / airport 9. Customs clearance 10. Local trucking company to pick up cargo at port /
airport 11. Delivery to buyers warehouse / facility
Involved parties: Factory/Vendor/Buyer (3) Customs in China/Hong Kong/Final Destination (4-5) Logistic companies: Trucker/Shipping Lines/
Forwarder/Broker (5-7)
Total parties involved 12 – 15
What new buyers need to know Mike BellamyCSIC & PassageMaker
Key Logistics Points
Find the right partner
Fast and Slow Air 2-7 daysFast and Slow Sea 15-30
daysIntermodal
5 years ago vs. Today
What new buyers need to know Mike BellamyCSIC & PassageMaker
Goal of Payments Segment:
Common pitfalls/best practices for documentation and terms of payment
What to do when things go wrong.
What new buyers need to know Mike BellamyCSIC & PassageMaker
Lessons learned:
“30-40-30” & Roadmaps
Financial Exposure is really Quality Exposure
Be careful if transferring funds to a private account or 3rd party trading company
RMB accounts in near future
Is the name on the bank account the same as the name on the PO and the same as the production site?
What new buyers need to know Mike BellamyCSIC & PassageMaker
Traditional RiskFinancial due diligence (www.CBIconsulting.com.cn)
Site visits (confirm vendor is a real manufacturer)
State lead times & penalties in contract
Jurisdiction
What new buyers need to know Mike BellamyCSIC & PassageMaker
Evaluate reward vs. risk (especially for initial production run)
Payment Terms are not Incoterms
PO & Contracts will be reviewed in separate seminar
What new buyers need to know Mike BellamyCSIC & PassageMaker
What to do when things go wrong?• Find the right supplier in the first place• K.C.C.C. (keep cool, communicate clearly)
• Arbitration/ Mediation • Legal enforcement as last option
(8-0 record at the moment)
Options for lawyers in China
What new buyers need to know Mike BellamyCSIC & PassageMaker
www.ChinaSourcingInfo.org/book
Shameless Book Plug
Includes templates for PO, Supplier Contract, Factory Audits, QC guidelines, RFQ and more
$150 USD online or $100 Cash at booth at trade show while supplies last
What new buyers need to know Mike BellamyCSIC & PassageMaker
Corporate Sponsors
What new buyers need to know Mike BellamyCSIC & PassageMaker
If take away just two things…
Spend the time to find the right partners for both manufacturing and service providers
Inspection linked to a Payment Plan
PassageMakerEmail: [email protected] Company: www.PSSchina.com
China Sourcing Information Centerwww.ChinaSourcingInfo.org
Blog: www.AnotherChinaBlog.com
LinkedIn “Mike Bellamy China”
Booth # 3G01