Managing Factory-Client Dynamics in Modern China

In order to maintain a competitive edge in manufacturing today, businesses are forced to consider sourcing their products from China. Most Fortune 500 companies already do this, and now with the growing number of sourcing agents and improved communication with China, smaller companies are also capitalizing by manufacturing in China. Forming a strong and professional relationship with any manufacturer you work with is a must. However, developing the type of business relationships Western companies are accustomed to with Chinese manufacturers is a delicate operation. This should not be a deterrent from working with manufacturers in China, but it is vital for business to understand how to forge and solidify these important relationships. Let's look at the different perspectives between a foreign business as a buyer and a Chinese manufacturer as a producer. The buyer usually wants to form a long-term partnership for reasons of convenience, reliability and to guarantee low manufacturing prices. Most businesses would love to find a few reliable Chinese manufacturers they can count on and partner with them. Buyers will think of this relationship as a "win-win" relationship for both sides since they are getting their product reliably and efficiently and the manufacturers have a client promising to buy product consistently and at sufficient volume. While Chinese manufacturers would not necessarily mind this sort of relationship, they do not fully share this point of view and will not immediately jump into a long-term partnership. The manufacturers are generally skeptical of foreign buyers and their "long-term" partnerships. The Chinese manufacturers know that many buyers promise to buy regularly and in huge volumes but realistically they often can't deliver. The manufacturers are also aware that many buyers will inflate their purchasing power in order to negotiate a better deal and that ultimately buyers are more loyal to the dollar than a particular factory. This means the buyer will switch factories if it makes fiscal sense. Therefore, the mindset of Chinese manufacturers is more of a short-term view of business relationship when compared to buyers. This short-term view seems rational when viewed from a Chinese manufacturer's perspective. So, how can a business act appropriately and get a manufacturer to maintain a reliable relationship for a longer period of time? Think and act more similar to a Chinese manufacturer at the beginning of a business relationship. This means that you should build your trust with the manufacturer one step at a time and not try to immediately form a long-term partnership. The key is finding a factory of the right size that can manufacture your product at a consistent volume that you can guarantee. The following strategies will ensure a good relationship with the manufacturer and lead to a fruitful partnership. Don'ts. Chinese manufacturers do not like dealing with stringent buyers. They will raise prices and/or manufacture a lower quality product next time around if they do not like the buyer. Don't accommodate too easily to production constraints. Manufactures consider compromises a weakness and will then slacken on effort, quality and production. Don't base your prices on quality alone. Lastly, realize that it is worth paying a little more to work with a superior factory. This will save your business money and time since there will presumably be less quality control issues translating to fewer delays. How your business should work with Chinese manufacturers. First, a business must be able to evaluate a manufacturer's ability to meet quality standards, time constraints, and logistical requirements. To do this, you will need to visit the factory and clearly explain what you expect. A trusted sourcing agent can act on your behalf and often provide essential insight into these areas. Sourcing agents are skilled at navigating the ever-changing marketplace and generally have a database of worthy manufacturers. You or your sourcing agent must always monitor production quality and maintain your quality standards as much as possible. The manufacturers are not necessarily trying to tarnish your business, but with their short-term view of business relationships they have less incentive to produce a high-quality product in a timely manner. Rigorously inspect your product and test samples. Only promise regular business to the best factories and make sure you can stand by your promises. Keep your factory honest by having it compete for your business with at least one other factory to avoid unfair prices. However, use this healthy competition as a bargaining tool and don't just change manufacturers at the drop of a hat. Most importantly, put yourself in the Chinese manufacturer's shoes and know that some customers are more valued than others and receive better treatment based on their relationship. Lastly, remember that a trustworthy sourcing agent can be a very helpful associate and liaison when dealing with these and other issues that may arise when dealing with manufacturers in China.