Posted by Roger under: Business in China; Chinese Suppliers; Customers.
For all the complaining about poor quality or shoddy suppliers, we often forget that customers themselves are often equally as much at fault. From their inability to communicate needs to their unwavering belief that it should be a certain way (even if the reality is its often not), for every five bad suppliers there is at least one or two customers who are equally responsible for their order related difficulties. So here are my top ten dumb things I see overseas customers do when working with China suppliers:
1) Enlist a “friend” to help with their ordering/sourcing/shipping etc.
Usually the main criteria here is either the person speaks Chinese or English (or their home countries language). I know some very dishonest English speakers as well as some ten year old children that speak fluent Mandarin. I wouldn’t trust my business needs to either of them. Even worse, often this friend may have no or little professional experience at all. Examples that come to mind are “Chinese’s wife’s cousin,” “girl I met in a restaurant,” and my personal favorite “my neighbors son.”
2) Enlist the services of a buyer’s agent who has no experience with the product they are sourcing or manufacturing.
Another really silly one. I know absolutely nothing about sourcing medical products. If you as the customer are silly enough to believe I can gain the knowledge and expertise in a short amount of time to handle your business in a skilled, and savvy manner then you should be silly enough to accept the inevitable problems that will occur shortly thereafter.
3) “I have known my China supplier long enough that we have become good friends.”
I am not going to touch this one with a ten foot pole…. I wouldn’t buy a 40 foot container from my friends nor would I want to be “buddies” with my suppliers.
4) Switch agents/suppliers because of “low quality.”
Now this is a tricky one since quality problems do occur no matter what price you pay. However, I find that 90% of the customers who approach looking to switch due to quality problems are almost inevitably having problems because they insist on paying rock bottom price. Either they don’t want to pay for outside non-biased quality control, or they have been buying low end for so long that they see slightly higher upfront costs as major sticker shock. Switching suppliers, QC agents is not going to help. Switching mentalities and paying for slightly better product just might do the trick.
5) If only I could speak Chinese I could just clear this up in an instant.
Another favorite of mine. Seems they missed what the rest of us already know: that learning Chinese is by far the easiest most straightforward part of doing business in China. Ditto for working with someone just because they speak English (Or their home countries language). I have seen people pick partners specifically for this reason despite the fact that all other factors are completely wrong.
6) Hong Kong is the “English speaking” gateway to China.
While this might have been the case 20 years ago, this is no longer true in today’s terms. Having spent a significant amount of time in Hong Kong, I can tell you that some very China savvy people and companies to be found there. However, living in Hong Kong does not automatically make you knowledgeable about China. In fact, in some cases its a disadvantage as Hong Kong often has more in common with the west then it does with China. In some regards this is the disadvantage of Hong Kong.
7) Tell me how experienced they are with China, having spent many years buying from China, traveling to China, attending trade shows etc.
After 14 years of living and working full time in China, I am only just now starting to realize how little I know. Which leads me to wonder how they learned all that in just a few business trips.
8) Continue buying from the same suppliers for extended periods of time despite the fact that quality is terrible, deadlines are never ever met and promises are continually broken.
If they are doing such a bad job, why do you continue to reward them with further orders?
9) Asking the same questions despite having received clear answers.
Now this is more of a personal pet peeve of mine and not always related to China but I find some customers continually ask the same questions regardless of whether you have answered the question very clearly in the previous email (and the one before that, and the one before that). Maybe this is the product of small screens, attention deficit disorder or just plain battiness, but regardless it sure eats up time.
10) Buying from China.
Somewhere along the way people got the idea that a) everything comes from China b) they Chinese are now capitalists and business people just like us and c) for me to be in business I MUST be buying direct from China. Quite frankly there are a lot of smaller customers who simply are ill-prepared, inexperienced and simply not suited to the many difficulties and complexities of buying direct. These customers are might be much better off getting their product from local importers and distributors who have the experience and resources to smooth over the many bumps which one will inevitably encounter.
Posted by Roger under: Business in China; Highlites.
Interesting article on the Financial Times website called “Exquisite artifacts from the Forbidden City.” Whats interesting is the section which discusses the Qianlong emperor:
The country’s attitude at the time to non-Chinese “barbarians” is summed up nicely in a letter Qianlong wrote to King George III in response to a trade mission sent by the English monarch to Peking (as Beijing was then known) in 1793.
“As your ambassador can see for himself, the celestial empire abounds in all things and lacks nothing. I set no value on objects strange or ingenious and have no use for your country’s products,” the emperor responded to the English requests for greater access to the Chinese market. Despite King George’s impudence at even suggesting more interaction between Chinese and foreigners, Qianlong forgave him the affront: “I have ever shown the greatest condescension to the tribute missions of all states which sincerely yearn after the blessings of civilisation so as to manifest my kindly indulgence.”
The letter ended with the customary imperial sign-off: “Tremble and Obey.”
I think it speaks for itself….
Posted by Roger under: Furniture Industry; Industry Trends; Manufacturing & Production.
Chat with any “old school buyer” of Chinese antiques about the late eighties/early nineties and stories of 200 RMB rosewood tables and Ming dynasty porcelain for a few hundred RMB will bubble quickly to the surface. In recent times, this period might be considered the modern birth of the industry, with western buyers in Hong Kong at the forefront. Ten years later, Chinese mainland buyers have become the dominant force with Hong Kong playing backseat to Beijing, Ningbo and Zhongshan – all playing equally major roles in the industry. How times have since changed! The last three years however, have seen lighting fast changes within many of China’s industries. And the antiques/reproductions segment has in no means, escaped this. So what can we expect in the future?
For suppliers, factories and workshop
Labor Shortages:There has been much coverage in the media attesting to fact that, despite its 1.3 billion strong population, China is experiencing labor shortages in many industries/areas (particularly in the pearl river delta). In the furniture industry, the effect is evident in the average age of a carpenter with a glance inside any workshop revealing most are well into their 40ies. As many young people today have no desire to pursue a career perceived as dirty, backwards, low paid and labor intensive, expect this imbalance to continue. Its no secret within these circles that each year it becomes increasingly difficult to find/employ skilled Chinese carpenters and within five to ten years this will become a major problem for the industry.
Higher labor costs: In 2007, the starting salary of a college graduate ( w/computer and language skills) working in a foreign company was equal to or exceeded that of a Chinese carpenter. Its important to realize that office staff are generally individuals who live/work in the city, have college degrees, computer skills and likely foreign language skills as well. Yet by 2010, the monthly salary of carpenter from the countryside, with a middle school or high school education living and working in the factory will exceed (in many cases be double or more) that of entry level office worker. Therefore its no surprise the average monthly salary of a carpenter is a hot topic among workshops this year. Once treated as unskilled labor, carpenters and antique restorers are now essentially taking their rightful place as skilled craftsmen with compensation to match.
Diminished bargaining power: Chinese treat business as war and negotiating for a raise is no exception. Stories of the Nouveau riche coal miners snapping up high priced antiques, car buyers paying for their buicks with cash, the international spectacles of the Beijing Olympics, twenty years of strong growth and even the local media’s heavy propaganda coverage of the “communist economic miracle” have given rise to a “sky’s the limit” mentality. This combined with massive social pressure to get rich have turned many workers into mercenaries. Despite the global economic crisis and subsequent slow recovery, workers continue to demand increases and stories of workers defecting to the factory down the road for a mere extra 50 RMB are very common. In China loyalty in not earned but rather purchased.
Improve/Innovate or go under : In other words, all the things which should occur in a maturing market. Of course, this will also present both opportunities and challenges. Some general trends:
- Both Chinese and foreign customers have a multitude of choices and are gradually demanding better quality-better value for their money.
- Foreign customers particularly import buyers, reluctant to pay higher costs will need extra incentives or greater value added. In cases where customers are unwilling to pay more, producers may need to operate under thinner margins, provide better value for the money or seek out new customers.
- Price was once the dominant (only) factor. Good design has now become an additional buying factor.
- Its no secret (or shame in) that China wants to climb up the value chain. In practical terms, this means industries perceived as unskilled, labor intensive or resource heavy can expect no assistance from the government in the form of tax breaks, incentives or loose regulations.
- The Lacy Act: More paperwork for exporters who are sending product to the US. See here for more info.
Don’t ignore the domestic market:
|Searches for “Chinese antique furniture” have decreased on Google since 2004,
yet on Baidu (Google’s chinese language competitor) an equivalent Chinese language term
has held steady and now after the economic crisis appears to be once again rising.
Read the rest of this entry »
Posted by Roger under: Industry Trends; Pricing.
The Associated Press
Furniture companies are raising prices despite fears that higher costs could kill off a rebound just as recession-shocked shoppers appear willing to spend.
Furniture makers are blaming higher labor and material costs for producing in Asia as well as trans-Pacific shipping fees. Industry insiders expect more news of price hikes after buyers and producers gather in High Point for the world’s biggest furniture trade fair, which began Saturday.
“I’m aware of a lot of manufacturers that are considering price increases in this upcoming April market. They will announce a price increase and they will see if their major retailers are willing to take it, and if not they’ll back off,” said Bob George, president of Atlanta-based Impact Consulting Services Inc., which advises furniture manufacturers and retailers.
One big factor driving furniture prices is the rising cost of shipping from Asia to the United States.
Last month, the Federal Maritime Commission, whose mission includes protecting U.S. maritime commerce from unfair foreign trade practices, started investigating whether a surge in shipping fees could strangle the budding U.S. economic recovery. The average price of shipping a standard 40-foot container from Hong Kong to Los Angeles, for example, jumped 61 percent in the first week of April compared with the same time last year, according to data from London-based Drewry Shipping Consultants.
Another culprit is that more than two-thirds of the wood pieces sold in the U.S. are made abroad, and rising living standards in China and Vietnam are bidding up factory wages, said Rob Sligh, chairman of Sligh Furniture.
Posted by Roger under: Industry News & Events; Shipping & Ocean Freight.
If your in the furniture industry and dealing with American customers, yet haven’t yet heard of the Lacey act, get ready – you soon will. Though around for quite some time, it was amended in May 2008 and makes it a federal crime to trade in illegal wood products. Under a phased in process, industry sectors will have to declare both the scientific name and the country of origin (IE where the wood was harvested) for any wood elements used in the said imported products. While this has already been applied to sawn timber, wood flooring and other wood products, the next phase, starting on April 1st, 2010 will apply to the following HTS headings (The phase after that is Sept. 30, 2010 which will include additional furniture related categories):
- Ch. 44 (Wood & Articles of Wood
- Ch. 66 (Umbrellas, Walking Sticks, Riding Crops)
- Ch. 82 (Tools, Implements)Ch. 92 (Musical Instruments)
- Ch. 93 (Arms and Ammunition)
- Ch. 94 (Furniture, etc)
- Ch. 95 (Toys, Games, & Sporting Equipment)
- Ch. 97 (Works of Art)
Essentially this means that your broker will need to file an additional form specifying the wood species used (by latin name) and the country of origin (where the wood came from – not where it was used). For example, a teak chair would need to be specified as Tectona grandis. For now, failure to submit a declaration will not result in prosecution or delay clearance until after the phase in period (Packing materials do not have to be declared). For an industry with complicated supply chains, particularly those dealing in hardwoods this may prove to be a headache, especially for medium sized and smaller suppliers who are sourcing materials through middlemen. Ikea has called it unrealistic and said they would need to transmit 33.6 billion lines of data to the government over the course of a year. But don’t tell that to Gibson Guitars who became one of the first casualties of the Lacey Act, when they were raided last year over imports of rosewood from Madagascar.
|13. ARTICLE/COMPONENT OF ARTICLE:
||14. PLANT SCIENTIFIC NAME: (Genus and Species)
||15. COUNTRY OF HARVEST:
||16. QUANTITY OF PLANT MATERIAL:
||17. UNIT OF MEASURE:
||18. % RECYCLED MATERIAL
|Tables made of Mahogany
How this plays out in practicality will remain to be seen, however for those importing “one-off” consolidated pieces via a freight forwarder or packing company, an immediate headache will be hunting down the scientific names of each wood species. For look-ups of the latin names of commonly used wood species try the Integrated Taxonomic Information System website or the PLANTS Database on the USDA website.
Posted by Roger under: Business in China; Chinese Partners.
The following is the first in series of posts chronicling and at times ranting about , some of the (often frustrating) experiences we encountered working with some local Chinese partners. While a excellent (though costly) learning experience, needless to say this particular partner relationship has now ended.
Little white lies…
|Anyone have an aspirin?
Something I found extraordinarily annoying, really hard to stomach, and terribly counter productive, is the tendency for some Chinese partners and suppliers to blurt out what ones knows is definitely a lie, rather then simply state the facts and subsequently determine what to do about them. Sure, we all know telling a white lie in order to preserve face is accepted here in China, but why tell a much bigger lie knowing that chances of it coming back to haunt (in the short term even) you are better then 100%? The focus seemed to be on answering the question as quickly as possible, with the lest effort in a “satisfactory manner” today, rather then address the actual issue at hand to avoid problems tomorrow. And often the mechanism employed was a white lie.
Case in point.
A typical dialogue with our partner (If you speak Chinese, verbalize this in Chinese and it will make perfect sense):
ACF: “How are we coming along with this item. Will it be finished on schedule?
ACF: How far along are we?
Partner: In the warehouse, already started.
ACF: So, can I assure them it will be ready for transport by Friday?
ACF: 100% sure?
Partner: 100% sure.
ACF: You really sure? You know it has to be delivered on Friday?
Partner: 100% sure.
ACF: It has to be delivered on Friday.
Partner: No problem!
The next day, in follow up, the dialogue repeats itself. Same conversation. Same assurances. Early on, we learned two things: A) if you need it on Saturday, best to set the deadline for Friday (better Thursday) and B) verification is the key to success. In this case, that means both calling over to the workers themselves and one of our own staff going to the factory to visually inspect progress themselves.
This generally resulted in us determining one or all of the following:
The item in question hasn’t even been started.
Its sitting in the warehouse and has not even been moved into the work area.
What item?!? None of the workers had informed about it nor knew it was to be finished within a few days
It was on the schedule but had been pulled off of it to work on something “more pressing.”
- Partner: Is there a problem?
- ACF: Yes!
- ACF: You told me this was in progress, now I find its not even started.
- Partner: Aiya..!
- ACF: What are we supposed to do now?!?!?
- Partner: You never gave me the paperwork.
- ACF: (pull out the paperwork) You have had the paperwork for weeks. You signed for it on xxx date.
- Partner: Aiya….. (pause)…. When is the delivery date?
- ACF: Friday!!!
- Partner: Aiya…
- Partner: Can they wait a few days longer?
- ACF: WTF?!
- Partner: Its tight but… we can do it… we will have to work fast.
- ACF: How did this happen? You told me 100% this was in process
- Partner: Aiya….. I Forgot….
- ACF: Its on the schedule. Its been on the schedule for ages. I reminded you several times about this. The production staff reminded you several times about this. How could you have possibly forgotten?
- Partner: You know, I am so busy, so many things to take care of.
- ACF: Busy? Yesterday afternoon, I saw you sitting in the office playing poker on QQ (computer). How is that busy?
- Partner: You know, I so busy and have some much pressure on me. Running the factory is a lot of headaches, a lot of troubles. I have to relax sometimes.
- ACF: Really? (sarcastic tone).
- ACF: Really not interested in hearing about your problems. Managing the customers, quality control, orders, accounting, deliveries and the rest of the back office is a lot of pressure and troubles as well.
- Partner: Aiya..
- Partner: I better go and get this taken care of right away! (rushes off…)
Generally the result was a) the order had to be rushed b) problems with quality occurred c) our staff had to work overtime to make sure it was done and d) in many cases the entire order would need to be redone (at our expense) and/or redelivered a second time.
The main issue here seemed to be that the primary goal was always to address the question at hand with the least resistance and as expediently as possible, rather then taking action on the actual issue. It was almost as if, in his mind that by assuring me the order/item was “in process” he seemed to solving the problem! While there were instances where everyone involved was extremely busy where certain things were genuinely overlooked, much of the time, this seemed to be an autonomic ”white lie” response – one conditioned into the brain over the many years: don’t think – just give the “right” answer. Maybe its a problem with different ethical systems?
Thats not to say this is universal – the smart Chinese partner will knows that by getting a handle on things today, you will save yourself loads of time, money and headaches tomorrow.