Chinese New Year has just finished and we a want to wish you a happy and fruitful Year of the Ox. According to Chinese legend, the Ox represents Ambition, Prosperity, and Strength.
It is clear that 2009 will be a challenge for everyone (buyer and factories alike) and the need to be Ox like will be a must. Dealing with and overcoming the world wide recession is a task we must all address. Our clients all over the world are telling us the same things. They want to move forward cautiously because of the uncertainty in the market now.
If you are importing goods that are made in China then you are probably aware of the need for QC, Project Management, and Third Party Inspection. I have listed several techniques and ideas to keep in mind when talking to a potential new supplier or your existing ones:
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. Because of the huge growth many Chinese factories have seen in recent times, most do not know how to react to a recession. They have become too heavy and complacent. They now face a big problem and some struggling. They have become more attentive to customer needs than just a few short years ago. Ask them to reduce their Minimum Order Quantities (MOQs) to help you deal with slower inventory turns.
3. Push your suppliers to become more efficient, develop new product, and be proactive during these slow times. If you have manufacturing experience, use that to help your suppliers any way you can.
4. Ask for better payment terms ASAP. You suppliers might actually be planning on changing their payment terms to better benefit them because money from banks is tight now. If you ask for better payment terms first, that will give you the upper hand if they push back with plans of increasing the deposit or changing Net 30 to Net 15. Take time to think about and investigate why they want to change their payment terms and whether this is a sign they are in financial trouble.
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. Be aware of the product codes, description, etc of the raw material used in your items. With pressure to reduce costs, using less expensive materials than used previously is a high possibility. Make sure your factory uses your specified raw 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.
Take this opportunity to use the Ox as your motivation to face this challenging 2009 with a positive attitude. With proper Project Management, Third Party Inspection, and QC at your Chinese suppliers, your company will strive and stake market share from your competitors.
Best regards,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com
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