Direct Sourcing in China


Today’s competition is too fierce and most companies have no other choice but making the China direct sourcing strategy a part of their overall strategy.

Different companies have different needs that require them to learn how to implement a direct sourcing strategy. It could be because you must be a cost leader, it could be because you have to control your production process, it could be because you want to protect your IP. No matter which one, if you have all the sufficient resources, the China direct sourcing strategy gets you closer to all the above.

In the past (20 years ago) finding suppliers was a challenge. Many people made a fortune only because they had the phone number and contact person name of manufacturers. In the pre-WhatsApp and wechat era, it was difficult to find a manufacturer…any manufacturer. But now, when international phone calls are free, air tickets are cheap, and Chinese manufacturers travel the world exhibiting in every possible trade show, finding a factory is not a problem anymore. However, controlling the process and the quality is not always easy.

IS DIRECT SOURCING IN CHINA GOOD FOR EVERYBODY?

It does make sense for companies with a very diverse scope of activities (like retailers who import thousands of SKUs from multiple countries and don’t have regional offices in those countries) to work with local agents or trading companies. Managing suppliers and quality systems is very time consuming and requires the right skill set, the right experience and the right people in the right place and the right time. Trying to manage your suppliers without sufficient resources (people and time) could result in costs (quality and delivery issue) that are much higher that whatever trading companies and agents would have charged you.

Still, every company has core products and business scope. Every company wants to be in total control of its core product, their production process and have a direct relationship with the producer of these products. Markets demand better and cheaper products, shorter delivery times and an ever improving user experience. If you are like my customers, you probably feel that bringing the right product to the market on time, requires that you keep your own fingers on the pulse, have the ability to know when things don’t work the way you want them to, and the option to bring them back on track your way.

SO HOW DO YOU DO IT YOURSELF?

I assume you already have a simple and straightforward process that helps you contact and select the most suitable suppliers for you.

Next, you need two things:

One – You need to have a reliable source of information that will give you real time and agenda-free updates, on a continuous basis, about what is going on in China. You need to know what happens when it happens. You must make sure you have the ability to shift events in a direction that works for you.

It is very important that when issues occur, you will be able to discuss them with you manufacturer and sometimes, their suppliers and subcontractors. It is very important that you will remain in control over the decision-making process and confirm the solution that was agreed on will not create other issues, and especially issues that you will find out about long after the goods left China.

Two – You need to be able to speak to multiple people in your manufacturer’s organization from both high and mid-management levels. From each of these levels, you will receive valuable information. However, if you only get information from one of these management levels it will be very difficult for you to evaluate what is the value of the information and how much of it is factual, and how much is an interpretation.

If you travel to China frequently, you may have already learned enough about the Chinese business culture and so it will be easy for you to understand both what your counterparts are saying, and what they are trying to say. If you feel you are not sure you understand correctly messages people in China are sending you, and that you don’t manage to get your own messages across, you might want to ask someone with the right skill set to join your team.

If you have your vendor sourcing and selection process in place, you established a reliable source of information on the ground in China and you have and open communication channel that allows you to send and receive messages effectively you are definitely on the right track. Now you can setup your own quality team, add new vendors to your supplier bank on a regular basis, and stay in control of your production at all times.

Source: www.csoprojement.com/china-direct-sourcing-diy/
Image: Wikimedia

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