Cultivate a curious spirit.

This should be something you require from yourself.

Before you have any meeting, answer any email, respond to any brief….

Formulate questions.

Think of things that need asking in order to make whatever business transaction you’re doing…a success.

Let’s put business aside for a second and consider LIFE….the personal side of things. Really it’s hard to distinguish between life and business but be that as it may.

If you’re getting into any kind of romantic situation, I’d hope you would ask questions.

Be curious about others; their lives, their processes, how they get from point A to point B.

Ask questions in order to learn.

You ask questions to find potential red flags.

To uncover problems.

If you’re a supplier you should ask questions to better understand the project and the client expectations.

If you’re a buyer you should ask questions to better understand the supply side and make sure the supplier understand what YOU’RE asking.

If you’re an employer.. a big fat cat boss you should ask questions of your employees.

“What do you do on the weekends?”

“What are your children’s names”.

“What things do you think we can do better in this organization?”

Don’t be afraid of answers.

Many supposed leaders don’t ask questions because they’re afraid of real answers. They also don’t volunteer information because they walk in shadows and are terrified at being exposed.

This type of leader or person usually shares real estate with 100’s of white elephants, but nobody talks about it.

I’m a father and I ask my children questions; this how I can gauge where they’re at, what they’re thinking, how they perceive things.

On the flip side, if you interact with people who don’t ask questions… then flee.

This is a bad sign.

If they don’t ask pointed questions to understand.

If they don’t casually ask questions about you…personally.

If they don’t have a curious, inquisitive spirit…it’s not a good sign.

It shows they lack human-to-human awareness and there’s something that down the road is going to go south.

These type of people are generally in their own worlds and are oblivious to others.

They weren’t taught to share.

As adults we don’t share our toys.

We share experience, guidance and answers.

The Promotional Products Industry and Factory Direct

Lots of noise in these modern times.

This noise says that if you import and if it’s not factory direct, then…you’re simply doing it WRONG.

Regardless of your success.

Your orders may arrive on time.

Safe.

Good quality.

You’re keen on the price.

But if you’re not doing this directly from the facility that’s “putting hand-to-plough”, then you’re doing it wrong.

That sounds weird, right?

I mean if it’s working, then…why is it not working?

Like I said, that’s just noise.

If it works, it works.

Here’s more on why distributors in the promotional product industry shouldn’t always work factory direct.

They necessarily don’t WANT to work factory direct.

The factory doesn’t want to work with YOU.

Quantity & price advantage:

Trade companies, because they bring frequent work to the factories…

…because they frequently work in said industry (promotional product industry).

…since they have experience in working with overseas buyers on a more direct basis.

…offer favorable quantities that factories don’t offer.

If a factory offers the same minimum quantity that the trade company offers, the factory has to consider the risks involved.

• Handling fussy clients (factories view overseas clients as demanding. Promotional product importers by nature are demanding and lack understanding of manufacturing processes).
• Communication issues with foreigners. Misunderstandings that the buyers help rig up because they assume the factory would “understand”.
• Customization requirements, sampling, input from 3rd party vendors. The factory simply doesn’t want to get involved. That’s not to say they don’t want to do it…they simply don’t want to do it FOR YOU. Perhaps down the road, but you’ll have to show your sincerity and “grow” as a customer. Many customers don’t have the time to “grow” with a factory and show they’re a 5-star customer. Thus further proving the need for a trade company.

The capable trade company offers lower minimums, because they know what they are getting in to.

The factory offers lower minimums to the trade company, because they feel more comfortable working with the trade company.

The same thing applies to price.

Factories add on money to the project, to cover the unknowns.

It’s a large misconception that you’re always going to get a cheaper price when working factory direct.

There.

I said it.

This kills the narrative of many companies.

Many companies tout your desperate need to work factory direct.

They do this so you’ll see what a complex web of complications you find yourself in.

And then, badda bing badda boom, you’ll need their quality control, sourcing or managing services to get out of the fire.

Cataloguing information:

Trade companies do a better job of cataloguing information.

They have a better database of previous products.

Images at-the-ready.

Trade companies frequently quote at a faster rate.

Experience in or connectedness to the industry:

An capable trade company has experience in working with the promo industry.

Experience in working with YOUR country.

Let’s do a hypothetical.

Say you’re bringing in serving trays branded with an alcohol brand logo.

The trade company may have a catalog of all alcohol promotional products.

They have prices at-the-ready.

There’s some understanding of the end-user industry.

How about going factory direct?

The factory, although they make that serving tray, that’s about where the knowledge ends.

They may make items for many industries in many countries.

Therefore they’re less “on top” of the intricacies you need them to understand. In explaining these things to your factory, there will be a bit of “reinvention of the wheel”.

If you’re only planning to order a custom project 1-time.

• is it worth training the factory in all the necessary understanding?
• Or sticking with the trade company that understands nuances of the promo game?

More solutions / options:

If you’re not a large customer to the factory, they’re going to be rigid in solutions.

A trade company is more flexible on packaging options.

If the project needs input from third party vendors, the trade company is nimble in tying all of this together.

Trade companies are good at connecting 3rd party vendors…critical for the promotional product industry

A good trade company has an established supply chain.

A factory is more likely to say “sorry, we don’t do that.”

And it’s true.

They don’t “do that.”

If you’re not a vip customer (ie buying the most), a factory is likely to string together supply options on your behalf.

Importers in the promotional product industry tend to order on the smaller side.

Orders may be frequent.

But the orders are highly customized and diverse. Meaning that 1 factory, 2 factories, aren’t enough to service a promotional product importer.

A promotional products buyer may quote from and use many factories throughout the year.

A vast range of products require many different styles of production facilities.

Thus the trade company shines in servicing this type of buyer.

Many factories like it this way, especially when supplying to the promotional product industry.

Factories have relationships with the trade companies.

They are pleased to let this continue to play out.

It’s almost to the point of presumptuousness.

Or worst case, arrogance, to assume all factories want to work directly with the foreign buyer.

Places, regions, and people have structure.

Supply chains.

Relationships.

Why is it, when buying from abroad, people think these structures are suddenly outdated?

Yes the internet and globalization shrunk the world.

But not entirely…at least not yet.

In a recent post, I shared on some various meanings of “factory direct.”

On the flip side, there’s another form of product sourcing from China.

In fact, the more efficient way for a large swarth of companies is to go via intermediaries.

“Jacob are you serious? I thought factory direct was the golden goose?

How can you say go via an intermediary?”

Value of an intermediary:

These intermediaries, for certain industries, know what they’re doing.

The know the nuances of the industry.

They manage quality requirements and also other EXPECTATIONS.

They understand the ‘unseen factors’ more than the actual production facility.

Let’s use the promotional products industry as an example:

When I say the promotional products industry; these are distributors that sell branded merchandise to companies.

In short, distributors are marketing companies that deal in physical, branded or custom merchandise.

Stuff for events, launches, businesses, whatever way companies and brands want to advertise in product form.

Wide range of dollar value in orders

There can be a humungous range of order sizes in the promotional products industry.

It could be a distributor selling 200 unit ball pens to a local real estate office. The distributor buys these pens from a domestic supplier. The domestic supplier prints and delivers the pens in a matter of days.

Obviously this type of order doesn’t go direct to China, so we’ll scratch the smaller projects out of this equation.

But then there’s the larger distributors and the larger deals.

Let’s say a national brand wants to do a custom pet toy bin with various custom doggie toys. The entire set goes into a large retail chain as a gift-with-purchase around the holiday.

Ultimately there’s more than 1 production facility involved.

Now we’re not talking a local promotion (ie real estate office and pens) but a NATIONAL CAMPAIGN.

The order value is easily in the 6-figure range and may be 100’s of thousands of units.

The national brand shops this RFQ to distributors.

As the distributor quotes the brand, they have 1 of 2 source options; buy from a domestic importer or go offshore.

Many times the end brand isn’t even clear on what they want.

The distributor puts everything together and bids on the project

The quotation from the distributer includes the product, the delivery and sometimes the distribution.

As the distributor quotes the brand, they have 1 of 2 source options; buy from a domestic importer or go offshore.

Buy from a domestic importer.

This domestic importer is largely more expensive than their overseas counterpart.

They offer favorable payment terms that the distributor doesn’t receive from offshore suppliers.

The domestic supplier handles the entire process from product development to delivery.

They ownership of the goods from the factory to delivery.

In this case, the distributor doesn’t worry about logistics and customs clearance.

There’s more security for the distributor because the importer is onshore.

Naturally, there’s more oversight.

The distributor has someone under the same laws to hold accountable. Not to mention, there’s another onshore company they can discuss the project with in realtime.

But also can be another layer of ineffectiveness…

Generally, lead times are longer with domestic importers.

A downside of working with the domestic importer; there’s no real-time order control.

The domestic importers don’t always have overseas offices.

They domestically control the order via late night emails and early morning Skype calls. This lacks in realtime problem solving.

The onshore importer doesn’t always go directly to factories.

Frequently there’s in-between padding of more intermediaries.

Or the distributor goes offshore.

When they go offshore, the distributor decides if they want to attempt to go ‘factory direct’.

Or, they decide to work with an overseas intermediary company (sometimes called sourcing agents).

Questions the distributor has to ask themselves:

• Pay this supplier to handle my production or be more adventurous and try to go ‘factory direct’ and save on margin?”
• If the distributor goes factory direct, that takes a certain time investment. Is the extra margin from the intermediary company worth the time they’ll save?
• Does this additional margin cover the advantages of order management and controlling the unknowns?

An overseas company that the distributor trusts greatly eases the mind…

Tune in to the next post: More on the Promotional Product Industry and Factory Direct

I’ll open up more reasons why the distributor isn’t necessarily eager to work factory direct.

Messy.

Loose.

Don’t think ‘the method’ can be sacrificed as long as the result is good.

In offshore manufacturing, bad methods easily lead to bad results.

Bad methods lead to creeper problems.

Too much instant communication, too casual

I’m like the grumpy grandpa on the porch.

“Back in my day, importers sent 12 page faxes and you got out your highlighter and highlighted all key points”.

It’s true though.

As communication is more instant with multiple channels, this leads to more mess.

Buyers communicate with their supplier in too many streams.

(Send Organized Emails, Not Streams of Thought)

There will be multiple, rapid WeChat methods back and forth.

Long email streams with important specifications buried like hidden treasure.

Multiple attachments sent and some are modifications of others.

Skype chats with no record of the audio.

Is it possible for important specifications and confirmations to be lost in all of this clutter?

Gather, Send Important Specifications in a Systemized Way

You need to be purposeful when you send details to your vendor.

The goal is acceptable quality and good product.

How to use your communication to reach this goal?

For each project, you need to start one document that’s going to serve as the STANDARD file.

This may be a folder document on a project management site.

Or could even be something as simple as one master Word document.

Regardless, this becomes the standard.

The go-to file.

Then when there is’s a Skype call, great, add the new points to the file.

When there’s an email that confirms something cannot happen or an aspect is deleted from the project, super, change the document.

The document can be tweaked and updated along the way.

There’s a great purpose to the document (or file)…

You’re making this for a 3-fold purpose.

For Internal Reference:

Use this consolidated file of all important specifications internally.

No more combing through lengthy email threads late night trying to find when a measurement was mentioned.

It’s what you or anyone in your company can use as the on-going record (or past record) of the entire project.

For the Vendor:

This is the vendor’s referral document. You cannot assume your vendor is going to summarize all points from every email, Skype call or chat. Perhaps over time the vendor can add to this document themselves.

Your goal in communicating with your sales contact is to have sufficient clarity in your files; specs, pictures, arrows and images that people on the production line understand what you mean. Use your sales contact as a conduit to communicate information to the factory floor.

(More on your sales contact:  Equip Your Sales Contact to be a Better Partner)

Ultimately for the Quality Inspection:

Now as both importer and factory having the living breathing document (or file) between them, this now easily transitions over to the quality inspection team. The information that’s been stored and clarified, now can easily be used as the QC checklist.

When you brief your QC team on what to check, you don’t have to go back and reinvent the wheel.

It’s ready made.

Buyer is clear.

Supplier isn’t caught off guard.

Quality inspection has the right detail in hands.

Product quality comes out correctly.

With many importers, it’s like a Dr. Jekyll and Mr. Hyde scenario.

They may import and sell to national brands. They have a pristine image.

They’re knowledgeable in their product area.

Having a social conscience and awareness is of the utmost importance to them….at least that’s what they show.

Perhaps they don’t sell to a brand but ARE THE BRAND.

The market loves the product. It’s gaining national exposure. Millennials love using it and having one in their pocket and maybe 2 at home.

This is the image they portray on the home front.

Socially conscious? You bet

Transparent and aware? For sure. I mean, hey, it’s 2019.

But when they turn around and focus offshore…everything changes.

Earlier I used the Jekyll / Hyde example.

How about Incredible Hulk?

They’re very composed and professional when it comes to anything branded or public.

But when it comes to the overseas’ side, it’s “Hulk Smash.”

Rough processes.

Clumsy in vetting.

To heavy-handed in proceeding without first implementing fail-safe steps.

Pardon the pun, but it’s like bull in a China shop.

The sourcing doesn’t reflect the values of their brand. They actually source product in way that’s contrary to their values.

Imagine you visit a famous brand’s website and it says something like,

‘We’re not very clear on who manufactures our items. We source product quite haphazardly and just get many quotes from vendors. Not really sure if they are the manufacturer or a trade company in between, but as long as it gets done, right?’

No right-minded businessperson would say this. But many act this way.

Do you work with factories that you would be proud to display on your website?

But let’s back up for a moment…do you even know who you work with?

I mean, do you really know?

How about if your brand or investors wanted to tour the factory?

All good?

Or will you have to scramble for some quick fixes or…excuses?

Factories close because of government mandates.

Public relations nightmares happen because buyers didn’t thoroughly vet their vendors.

Source product, communicate, approve, vet as if your brand, your investors and your market are watching.

It’s only going to get more transparent.

Now’s a good time to start.

They err too far in one direction.

Or they lean too much in another.

Over my years of working with overseas vendors, I’ve learned the best form of communication is a balance of professional courtesy.

Keep in mind the old expression, “It’s just business, nothing personal”.

Don’t be too nice to your overseas vendors.

Nice meaning, overtly sweet and condescending. Many of these suppliers are hardened business professionals.

Just because the salespersons has a Hello Kitty backpack doesn’t mean they’re 6 years old.

Certainly don’t be hysterical and emotional.

Be sharp.

Firm and to-the-point, but not robotic. If you’re too robotic the supplier may only function “to-the-letter-of-the-law” and not look out for solutions or expansion.

For example, “If the client wanted us to fix this problem, they would’ve told us.”

Western buyers get beguiled by initial “niceness”.

Caveat: this is written at the risk of some generalizations, but keep in mind I’ve got 18 years experience to back me up.

Buyers, in their sourcing, become amazed by the “sweetness” or agreeability of their vendor.

This lulls them into a lack of awareness.

It decreases their defenses.

Decreased defenses mean lack of order control.

“I mean, after all, the supplier is so nice. She’s so sweet on our Skype conversations.”

This shouldn’t make a difference in how we handle business.

The Western buyer gets caught up in making sure they appear “friendly” to the overseas vendor…

It’s like for some Western buyers, they treat their importing experience as if they’re on a light-hearted school field trip.

They wouldn’t treat vendors in their own home country this aloof.

But something happens to their sharpness when crossing borders, either virtually or physically.

China businesspersons have years of negotiating warfare on their side.

They know to start off sweet. In their minds, being kind leads to reduced blame when problems happen.

We all appreciate ‘nice’.

Whenever a problem arises and you ask how will the vendor compensate you, notice what happens to the “sweet”.

Will directness or frankness hurt a relationship with your factory?

I would say “that depends”.

If you’re accustomed to being casual and overly friendly, yes the directness may affect things.

If you’re too chummy, the sales contact comes to know you as Mr. Nice Guy.

The word “friend” may even be thrown around.

So, then when you decide to get serious on a matter or if something becomes a very stern focus, the supplier isn’t able to process.

In some respects, supplier see Westerners as either cold-hearted robots or teddy bears. If you’re always the teddybear and then decide to get serious, the supplier has trouble processing it.

When you, the teddy bear, really double-down to show something needs extra focus or there’s a problem, the supplier doesn’t understand the weightiness of the situation.

You may say it doesn’t culturally translate well when you go from friendly to tough.

Your lower-level sales contact will then will feel betrayed and go into “do whatever you say mode”.

This mode is dangerous and they’ll stop actively looking out for solutions (see above “robotic”)

So don’t be topsy turvy.

Avoid being casual when things are going great.

Then flipping your lid at the first sign of problems.

Be firm and professional from the beginning. The factory’s main goal as an organization is to make money, regardless of what each individual salesperson thinks or feels.

Be firm and professional from the beginning.

If the supplier thinks you can accept this new change, then they’ll see if you can accept another.

They’ll keep moving the goal posts if you can accept it.

The standard isn’t a nebulous “what’s right”.

But the standard will be whatever they can get you to accept!

Be professional, be consistent and your factory will actually respect you better.

This shows in the supplier’s service and more importantly, in your quality.

Processes are more piecemeal.

Service is based more so on the here and now.

Product understanding and quality are not so much the goal, as is “order in, order out.”

This is a continuation from the last post on the dynamics of a smaller facility.

Smaller Factories and the Various Risks

Less knowledge of the product in the outside world.

Frequently these shops manufacture for domestic business or developing nations.

If you’re a buyer from the USA, with USA quality expectations, the factory is oblivious to what you expect.

They may listen to what you request.

They’ll agree.

But they do not have firsthand knowledge of the product in it’s market.

The expectations of the product are lost on the factory…or you may say the “spirit” behind the product.

This bleeds over into the quality and the handling of production.

The factory may overlook market specifics that the buyer assumes the factory considers in manufacturing.

Usually there’s a trade company in between.

The risk buyers face from smaller factories may not come first-hand.

In other words, if you buy from trade companies, they handle these facilities.

Many problems your trade company supposedly handles on your behalf is because they contract smaller factories.

The trade companies volley between different vendors at any given time, thus the inconsistency in quality or timing.

No quality systems in place.

There’s generally no QC on incoming materials, especially when they are purchased from the brother-in-law.

The smaller factory “trusts” their source and doesn’t want to cause a familial rift. This is a hypothetical, but a very real situation.

Operators are often paid by the piece.

Churning out quality products is not something they care about (and they hate having to do rework).

When the buyer has them do the rework, this frequently leads to even more issues; damaged packing, dirty product.

• No first-piece inspection, no formal in-process inspection.
• No process for workers to escalate issues they see. Boss is busy, bosses wife won’t allow for company rifts.
• One or two skilled technicians keep the whole place up by doing constant fire-fighting, and all sorts of problems balloon as soon as they are off the job

Lack of consistency in workers.

Workers come and go.

An able sales contact that deals with overseas buyers won’t stick around long.

The sales contacts the factory does have (assuming they deal with foreign buyers) have little experience in international professionalism.

You’ll spend many late nights explaining specifications.

Doubts linger on if the factory really has a solid grasp on the project.

Because of fewer workers on production lines, this leads to the obvious quality issues; skipping processes, sloppy packing.

And there’s also overall delays in timing.

Inconsistent volume of business:

Sometimes the service is great and with the right control, you can achieve good smaller runs.

I remember cases where I was developing product and the factory was motivated to handle a project.

Until an old, larger customer returned for business.

Then our job was no longer important or was regulated to lower sales staff.

This would lead to either potentially delayed or rushed production.

Sometime if we were in the middle of developing the sample and if it wasn’t smooth, the factory would altogether want to drop the project.

Communication:

Regardless of instant communication, smaller factories aren’t proactive with communication.

Whether verbal or visual, there’s lack of substantial updates.

The smaller facilities won’t actively send images of your product.

Frequently you won’t know what phase production is on until they send the 70% invoice saying they’re ready to ship.

Lack of compliance:

If you want to manufacture anything require some form of compliance, forget about it.

They’re not up-to-speed socially or from a manufacturing standpoint.

The physical facilities are outdated. They would fail any social compliance certification.

The HR policies are sometimes horrible.

There is no protective equipment on processes such as polishing or cutting. Employees just grab tools and get started in a haphazard fashion.

If you import on behalf of a brand, you wouldn’t want to take your buyers to these places.

Hell, the folks that buy the product off the shelf wouldn’t want to see this place.

I saw this when I was working in the promotional product industry.

I always thought to myself, “I wonder if their brand knows they buy this way?”.

Stability:

These facilities are less stable.

China seems to close more and more of them as each year advances.

Factories move towards automation.

These smaller facilities are not able to keep us with the competition.

Here’s an article, not so much about smaller facilities but the pressure that the factory business is under to modernize or get left behind.

China Transforms and a Factory Owner Struggles to Follow

Debt:

Debt is a monster found in the warehouse of some of these smaller factories.

In a world of rising wages and if the factory owner was a poor money manager, he’s doing all he can to hang on.

Dealing with a factory in this predicament is dangerous on many levels.

Worst case scenario, means the factory closes and doesn’t deliver your product.

Of course with your money in hand.

This is almost my mini-book experiences with the small facility in China.

I hope it’s an educational read for anyone who works with these smaller shops and perhaps is looking for better out of their importing?

How do I know about these smaller production facilities? 

For years I would export (when I lived in China) and import for the promotional product industry. The North American promotional product industry, when it goes offshore for manufacturing, has these requirements:

• Super fast turnaround time.
• Low minimum quantity.
• Customization at a lean budget.

The larger, better manufacturers don’t want to touch these kinds of orders.

It’s not worth their time. Many promotional product orders are 1-offs. The larger facility isn’t interested in reinventing the wheel for something that’s never going to come back.

Therefore when a promotional product distributor would venture offshore, they’d work with trade companies.

It’s not only for promo items though, these smaller shops also serve private label and FBA style sellers.

These trade companies then work with a small production facility that would agree to those requirements.

These are the types of production facilities that are behind the “Wizard of Oz curtain”.

You fly to Hong Kong for a trade show and meet your supplier.

You ask to see the factory and your supplier is hellbent on you just keeping the meeting in Hong Kong.

Why?

Because they don’t want you to see this place. It reveals that they’re outsourcing you to shaky ground.

Trade companies don’t allow power over your own supply chain.

Because of Alibaba and LinkedIn a buyer can work directly with some of these facilities.

They may be jacks-of-all-trades and promise ability in many product categories.

I’ve had good first-hand views of these factories from a business-standpoint and you may say they run in the family. My wife’s family has their own network of these small production facilities.

What’s it like in one of these small production facility eco-systems?

Location

Most factories now in the manufacturing hubs of China are well outside the larger cities. This started in the early to mid 00’s.

In the small towns, you can still find these factories operating close to older homes and in neighborhoods.

Whereas many of the younger factory workers go work in the larger facilities closer to megacities like Guangzhou or Ningbo, the workforce in many of these facilities may be older.

Much of the production line are young men and women from the even more rural areas. To them it’s an opportunity for income.

The office workers are in some way connected to the owning family. Not necessarily blood relatives, but folks they’ve seen around town for years.

It’s like one big happy family… 

It’s a family dynamic. These facilities are what you may refer to as a mom-and-pop shop.

The Boss

You have “the Boss” who is the head (on the surface) of the factory.

Usually he doesn’t speak English and perhaps even struggles with good Mandarin.

I don’t say that to be dismissive. If it’s a smaller facility, for example, in the North of the Jiangsu province, the boss is accustomed to speaking his local dialect and only uses Mandarin when he travels to Shanghai..for example.

His range of knowledge on the production varies.

In some of these facilities he may be very active in working with the production line and checking. This is a good thing.

In other types of smaller factories the Boss is happy to fully delegate all responsibility to a diligent manager.

The Boss’s primarily responsibilities would be:

• Time spent with local government officials. This involves maintaining their status to keep the operation running. With these smaller facilities, they seem to be endanger of closure any moment as China cleans up the proverbial act more and more.
• Connecting with the 3rd party vendors. He maintains relationships with them.
• Keeping the connection with sales people from the trade companies. This may be for international sales or domestic orders.

Was poor quality material used in your order and the factory didn’t reject it?

It may be because the Boss didn’t want to disrupt a good relationship with his friend.

There is a large misconception that PROPER China importing is based on relationships and face.

No, for the experienced importer, proper importing requires knowledge and calculative steps.

But, for these smaller production shops, they are indeed still largely relational in their own circles.

The Boss’s Wife

I use that term because that’s what she’s called in Chinese. 老板娘

She’s usually the lady to fear.

She’s the powerbroker behind the scene.

If she’s not directly in charge of the accounting, she’s well in-tune with what’s going on with the business. I’ve seen orders delay because a certain document couldn’t be sent because she was the only person with access to the chop (stamp). And she was out shopping…

I’ve been in touch with sales contacts before fixing issues and the Boss’s wife can make or break a situation.

If she’s a professional in her field, she’s a great contact to know and have on your side.

If she’s temperamental and only focuses on the next order or cash flow, then tread softly.

Since cash flow is inordinately important to these facilities, they are more concerned with “shipping the order” than getting it right.

Her focus is to make sure the factory spends it’s energy on the larger customers.

Because of our politically correct times, I don’t want to say “Dragon Lady,”… but I am thinking it.

The Diligent Manager

Usually the true production knowledge and hard work stems from this person and his or her direct staff.

They are the ones that connect with the trade companies.

If these factories work directly with foreign buyers, this assistant may be one of the sales contacts.

This may be the bosses son or daughter in many cases. They’ve grown up around the business and have stayed in the hometown. Many of them went of to a university and have like the prodigal child, returned to help with the family business.

They work long hours and legitimately are doing their best to get the orders out correctly.

Production errors that happen are not their absolute fault.

It’s the factory’s system to blame, or lack thereof.

This assistant may be in charge of too many tasks and there’s no real oversight on the factory floor if he isn’t around. He can catch a few problems here and there. But he’s doing his best to keep his head above water.

But his time is stretched between production, sales, meetings and travel.

The smaller production facility and Chinese New Year

At the time of writing this, we’re just a few days away from the holiday.

Before the Chinese New Year, many smaller factories and businessmen are hounded by past due debts.

The above-mentioned boss spends much time this year chasing down domestic clients (money owed) and staying away from his vendors or old disgruntled employees (money due).

Owing money to business partners there, especially in the rural areas, is a huge phenomenon.

That’s one of many reasons importers should be aware of when working with a smaller production shop

This article warrants a follow-up post on the dangers buyers face when they work with one of these smaller facilities.

Why is that term so conspicuous?

It conjures up the vision of the importer going direct to the source.

Like a modern-day Ponce de Leon they are going directly to the fountain of youth.

No intermediaries.

No middlemen.

Agents, traders, buying houses…be gone!

Some companies say it as a marketing term.

Factories say it as a point-of-fact.

Benefits of factory direct

Factory direct obviously gives the impression of lower costs.

This impression is true…for the most part.

There may be a few contingencies here and there.

But largely when you buy from the source, your cost is more economic.

Anybody in between the buyer and the factory slaps on their own margin.

Previously this was a better business model when China sourcing was simply about who had access or contact details.

Now, in 2019 the rules are changing and transparency is the expectation.

As important as “factory direct” is for pricing, price shouldn’t be the main issue…

You, the importer, the one whose brand, reputation and money are on the line, need to know with whom you are working.

On your part, this takes investigation, audits or traveling to Asia.

Quality begins in knowing who manufactures your merchandise.

Problems in an overseas project start when buyers are haphazard with details.

If you demand quality, then operate in a way that results in quality.

Trading Companies

These are the companies that buy product from the factory and resell it.

Their “factory direct” means: they are buying products directly from a factory and selling them to you.

With this you get extra margin liberally lathered onto the original price.

Kind of loses it’s intention in that way, right?

But supposedly, they make the experience very easy on the importers behalf. Wink, wink.

In order for them to make their margins, they generally take buyers’ requests to lower-end production facilities.

Unless you’re a favored buyer of the trade company, you’re largely in the dark of what’s going.

They filter updates through whatever image they want to convey.

Truthfully, there are some capable trade companies.

And there is a large bulk that create more problems than they solve.

One thing they all do, is decrease the buyer’s control over their own supply chain.

Individual Freelancers

Perhaps they have their own company name, letterhead and may have a few staffing.

They aren’t as large as the above mentioned trade company and are somewhat more specific in what they manage.

I used to work with one guy who was an old hand in Taiwanese toy factories.

He was an expert in plastic molding.

We would give him our plastics work, he’d take it to a factory for us.

He did most of his work from his car. This was way back in 2004 and ’05.

You’re still losing margin but not as much as if you were dealing with a trade company.

Many overseas companies that say “they have an office in China,” actually have some sort of agreement with these types of freelancers.

Their factory direct means: they are good friends or family with with the factory owner. Or they are a group that’s specialized in that product area, ie my plastics friend from back in the day.

They are not charging you much margin, because they also get a bit of sweet kickback from the factory.

Usually the communication isn’t great from these folks and the level of control varies but isn’t that great.

They’re not seeing themselves as necessarily the “control point” of quality but more of a connector.

They leave any kind of order and quality control up to the factory until major problems arise.

Factory Off-Site Sales Offices

Now here’s a grey area.

Some factories only work through this “off-site office”.

This “off-site” office may be an actual part of the factory.

In other words, factory-owned and as much a part of the factory as the factory.

But sometimes these off-site offices are just another form of the above mentioned freelancer.

Confusing, huh?

They are not necessarily the same company but the factory may only work through them.

Perhaps there’s some constraint in the factory’s overseas sales to use this office (ie an English speaking brother-in-law runs it and they feel obliged to give him the sales).

Their factory direct means: pretty much the same thing as real factory direct. If it’s not the actual company, there’s some margin loss but not as much as the trading company or freelancer.

These people sometime take forever for updates and clarity because they may be a good distance from the actual production facility.

If they were located inside of the factory, the updates would be swifter and they’d have more immediate knowledge over the product.

Many times you have to wait for them to physically arrive to the factory for any forward movement or updates.

Sometimes this is only be a few days out of a week.

Factories

As much as circumstances allow, your goal as an importer should be buying from a factory.

Most capable factories that you should be working with are able to service foreign buyers.

If a factory isn’t able to export, there may be red flags with their quality systems.

Their “factory direct” means: you are getting pricing as close to the source as possible.

It also grants  you more control in your supply chain.

You have a sales contact who properly communicates and provides better control over the production lines.

Generally this salesperson is more knowledgeable over the in’s and out’s of the product than your contact in a trade company.

A few caveats for smaller factories:

• Some factories that work tightly with those off-site sales offices may actually quote you higher than the off-site sales office. If the factory doesn’t have the abilities or confidence to handle overseas buyers, they may charge more to cover any “unknowns.”
• Occasionally they’ll pitch you back to that offsite office or that freelancer if it’s family related and they feel they owe the “commission kickback” to their relative.
• If a factory is busy and their work load is too much, they will outsource part of your work to sub-factory contractors. You may not know this until later on, or until you see inconsistencies in quality or color or whatever the case may be.

(with including 3rd party vendors, this can get more in-depth but for the sake of an already long blog post, I’m going to leave it there).

Ultimately it’s your responsibility to know who manufactures your merchandise.

It’s YOU that imports the goods.

It’s your name connected with it.

It’s another layer of effort that precise importing requires.

It pays off in you having better control over your overseas projects.

The supplier seems cooperative and sent over the quotation just fine.

They’re eager to manufacture the samples. Maybe the samples arrive and everything is ready to move forward.

Perhaps mass production is underway and you’re sitting back waiting for a smooth delivery.

Whatever phase, in your overseas manufacturing project, problems can arise.

Something is now WRONG.

You find out the supplier won’t or can’t produce as per the agreement.

The delivery time is shot.

Maybe the QC team went in and found problem after problem.

Did the problem happen in a vacuum?

Or is the problem connected to something you didn’t consider?

Seemingly problems can enter an overseas manufacturing order like a slow poison.

At first it just seemed like normal quips or wrinkles to smooth out.

Little by little the problem rears it’s ugly head.

Now you’ve got a full-blown issue on your hands.

What phenomena can corrupt an overseas manufacturing order?

It’s like a virus into a software…it creeps in and then nothing works right since.

Not knowing anything about your supplier: 

Are they a trade company or a factory? Not knowing how long a supplier has been in business may not be the wisest thing.

You decide to visit the factory and get to the heart of an issue.

But they are just some intermediary who won’t disclose the factory location.

What happens if they close down suddenly and your deposit is in their hand?

Remiss in discussing a quotation:

When you receive the supplier’s quotation, you proceed to the next step, with very little to no discussion.

“So what. I didn’t take the time to discuss the quotation. How big of a problem could that be?”

Big problem.

How do you know you’re talking apples and apples?

Buyers and suppliers speak a different language.

And I’m not talking about spoken language. I’m talking about culture, context, understanding.

A quotation, especially for new vendors and new products should be hashed.

After all, when the supplier quoted the project, they weren’t really sure whether you were going to order or not. So they didn’t put a whole lot of focus on the case from the beginning (this happens!)

Multiple discussions should take place to assure both sides are simpatico on meanings and requirements.

Being overly happy about a low price instead of actually considering reality:

“Hey this price looks great, let’s rock n’ roll”.

Sample arrives and the buyer thinks, “What in the world is this?”

But this is what the quoted price produces.

If you want better then the price is now __.

When the client goes into the RFQ process and doesn’t provide a proper specification sheet or a physical example, this is usually the fruit.

The list of reasons this happens:

•  The supplier is a low-end supplier and they’re simply unable to achieve needed quality.
• The buyer didn’t take time to compare what the market at large quotes for this same product. A quick google search may show the quote was severely under price.
• The supplier isn’t clear on needed material or quality. When everyone’s just reading words on a brief, it isn’t always crystal clear. That’s why a picture/sample/mock-up can be worth a 1000 words.
• Low prices dazzle a buyer. An inexperienced buyer marches forward with dreams of low margin instead of being grounded in reality.

Taking too long on the samples:

The sample process takes longer than it should have.

“So what, so they took too long, the sample is fine, let’s proceed”.

But it’s more than “they took a long time”.

Why did they take a long time?

Because sometimes this is a sign that they’re going to have a worse time in mass production.

It took the supplier forever to get the sample right.

And consider this; sampling processes are done in a smaller, more controlled production line dedicated for samples. If it took them a long time to get the sample right, can you assure mass production goes flawlessly?

Many an order I’ve seen fail was because the supplier couldn’t fulfill requirements on a mass production scale.

Sampling, no problem.

Doing it right at mass volume, problem.

Neglecting specifications and requirements:

You’ve been confirming samples and ordering from the vendor. Perhaps you’ve done a few orders now.

But then a problem turns up. Maybe there’s a recall for material used.

Or there’s a new regulation in California (imagine that) and you’ve got to describe your material.

But you have no idea how to do this!

You don’t know what material is being used.

You’re not sure the grade, the chemicals involved, whatever the case may be.

This comes from not establishing a firm specification and material sheet with your vendor.

Relaxing once prototypes are confirmed but not actually controlling the order

Too often orders fail from the start of mass production until shipment.

In other words the feeling out process, quoting, sampling…all went well.

But the buyer is complacent to monitor mass production.

Or the supplier doesn’t control their production line.

Since there was no proactive control during mass production, the final quality inspection is like a bucket of cold water.

Major problems turn up in the final quality inspection. You could rework them or get a discount or have the supplier send you an apology letter…but either way, it’s a bad situation.

What about logistics timing?

Being casual about the logistics leads to timing headaches.

Shipping delays happen because buyers don’t book their shipment properly.

Properly means on time, documents complete and working to get truck to port before the sailing date.

It’s tempting once you confirm the sample to let out a big sigh of relief and think production is smooth sailing.

Don’t fumble on the 1-yard line; finish strong in your overseas manufacturing order.