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. Push for price discounts from your current suppliers. For example, steel prices have dropped by 20% from Sept 08 to Jan 09. There is talk that some raw material prices will start coming back up in February 09, but until that starts happening keep asking for discounts.
2. Push for lower Minimum Order Quantities (MOQs). The factories are more willing to reduce their MOQs now than they were before 2008. Use this to your advantage to lower your inventory dollars.
3. Talk to and persuade the factories you are buying from to be proactive and efficient. Ask them to develop new product and capitalize on their competitive advantages. Share your manufacturing experience with them.
4. All buyers are trying to reduce the amount of cash tied up in inventory, so they are pushing for better payment terms. Unless you have a long standing, strong relationship with your supplier or suppliers, I don't see many Chinese factories giving better payment terms. Especially now with lenders not lending as much money, the supply of money is tight. If anything factories might start pushing for larger deposits and quicker payments. This could be a sign they have financial problems, they are questioning your financial strength, or they are just being very conservative. None-the-less, ask for improved payment terms and see how they react.
5. When talking to your suppliers about finances make sure you are asking many questions and getting the whole picture. Visiting the factory, doing inspection, and seeing their current production line will give you a good idea of their volume of business and is a good indicator of financial strength. Ask harmless questions to line supervisors and assistants (not the boss or the sales staff) like have they been working a lot of overtime, are they loading a lot of containers each day or week, are they buying raw material from the same suppliers they used in 2007 and 2008, etc. These are simple questions that a non-suspecting person will answer honestly while the salesperson or boss might give you a different answer. Be diligent and don't get caught holding a worthless PO.
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. Finally explain to your suppliers exactly what is going on in your market. You are both in business to make money and as you succeed, so do they. If they have a better understanding of what is going on, they will not be as stressed and more willing to help you however possible.
As the year of the Ox begins with the worlds back against the wall, we must all be determined that survival and prosperity are possible through strong thinking and ambitious and dedicated actions. 2009 is the equivalent of Mother Nature's natural selection where the strongest survive and thrive. Providing great service to your existing customers, taking market share from your competitors, and controlling/improving your supply chain through the proper use of Project Management and Third Party Inspection will put you on the strong side of this natural business selection process.
Sincerely,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com
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. Push for price discounts from your current suppliers. For example, steel prices have dropped by 20% from Sept 08 to Jan 09. There is talk that some raw material prices will start coming back up in February 09, but until that starts happening keep asking for discounts.
2. Push for lower Minimum Order Quantities (MOQs). The factories are more willing to reduce their MOQs now than they were before 2008. Use this to your advantage to lower your inventory dollars.
3. Talk to and persuade the factories you are buying from to be proactive and efficient. Ask them to develop new product and capitalize on their competitive advantages. Share your manufacturing experience with them.
4. All buyers are trying to reduce the amount of cash tied up in inventory, so they are pushing for better payment terms. Unless you have a long standing, strong relationship with your supplier or suppliers, I don't see many Chinese factories giving better payment terms. Especially now with lenders not lending as much money, the supply of money is tight. If anything factories might start pushing for larger deposits and quicker payments. This could be a sign they have financial problems, they are questioning your financial strength, or they are just being very conservative. None-the-less, ask for improved payment terms and see how they react.
5. When talking to your suppliers about finances make sure you are asking many questions and getting the whole picture. Visiting the factory, doing inspection, and seeing their current production line will give you a good idea of their volume of business and is a good indicator of financial strength. Ask harmless questions to line supervisors and assistants (not the boss or the sales staff) like have they been working a lot of overtime, are they loading a lot of containers each day or week, are they buying raw material from the same suppliers they used in 2007 and 2008, etc. These are simple questions that a non-suspecting person will answer honestly while the salesperson or boss might give you a different answer. Be diligent and don't get caught holding a worthless PO.
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. Finally explain to your suppliers exactly what is going on in your market. You are both in business to make money and as you succeed, so do they. If they have a better understanding of what is going on, they will not be as stressed and more willing to help you however possible.
As the year of the Ox begins with the worlds back against the wall, we must all be determined that survival and prosperity are possible through strong thinking and ambitious and dedicated actions. 2009 is the equivalent of Mother Nature's natural selection where the strongest survive and thrive. Providing great service to your existing customers, taking market share from your competitors, and controlling/improving your supply chain through the proper use of Project Management and Third Party Inspection will put you on the strong side of this natural business selection process.
Sincerely,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com
About the Author:
Mr. Greg Schultheis has been living in China for more than 6 years. Mr. Schultheis is from America, but lives full time in China and speaks Chinese. He has consulted for big and small companies across the globe. By emailing Mr. Schultheis at info@amrosia.com you can get a free consultation on Project Management and Third Party Inspection in China.
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