Is quality standard optional for the Chinese?
One of the most critical issues when dealing with a Chinese supplier concerns the level of quality standard. News that some suppliers from China did not respect the standards and, therefore, the whole batch is useless or unsellable are still frequent. So how is possible to manage this kind of situation, or even better, how to prevent such an uncomfortable scenario?
Definitely one of the easiest and most feasible actions starts with the agreement between the buyer and the supplier: it has to be totally clear in each point. It is advisable to create and share a check-list and the two parties should keep samples of the final product. It is very vital that the contract with the supplier includes all the conditions of the delivery process and details about defective products, warranties, complaints and spare parts.
Quality inspections are a key issue when dealing with suppliers, especially if the factory lies miles away from the buyer. Generally speaking, Chinese suppliers provide goods to many different buyers and this means that on an overload period they may outsource the production, and sometimes this may cause a problem, especially concerning quality A general suggestion is to perform regular quality inspections during production, after having carefully agreed on all most relevant points such as materials, dimensions, colours, technical requirements, and quantities . If possible, the buyer should ask for a pre-production test on a few hundred pieces in order to test the quality of goods, and also to verify the capability of the company to produce the agreed amount while satisfying the level of quality standards.
One other option is to clearly indicate in the contract that the supplier cannot in any case outsource the production.
Last but not least, if the buyer settles the payments through L/C, one of the requirements to be fulfilled should include the approval of quality inspections.
Another sensitive issue concerns packaging. Packaging is not simply throwing goods into a box, but most likely also contributing to your business turnover, just because damaged or defective products are a real cost for you since they cannot be sold. This also means that you risk to lose a lot of time and energy by resolving the situation trying to have your good arguments for the supplier to get compensation if you have not signed a clear agreement about this issue.
Safe packaging saves the buyer many troubles and should be agreed with the supplier. The buyer may even ask for some pictures of the packaging before the shipment, to estimate if the shipping t is feasible and will satisfy his/her requirements.
Damaged goods? No problem?
Defective products are definitely one of the hardest situations to deal with. Thus, it is fundamental to define the concept, the “tolerance level” of defects and state it clearly in the contract so that both parties (the buyer and the supplier) have a clear idea of the bottom line.
The level of quality standards has to be fulfilled according to the agreement and performing regular inspections during the production process may reduce the risk of future complaints or shilly-shallies concerning spare parts.
By the way, buyers must not forget that usually Chinese suppliers have slim profit margins, thus, when the buyer is asking for a high compensation for defective products, it is more likely that he will get a proposal of a small discount on the next order or a replacement with the total amount of defective parts. In this case, it would be important to understand who is in charge of the cost of shipment, custom clearance and distribution.
Definitely, this is why it is fundamental to agree on terms and conditions of defective products, spare parts and eventual money compensation policy before the production actually starts.
XU JIN LIANG . HE XIN . CHEN BING . DENG, “Bank Guarantees and standby letters of credit and Case Studies” (Chinese Edition) - Foreign Economic and Trade University Press– September 2014
Rosemary Coates , 42 Rules for Sourcing and Manufacturing in China (2nd Edition): A Practical Handbook for Doing Business in China, Special Economic Zones, Factory Tours and Manufacturing Quality , Super Star Press (July 19, 2013)
- Common mistakes when sourcing goods from China: http://www.forbes.com/sites/allbusiness/2014/01/30/8-common-mistakes-u-s-companies-make-when-sourcing-goods-and-suppliers-in-china/