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Axia Sourcing released the following six telling myths and realities related to global sourcing, breaking down common misconceptions about language-barriers, outsourcing partnerships, quality control and more. Global businesses can apply this knowledge to successfully navigate the world of sourcing while expanding business operations with confidence, regardless of the industry.
If you haven’t worked with a Chinese manufacturer before but are intending to start now, this article is for you. From the onset, we must inform you that you are in for a lot of positive gains, but you need to be ready for occasional production problems. One day you are panicking after a factory delays your products, the other day you are petitioning a manufacturer for refusing to rework substandard goods and another time you are running after a supplier who walked out on you without prior warning. Don’t get us wrong: There are many good manufacturers in China, but there is no harm in being cautious.
To set up a company in China, you must know and avoid the pitfalls that rogue manufacturers have led many foreign companies into. Remember that when it gets to product development, you have your own customers waiting for your deliveries, so you need a manufacturer who delivers quality products and in a timely manner. That being said, which mistakes must you avoid when manufacturing in China? How do you avoid them?
Trust is vital in business, but you must not trust anyone with your business interests. Do not forget that learning some words and phrases is crucial at the point so that you could do some basic communication. For more complex communication, a company that provides Chinese translation services needs to be hired so that no misunderstanding happens. When working with a Chinese manufacturer, avoid the mistake of allowing the manufacturer to control the quality of your products or the delivery time. Many entrepreneurs have made the mistake of sticking around even after realizing that a manufacturer or supplier is incompetent, probably because they are afraid to lose their pre-paid deposits. Tell you what; you would rather walk away and lose a small deposit than stick around and end up with substandard goods that will ruin your existing reputation.
Also, a small deposit may not be worth the frustrations that you will cause your customers by keeping them out of supply for long.
Another way of protecting your interests when dealing with a Chinese manufacturer is to always have an inspector or an agent on-site, constantly updating you on every stage of your product development process. A Chinese recruitment agency can help you find and recruit a reputable agent for that role. If the manufacturer tries any underhand strategies, you can easily stop them in their tracks. You will always be a step ahead of them.
For what it is worth, quality must always come before delivery speed for as far as product development is concerned. Product development requires tons of time and effort to be successful. And because your customers want top-quality products, you must not compromise quality for anything. The challenge that is unique to China, however, is that when you pressurize the manufacturer too much, they may not tell you outright. Instead, they will lower the manufacturing standards so as to avoid possible delays.
On the other hand, there are reported cases of Chinese manufacturers’ hiking production costs upon realizing how much value you’ve attached to the quality of your product.
How, then, do you find a workable balance? Again, sending a local agent to supervise the manufacturing process would be a great option for you. Because the agent understands the Chinese business culture and language perfectly, he/she will know how to send your message across without scaring away good manufacturers and/or falling into the trap of quack manufacturers who hike production costs for no apparent reasons.
Previous success can be used to gauge the performance of a manufacturer in the west, but not necessarily in the east. Chinese companies with reasonably good reputations have in the past frustrated many foreign investors, sometimes to the point of collapsing entire investments. Don’t make the mistake of trusting a manufacturer based on your past experiences with them; always be on high alert knowing that they can disappoint you at any moment.
The fact that a Chinese manufacturer hasn’t failed you yet isn’t a guarantee that they will not unexpectedly drop their manufacturing quality and damage your reputation.
There are many manufacturers in China today who are holding onto projects such as yours as their only means of survival. If you allow them the chance to rebuild using your money, they will fancy their chances without looking back. There are also manufacturers who are protected by government bureaucrats, so they don’t care too much about their reputation with foreign businesses. They will mess you up and continue with their daily operations as if nothing happened. You must, therefore, never drop your guard: Always be hands-on and control the behavior of your Chinese manufacturer.
Modern business means global business and the fast-paced, competitive technology landscape demands technology OEMs have a global footprint capable of reaching new customer segments and global buyers. In fact, according to the Computing Technology Industry Association (CompTIA), the global tech industry this year represents a $5 trillion opportunity for those manufacturers operating beyond their local markets to not only reach new customers, but also a wider selection of resources, expertise and innovation.
Establishing your organization’s global footprint is a key component in moving your globalization strategy forward. However, completing this step doesn’t mean your organization has completed or fully executed your global strategy. Establishing a foothold in the global marketplace is just one component of many in an OEM’s strategy to reach organizational supply chain goals. So, keep reading to see how your company measures up.
Once the initial groundwork has been laid, going global offers opportunities for expansion, optimization and even simplification. To assess how well your organization is doing, you’ll want to dive into a few critical areas and ask yourself these five questions along your global supply chain journey.
All too often, OEMs focus internally-out when strategizing their expansion efforts rather than following one hard and fast rule that applies to all aspects of their business—you can never go wrong when you do what’s right for your customer. The same is true for your supply chain. It’s not about having the mindset that you’re simply delivering a product. It’s about giving your customers the ultimate experience wherever they are in the world. That means the right product or part at the right location, at the right time and at the right cost.
The complexities introduced with such geographical expansion require a team that understands not just your products and customers, but the bigger picture of what you’re trying to accomplish. One of the greatest challenges in globalization is simply breaking out of what you already know and understand about your business domestically in order to think more broadly.
When you expand your operations globally, it means more than applying your current practices and simply shipping to an international address. As operations expand, it’s easy to overlook elements of your business that are vital to providing global markets with the same level of quality, service and speed currently delivered to domestic customers.
Additionally, if you have domestic challenges within management, manufacturing, supply chain or other core business areas, those are going to carry over into your new regions as well. That means ensuring you have the right team—or partner—to effectively handle all aspects of a global supply chain today and into the future.
This really comes down to whether you’ve been able to offload some of the more mundane supply chain tasks—say to a global distribution expert—allowing your staff to focus on what really moves the needle for your organization: continuing to innovate and deliver market-leading solutions to your customers. It’s a classic case of focusing on what you do best and letting others handle what’s left to drive greater business outcomes all around.
Whether you’re breaking into the global market or already established internationally and looking to expand, ensuring the right distribution model and footprint with the ability to expand as needed is critical. Markets change and demand fluctuates, which means your supply chain needs to have the same level of flexibility. If not, it might be time to leverage a supply chain partner that can.
An international presence is often necessary to meet your customers’ demands. But to ensure success, one of the most important first steps is to identify your specific supply chain goals and what that success might look like down the road, which can vary from OEM to OEM.
Going global is not a one-size-fits-all undertaking. For example, are your service level targets going to be the same for abroad as they are domestically? If so, is that going to be enough to compete with local competitors that already have a foothold in your target regions? And ultimately, what triggers will signal global footprint achievement? These metrics will form your ongoing checkpoints to gauge your progress along the way but only if you are able to incorporate some level of data analytics and real-time visibility across your supply chain, a critical aspect of any globalization effort.
If you checked less than three of these boxes, you could be on the right path, but may benefit from the help of a global supply chain management expert who specializes in identifying the gaps and the best possible solutions to get you back on track. For example, the right partner can provide a single, easy-to-use portal into your international supply chain providing you with the real-time data required for course correction. Beyond providing an instant global distribution footprint, they can also give you the cultural expertise and guidance required in each region, including everything from language barriers to local regulations and tax implications.
If you checked more than three boxes, congratulations! You’re on your way to new levels of growth and success, confirming a global footprint was the right step for your organization. The key now is staying on course and revisiting this checklist again down the road to ensure further progress in the right direction.
On the surface, the idea of globalization seems simple—you want to sell your products to customers outside of your country’s borders. In practice, globalization is a complex set of initiatives, processes, management structures, communication streams, workflows, physical locations and more. All of which require checks and balances to ensure you’re achieving your initial goals. Whether you go at it alone or alongside proven partners who can help you avoid the pitfalls, don’t forget to check in along the way and adjust accordingly for success.
Jay Fraze serves as the Director of Supply Chain Management Services within Global Lifecycle Management, a specialized solutions business at Tech Data.