April 2009 Archives

Follow up well afterwards

According to our experience, most of the exhibitors and visitors will not actively follow up after the exhibition, maybe because they are busy with catching up with other work postponed due to the trip. Even though you prepare very well before the exhibition and have a wonderful discussion with the right suppliers, the trip will be wasted if you do not follow up adequately. Although the Chinese are learning to be more professional and international in their approach, you can expect to receive 2-3 follow-up letters from the 10 companies you have spoken to. (Perhaps 10 years ago you could have expected all 10 companies to be waiting for you to call them first). In order to establish a healthy relationship with a promising Chinese supplier, you must be prepared to become the side who will take the first step and who can educate them and push them to be more professional.

Here we will talk about some details to pay attention to when you follow up with the exhibitors:

  • Follow up letter
A thank-you letter or a follow-up letter should be sent soonest after you have met with the supplier. The letter must include your full contact details in case the suppliers lose your business card. The letter could be either a simple thank-you letter or a letter reminding of the next steps, which is especially needed when you think you have reached a certain agreement with the supplier on what to do next. This is because the exhibitors normally cannot organize the information well and will forget what they promise to do afterwards and for whom they should do it. So to send a follow-up letter is a necessary step to double check whether the supplier remembers who you are and whether they really understand your needs for the next step.

  • Information review and integration
In the meantime you should review the meeting minutes, brochures and previous research when your memory is still fresh. When you review all the information, you will want to keep the following two aspects in mind:

  1. To check if the information you get from the exhibition is somehow inconsistent with the information you collected before. If so, which is the correct information and what is the reason for the inconsistence? Are there still some questions or confusion to be answered or clarified?
  2. To review if the information you get from different exhibitors is consistent. They may have different ideas on what is China’s most advanced technology or who is China’s largest supplier or who is a trading company instead of a real plant. By reviewing all these stories, you may be able to judge who is lying and be cautious with the liar in the future.  
If you have any questions, you should ask the suppliers as soon as possible when the contact people still remember you, otherwise you may not be able to get answers for some questions. If you have done adequate preparation and follow-up after the exhibition, you will have taken the first step of setting up a successful relationship with the suppliers. Then as long as you maintain this relationship properly, Chinese suppliers will always be willing to reply to you promptly and offer you good price.

Generally speaking, if you do not have your own sourcing team in China, there are two ways to source from China: 1) Deal with the original suppliers directly, or 2) Use an intermediary.

Dealing with the original supplier directly

One can easily find some suppliers’ information via the internet and start talking with their sales departments. Sometimes this can work well and the buyer can source the right products in this way. But often you will be unable to find the right person to talk to, or you cannot understand the salesman so well. You may also find that you do not have enough evidence to judge if this supplier is the best one in the industry, and it’s not so easy to get a general look at the industry in China. Some suppliers you contact may not be able to export. It’s hard to easily solve the problems that can occur during the transaction, which can result in late delivery, quality problems, or a host of other potential risks. Besides the language barrier, cultural difference is another main difficulty of doing business with Chinese people. These difficulties can sometimes confuse us or annoy us greatly – which can severely inhibit one's confidence in sourcing from China. There are some successful cases where sourcing from China started with a cold call from a foreign buyer to a Chinese salesman. But you need to carefully analyze if this model suits your sourcing needs and accordingly deal with the suppliers with extra circumspection.

Using an intermediary

Most of the time, anyone buying from China needs to find an intermediary to locate the right suppliers and to implement the whole sourcing process smoothly from China, at least at the beginning of the process. With a professional intermediary’s assistance, the buyer can be released from the problems inherent in possible information gaps and misunderstandings caused by language and culture differences, which can cause big mistakes and harm the business relationship. The buyers can think about dealing with the original suppliers directly when the cooperation is going smooth and a reliable business relationship has been built up after a certain period. In the next posting I will compare the two kinds of main intermediaries, based on knowledge and personal experience and knowledge built up over the years. A trading company specializing in the suppliers’ industry, and a professional sourcing service provider could both be suitable candidates when hiring an intermediary.

  • Exhibitor analysis
Based on market research, you may already be able to get a list of remarkable suppliers. Then you cross-reference with the exhibitor list to see which remarkable suppliers will attend the show and which will not. It is likely that there will be some exhibitors which are not covered in your market research. You need to do some web research on each of them to see if they are remarkable as well. For all the exhibitors you are interested in, you may conduct some research and get some basic understanding on what product they supply, where and how many they export, what position they occupy in the industry and whether they can supply you.

By browsing the exhibitors’ websites and from conducting the research, you may find more information and get a better understanding of how you can cooperate with these suppliers. You may need to prepare a list of questions for each supplier regarding their company situation and their products, especially the questions not answered by their websites and any confusion you need to have clarified.

  • Appointment making
Once you have drawn up a list of the exhibitors you are interested in from exhibitor analysis, you should start to contact the exhibitors as soon as possible and make appointments with them. You may find from your previous experience that the senior people, or the managers, or the decision makers, or the company staff who can speak English will not always stay in their booth. Some of them leave for home early to save costs or to visit clients in the city or even travel around and relax. So do not expect that you can discuss whatever you want to know with the proper persons at any time. Ideally, therefore, you need to find out the proper contact person, their mobile number, and the proper time and place to meet before you leave for China.

In the next posting, we will talk about the follow up work after the exhibition.
This is the last article of this series. After introducing the inspection levels, the AQL, and the types of QC inspections, I am going to put it all together by walking you through several examples.

Example 1: 5,000 widgets from a new supplier
You have no information about the factory, so you should adopt the normal level (a.k.a. level II). The order quantity is comprised between 3,201 and 10,000pcs. If you open the first AQL table, you see the code letter is L. (If you forgot how to read the tables, see the article about AQL tables). And with the second AQL table you see that 200 samples have to be checked by the inspector. If you opt for the standard AQL limits (0 C. / 2.5% M. / 4.0% m.), the inspection is failed if at least one of these conditions comes true:
  • One or more critical defects are found
  • Eight or more major defects are found
  • Eleven or more minor defects are found
And let’s say you want the inspector to check all the product functions on a few samples. This test takes some time. You can choose special level S-2. You see this test will be done on 8 samples (by opening again the first AQL table and then the second AQL table). The 200 samples can be checked by one person in one day, so a third-party QC firm would quote you one man-day.

When to inspect? If this is a standard product and you have flexibility with timing, a final (pre-shipment) inspection should be enough.

Example 2: 30,000 watches from unknown supplier(s)
You suspect that your supplier gave orders to several workshops to produce your goods, but he won’t tell you. And these items are rather valuable. A level-III inspection is probably the most appropriate.

If we read the AQL tables as we did above, we have to inspect 500 samples, and the maximum number of defects is: 0 critical, 18 major, 18 minor.

If a visual check on all samples and a function/accuracy check on a few pieces is enough, it probably takes two or three man-days.

When to inspect? If the supplier refuses to disclose the factory information, you have to go for a final (pre-shipment) inspection.

Example 3: Four different styles of garments from a good factory
You know that this factory’s workmanship is quite good. But you want an inspector to check all the conformity elements, and in particular the measurements. Level I should be enough. You sell these products in boutiques at a high price, so you can only accept 1.5% major defects and 4.0% minor defects (for garments, there are generally no critical defects). The fitting is quite important, especially for the brassiere and the brief, so 3 to 5 samples should be measured in each size. There are 4 different types of products, so there has to be 4 inspections:

Product

Order Qty (in pcs)

Code letter

(level 1)

No. of samples to check

Max. No. of defects

No. of samples to measure

Nightdress

1,000

G

13

1M, 2m

3 sizes x 3 pieces

Camisole

3,500

J

32

2M, 5m

3 sizes x 3 pieces

Brassiere

6,000

J

32

2M, 5m

6 sizes x 5 pieces

Brief

11,000

K

50

3M, 6m

3 sizes x 5 pieces

TOTAL

21,500

-

127

-

63


The total number of samples to check is only 127 pieces. But this order cannot be checked in one man-day, for two reasons:
  • There are four different inspections to carry out. For each product, the inspector has to check all the conformity elements (fabrics, colors, accessories, stitchings...). And there are four reports to prepare.
  • There are 63 samples to measure, across four different products and many sizes.
So it will probably take 2 inspectors for one day, and maybe 3 (depending on the products complexity).

When to inspect? The best is clearly during production, when the products are on the line. As the 4 products might not all be processed at exactly the same time, it might be preferable to send an inspector at different times. And if an inspection is failed, a re-inspection can probably be performed at the supplier’s charge.

Now what about you? Tell us briefly about your case in the comments section, and I’ll give you some advice.

Renaud Anjoran is the founder of Sofeast Quality Control, a third-party QC firm specializing in garments and textile in China. He also writes on the Quality Inspection blog. You can email him at info@sofeast.com.
In this article the author discusses different ways of avoiding risk in trading procedures, continuing from the previous two parts in this series. The main points covered in this part focus on payments terms, forwarder appointments, selection of banks for L/C, and customs and regulation related to the buyer's country.

我们在上回文章中谈到了一家公司在出口到中东的订单中遇到的实际诈骗。这样的案例其实比比皆是,其诈骗手段也是防不胜防。在现在的金融危机背景下,很多我国的供应商深受其害。那么,在我们的实际操作中到底应该怎样预防,或者说最大程度的避免风险呢,我们在这里会根据上次案例中的某些关键点来和大家讨论一下。 根据上次讨论的诈骗事件,在整个流程中,从国外买家下单开始,有5点比较值得特别关注。
  1. 付款方式。买家谈到全额信用证付款,乍看来一点问题没有,因为大部分人还是认为银行信用比较值得相信。殊不知这种例子中买家往往用一些信用评级不高的银行来操作,这就失去了银行信用本身的意义。在这种情况下,其实选择一部分的预付款要求还是比较可靠的,或者有可能的话提出让第三方知名银行保兑信用证。
  2. 买家指明货代。这种情况下往往买家回合期货带有一定的联系,并容易产生买家货代勾结的事件。出口方完全可以要求买家指名船公司即可。
  3. 小银行或所在国整体金融系统评级不高。这样的情况像我们第一点中谈到的,完全失去了信用证本身的付款保证。信用证可以全球通用的原因本身就在于‘信用’,而且为‘银行信用’,但是我们也要意识到,并不是全世界所有的银行都‘讲信用’的,所以在这一点上,还是严格把关使用大银行的比较好。
  4. 记名提单,而且是写明了买家的名字。这种情况主要和提货/退运联系比较大。据笔者了解,很多船公司在退运时都会要求提交收货人(提单上写明的consignee)出具的同意退货等有关证明。而在买家(收货人)本身就是想诈骗的情况下,他们怎么可能主动配合出具同意退运的相关证明?所以,在通常情况下,我们还是建议卖方在提单上写to order或to order of shipper的比较好。注:在某些情况下,即使to order of xx bank也是存在风险,笔者就听说过某些无良银行直接把提单交给了买方的事情。
  5. 买方相关国家规定或海关规定。这点没有办法改变,只能提前查明买方国家的相关规定比如无人认领下拍卖的一些条件,从而尽量提前避免这样的风险或查清出现这种情况的应对方法。

综上所诉,在一般贸易出口流程中,我们不能遗漏每个细小的环节。有些看似不起眼的小条款,往往会造成难以弥补的麻烦。因此检查,再三检查,应该成为外贸人的一个良好习惯。同时,经常地充电和交流也能起到扩充知识经验的作用。当然,笔者相信只要抱我好一些基本点,仔细审核,对于大部分的风险我们都可以过滤在萌芽期。

Do sufficient preparation

After you identify the right exhibition you want to attend in China, you will start with some preparation work. As far as I know, most companies will only prepare in terms of logistics, such as visa and accommodation arrangements. However, if you do a little bit more work on analyzing the targets of the trip, you will find it far more productive.

  • Team set-up
Ideally, the team visiting the exhibition needs to include both a product expert and a decision-maker on commercial aspects, which means it should involve representatives of at least the technical and purchasing departments. The team should be given a clear target to meet during the trip, such as a thorough study of the Chinese market, supplier approach, or collection of proper samples.

  • Material preparation
Because of the inconvenience caused by long travel, many persons only bring a few marketing materials or their company introduction and they sometimes do not even prepare a hard copy. I suggest that, although it could be troublesome, you need to bring as many brochures as possible. Considering the noisy and crowded environment of the big exhibition and the possibility that the Chinese suppliers are not very good at English or your translators are not good at terminology, to leave a proper brochure to introduce your company and your product or your service would be the best way for the exhibitor to remember you and pay more attention to you afterwards. By the way, please prepare enough business cards, at least 200 pieces, and small gifts if necessary.

  • Market research

When you have decided to attend a particular exhibition in China, you will need to conduct market research on the related industries in China. By proper research you may be able to determine the following:

What is the supply and export volume?
How far is the technology developed?
Who are the main players?
Is China a major supply country?
Is the price competitive?
What is the potential problem with using Chinese products in your country?

I personally think the last question, which requires you to combine the research on China with knowledge of your local market, is practically the most important one (apart from the actual price issue) because your discussion with the exhibitors will be more efficient if you can indentify potential problems at the very beginning.

In the next posting we are going to discuss more issues to prepare before an exhibition.

EVENTS: Canton Fair 2009

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China Canton Fair 2009

Venue:        China Import and Export Fair (Pazhou) Complex, Guangzhou
Dates:         15 - 19 April 2009
                   24 - 28 April 2009
                   3 - 7 May 2009
Organizer:   China Foreign Trade Center
Tel:           +86 (0)20 2608 8888

Briefing:
As China's largest trade fair, Canton Fair 2009 will feature over 55,000 exhibitors with an exhibition space of over 1,115,000sqm. 

Phase 1: 15 - 19 April 2009
Electronics & Household Electronic Appliances; Hardware & Tools; Machinery; Vehicles & Spare Parts; Building Materials; Lighting Equipment; Chemical Products; International Pavilion.

Phase 2: 24 - 28 April 2009
Consumer Goods; Gifts; Home Decorations.

Phase 3: 3 - 7 May 2009
Textiles & Garments; Shoes; Office Supplies; Cases & Bags; Recreation Products; Medicines; Medical Devices; Health Products; Food & Native Produce.


More information.

  • Exhibitors:
If the exhibition has an official website, you may be able to examine a list of exhibitors who will attend the exhibition or who attended the exhibition in previous years. From this you will be able to judge whether the exhibition is suitable for you to find proper Chinese suppliers, and you can especially look out for the following:

  1. Well-known international suppliers attending the exhibition: Nowadays, good Chinese exhibitions attract international exhibitors. Normally these exhibitions are in industries where China is relatively more advanced.
  2. Chinese suppliers’ names: You may need to count how many Chinese suppliers are on the list. If you are familiar with China’s province or city names, you may be able to get a rough idea if the suppliers are local or from different provinces. As China is geographically large, it will cost suppliers from other provinces a lot of time and money to attend exhibitions in Beijing, Shanghai or Guangdong. So if one exhibition in Beijing attracted many good suppliers from southern China, it is likely to be a good one as the suppliers consider it worthwhile to attend.
  3. Key Chinese suppliers: If you already know several big Chinese suppliers in the related industry, you can judge if the exhibition is worthwhile or not by checking whether these suppliers are attending.

  • Organizers:
Just as qualified products are manufactured by qualified suppliers, good exhibitions are organized by good organizers. You can judge whether the exhibition is a sizable one by investigating if the organizer is reliable and experienced. Many international exhibition organizers such as Reed and Koelnmesse are actively organizing big international exhibitions in China. Local players are also growing very fast, and most of the good ones have English websites, where you can get references.

  • Product range:
This is not always true but in the past I found that I could not find enough suppliers of certain commodities from exhibitions which apparently had a general scope. For example, if you visit an exhibition with a name like ‘industrial goods exhibition’ to look for casting suppliers, you may only be able to find 5-10 suppliers, even though the exhibition organizer listed casting in the product scope of the exhibition description. In this case, what you may want to do is either attend an exhibition specifically named as a ‘casting exhibition’, or attend a specific industry show as long as you know what industry the castings are used for.

If you have more ideas on how to choose the right exhibition in China to attend, please feel free to make a comment. We will talk about the necessary preparation work exhibitions in Part 3.

The first two articles of these series focused on the different inspection levels and on the AQL tables. So you know how to set the number of samples to check and how many defects have to be accepted. With these settings and your detailed product specifications, a QC inspector can check your products and reach a conclusion (passed or failed).

But importers face one more question: when should the products be inspected? This is an extremely important issue for buyers willing to secure their supply chain. Spending a few hundreds of dollars to check and fix issues early can be an excellent investment; if might save you weeks of delay, shipments by air, and/or lower quality products that you have to accept and deliver to your own customers.


Four types of inspections

Let’s picture the simplified model where one factory turns raw materials into finished products. (If you also have to manage the quality of sub-suppliers’ products, the same model can be applied to them).


Guest post image Final.PNG

Pre-production inspection

This type of inspection is necessary if you want to check the raw materials or components that will be used in production. Buying cheaper materials can increase a factory’s margin considerably, so you should keep an eye on this risk. A pre-production inspection might also be a good idea if you suspect that technicians on the factory floor have not been given all the information or have not understood all your requirements. How to make sure of this? By sending an inspector when the very first products are in process (under bulk production conditions). If you need to help the factory improve its processes, this is also the right time. But you will need to either send your own technicians, or find a highly specialized QC/engineering firm.


During production inspection

How to get a good idea of the average product quality, and be able to ask for corrections if problems are found? Send an inspector during production! It can take place as soon as the first finished products get off the line, but these samples might not be representative of the whole order. So usually such an inspection is done after 10-30% of the products are finished. What are the main benefits of an inspection at this stage?   

  • Be aware of quality issues early, and implement corrective actions before it is too late
  • Communicate with your supplier about what is acceptable and what is not
  • Get a precise production schedule
 

Final (pre-shipment) inspection

Inspecting the goods after they are made and packed is the standard QC solution of most importers. The inspector can really check every detail, including counting the total quantity and confirming the packaging. Final inspections are usually performed in a hurry, just before shipment. To avoid creating delays, inspectors can usually start after 80%+ of the order quantity is packed. Final inspections are appropriate if the factory delivered good quality on the exact same product in the past. Otherwise, buyers are strongly advised to have the products checked earlier.

The downside of final inspections is that inspectors adopt a “policeman attitude”. Factories hate the risk of last-minute rejection, after all the goods are made (and might not be repairable). Buyers have the upper hand and can often ask for discounts and threaten to refuse the goods. This is a major cause for the corruption of QC inspectors. Most Chinese manufacturers are not organized to keep their processes under control, and they often discover the issues after an inspector shows them defective samples. Helping them with pre-production or during-production inspections usually makes more sense.


Container-loading supervision

In some cases, a buyer wants to make sure the factory ships the right products, in the right quantity, and with the right loading plan. This supervision can take place immediately after a final inspection (in which case the same inspector does the job). But usually it is a separate service that consists of two steps:

  • Counting the whole quantity, opening a few cartons and doing a quick check on the products, and checking all the packaging details

  • Supervising the loading of the cartons in the container or the truck

 
The importance of detailed specifications

  1. Most quality issues come from miscommunication and misunderstanding. Importers should keep track of all their requirements regarding the product and its packaging. When a good deal of customization is involved, and for large orders, these specifications should be translated in Chinese (for the factory technicians) and included in a contract. When the time comes for product checking, the inspector will use this information as a checklist
  2. After an inspection fails, the supplier usually agrees to repair the problems and support the cost of the re-inspection. Detailed specifications are useful in avoiding endless negotiations with your supplier

Renaud Anjoran is the founder of Sofeast Quality Control, a third-party QC firm specializing in garments and textile in China. He also writes on the Quality Inspection blog. You can contact him at info@sofeast.com. 



The 9th China International Dye Industry, Pigments and Textile Chemicals Exhibition

Venue:        INTEX Shanghai, Shanghai Mart
Date:          8 - 10 April 2009
Organizer:   China Dyestuff Industry Association
                  China Dyeing and Printing Association
                  China Council for the Promotion of International Trade
Tel:           +86 (0)21 6279 2828

Briefing:
As one of the largest chemicals industry exhibitions in China, this event will feature more than 400 exhibitors with a total exhibition space of 20,000 sqm. The fair will display the latest industry information as well as the most advanced technology and equipment for different kinds of dyestuff, textile chemicals and various kinds of pigments and related procedures.

More information.

In the last article, we explained the different inspection levels that can be used. Another basic concept rings familiar to many importers, but is often not clearly understood: the AQL (Acceptance Quality Limit).


There is no such thing as zero defect

First, as a buyer, you have to know what proportion of defects is tolerated on your market. If you are in the aviation business, any defective part might cause a disaster, so your tolerance will be very, very low. But you will have to accept a higher percentage of defects if you source consumer products made by hand in China.


An objective limit is necessary

So, how many defects are too many? It is up to you, as a buyer, to make this decision. There are two reasons why you should not leave this to the inspector’s judgment: 

  1.  When it comes to giving instructions to an inspector, you should never leave gray areas—as they might open the door to corruption.
  2. Your supplier should have clear criteria for acceptability, or they will see rejections as unfair. The AQL is the proportion of defects allowed by the buyer. It should be communicated to the supplier in advance.


The three categories of defects

Some defects are much worse than others. Three categories are typically distinguished:

  • Critical defects might harm a user or cause a whole shipment to be blocked by the customs.
  • Major defects are not accepted by most consumers, who decide not to buy the product.
  • Minor defects also represent a departure from specifications, but most consumers would still buy the product.

For most consumer products, the critical defects are not allowed, and the AQL for major defects and minor defects are 2.5% and 4.0% respectively. Remark: a professional inspector will notice defects and evaluate their category by himself. But it is better if the buyer himself describes the most frequent defects and their categories. .


How to read the AQL tables

The master tables included in the relevant standards are commonly called AQL tables. Let’s take an example.

 

levels.JPGYou buy 8,000 widgets from a factory, and you choose the normal inspection level. In the table below, you see that the corresponding letter is L.

 

 

 

 

 

 

 

limits.JPG

Now let’s turn to the next table. (It is only appropriate for normal-level inspections). The letter L gives you the number of samples to draw at random: 200 pcs. And what about the AQL? Let’s say you follow the usual practice of tolerating 0% of critical defects, 2.5% of major defects, and 4.0% of minor defects. The maximum acceptable number of defects is 7 major and 10 minor. In other words, the inspection is failed if you find at least 1 critical defect and/or at least 8 major defects and/or at least 11 minor defects


Additional notes, for accuracy

  • The number of defects is not the only cause for acceptance of refusal. The products can be refused because they are not conform to the buyer’s specifications, even though their workmanship is very good.
  • If you have two different products (made with different processes or in different factories), you should do two separate inspections. If you inspect them together, one product might be accepted even though it presents too many defects. Why? Because the better workmanship of the other product might “compensate” for its poor quality.

Now you know how many samples should be selected, and how many defects can be tolerated. But when should inspections take place? After production is finished? Won’t it be too late for corrections if quality problems are discovered? These topics will be covered in the next article.

 

Renaud Anjoran is the founder of Sofeast Quality Control, a third-party QC firm specializing in garments and textile in China. He also writes on the Quality Inspection blog. You can contact him at info@sofeast.com. 

The 10th China International Cement Industry Exhibition

Venue:        Beijing Exhibition Center
Date:          1 - 3 April 2009
Organizer:   China Cement Association
Tel:           +86 (0)10 8837 5528

Briefing:
As the largest cement industry expo in China, the objective of the event is to facilitate the development of China's cement industry and to promote fair exchange and competition within the industry. The event is intended to provide a cooperative platform for domestic and international enterprizes to establish relations with customers.

More information.