How to deal with production problems in China

by Renaud Anjoran on 31 July 2010

Production problemsIf you work with several Chinese suppliers, and if you regularly switch to new ones, you will have to deal with production problems. It might be a factory refusing to rework substandard goods, or an unacceptable delay, or simply a project that comes to a full stop without warning.

Here are 7 pieces of advice for importers who are in such a situation.

1. Show that you are ready to walk away

The favorite strategy of Chinese factories that don’t want to correct problems is… to wait. And wait. Until their customer (who needs to deliver his own customers) must let them ship.

So the first thing to do is to give them the feeling that you’d rather cancel the order (and lose your deposit, if you wired some cash before shipment) rather than receiving products that can’t be sold at all on your market.

The second step is to try to understand the real reason of the problems, and help the factory. Tell them what you can accept, ask them to confirm that they can do it, and then tell them that it is a limit that you won’t allow them to break.

2. Have somebody on site

How do you really know what is going on? By sending someone (either an inspector, or a local agent) in the factory.

And how do you unlock a bad situation? Having someone on site definitely helps. Phone calls and emails to a salesperson will leave you frustrated and apprehensive. In China, delicate business conversations should be face-to-face with a manager.

You need someone who protects your interests on site. And a few hours are not enough (I was told “sorry, our boss is out so we can’t decide anything now” too many times)–it might take several days.

My clients sometimes ask me to go in a factory and talk to a manager on their behalf. I often have to describe the whole situation to the boss, who is not aware of it. It is an important first step. Then I try to find a solution that everybody can agree on (and that means many phone calls to the buyer along the way: it takes time!).

3. Don’t get emotional. Be curious.

Don’t piss the factory people off. Sure, there are at fault. But you will need their help. Bad manners and threats won’t help.

If they stalled halfway trough your production, or after substandard quality was detected, there is a reason. Here are the three most common types of issues:

-1- They are giving priority to another customer who is bigger than you… or who is better at defending his interests. You will have to guess by yourself. Once again, having someone on site helps–you can see what is on the lines and understand the situation.

-2- They have a technical problem that prevents them from producing your order, and they tell you it is impossible. If you have some technical experience, you might be able to help you.

In some cases it is simply a matter of common sense. For example, this week I sent a technician to see why a factory could not press a plastic label properly on the product. She used different temperatures and timings, and she found a solution after 5 tests. It took less than an hour. Sometimes we wonder “why didn’t the factory do this?”

-3- They think your conditions/penalties are not fair (for example you ask them to pay for air freight when they are “only” ten days late).

You will know right away if you are in this situation: they will tell you clearly. It requires a negotiation. The better prepared you are, the easier it will be.

4. Monitor progress closely

Finding a solution, shaking hands and going away are not enough. You should agree on precise steps, and then ensure that they are taken.

If the factory is not moving in the right direction for a few days, you know you are in trouble. You should immediately contact them, and send someone there again if are not given a good explanation.

5. Check quality before shipment

Even if your orders are quite small and you usually don’t control quality, this is the time to do so. A factory that is not happy about you, or that had to rush production, cannot be counted on to deliver perfect products.

If quality problems were noticed, you should impose a re-inspection. But before that, the factory should propose a way to improve the situation. Here are the issues to have in mind, and here is a simple chart of the process.

If the factory is really doing nothing, take the lead and send inspectors for a 100% check. In this case, only what is good can be shipped out. It can be expensive, but not as much as sorting the goods by yourself in your country.

6. Stop giving them orders until problems are solved

This might sound like common sense, but many importers have no alternative. When their own customers ask for more products, they send new POs to the factory they are arguing with. Why? Because they don’t know any other qualified manufacturer. It sends the wrong signal to the factory!

In general, importers tend to hope that the situation will get back to normal soon, even when red flags are multiplying. Then they get really upset when things are unmanageable. This is way too late! Walking away suddenly from a supplier can incur large losses for an importer.

7. How to prevent this type of situation in the future

Most efforts should take place earlier in the production cycle. Here are a few suggestions:

  • Avoid giving large orders to a first-time supplier, and increase business slowly (sometimes there is only a certain level of work that they can keep up with, and anything above that level will not be followed properly).
  • Set up a clear quality standard, and keep referring to it when the supplier asks questions or when you notice some issues.
  • Follow production closely with quality inspections, if possible both during production and before shipment.
  • Hold at least some of the payment until the quality of final products and the production status are verified. Paying by LC is safer with new suppliers.
  • If you cannot afford to cancel orders (maybe you have already sold the products on your market), you should cultivate a back-up factory. It can be in China, or in your country (in which case production and delivery can be faster).
  • Keep 2 or 3 weeks of safety in your schedule. Production problems regularly happen in China. Getting a back-up manufacturer up to speed takes time. Plan for it!

Any other tips, anyone?

Photo credit: wstera2

  • Landy

    Good tips, thanks for sharing.

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