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Importers Should Know How Business is Done in China

It is much better for an importer to make sure that he has the necessary organization in place before any order is placed. Shipments including their documents, product quality and punctual delivery must be controlled on regular basis and for that you need your own specialists.

It is also important to build up some relationship with your manufacturers because that is how business is done in China.

One of the more often asked question by our clients is usually how to import goods and products from China  more professionally. Funny thing though because although they are committed they lack the necessary insider knowledge to give it a head start.

Newcomers to the import business believe that it will be a relatively easy job to do. Just visit some factories in China and select products from their showrooms or use one or more of the China products search engines and choose products that are on offer there.

Theoretically it might even work but unfortunately in most cases importers will fail if they proceed that way.

Factories in China do not have self-service shelves for you to select from but make products to order instead.

Many importers also think that only the lowest possible buying price is desirable neglecting quality, manufacturer’s performance and life cycle of certain products.

They also neglect their responsibility toward their own customers because not the factory in China but the importer will be held responsible if something goes wrong with an imported product.

Avoid too many “Me Too” products but look for unique products and even better if they have not been released to the market yet. You will never find such products during visits at one of the many trade fairs in China or browsing the China products search engines. Every manufacturer hides his new products and visiting him in person at his factory gives you the inside what he has in the pipeline.

Most importantly, go and do your homework first and learn the trades before you make your first steps into China. Greenhorns w/o insider knowledge will either not be taken serious or even taken advantage of which can be easily avoided if you prepare yourself accordingly.

Monitoring the Production Progress is an absolute Necessity for all Importers

Constantly monitoring production progress is an important and necessary follow up task. Assuming everything is going according to schedule if you do not hear otherwise is much too risky.

What Can Go Wrong?

Anything could still go wrong for many reasons. The tooling can become damaged and the factory has to stop production until it is repaired. The factory does not want to be embarrassed telling you the bad news and may not inform you about the delay. They often have a naïve hope of fixing problems without having to tell you about them. It is a gamble that usually fails and you as the importer suffer the consequences one way or another.

It is a good idea to ask the factory for a status report on daily basis if necessary. Certainly ask them to inform you immediately about production problems that come up.

If a problem does arise, ask the factory for an estimated date it will corrected. If the delay is long, check back with them regularly, and have them confirm when the problem is fixed. After the problem is fixed, have the factory confirm the production completion date can still be met. If it cannot, have them provide a new date.

Capacity Constraints

The factory may have limited control over some capacity constraints.

These include:

 

  • Available number of production lines
  • Number of trained workers
  • Injection capacity of their own injection machines or from outside partners
  • Sufficient electric power available
  • On-time component and raw material supply
  • Legal requirement (e.g. allowed overtime working hours)
  • Weather conditions such as severe Typhoons can interrupt production

 

Some of the limitations can be overcome by subcontracting part of the production to other factories in the near vicinity. Unfortunately, this may have a negative impact on the product quality and raises liability concerns.

Many importers do not know the Chinese Government has imposed restrictions on the use of electric power for production. In many cities, factories will not have electrical power 1 or 2 days per week. Of course, the electrical power is not completely cut off but severe penalties are imposed if the factory is caught disobeying the Government instructions. Many factories have purchased electrical power generators to overcome the power shortages. The generators run on diesel and everyone knows how expensive this has become recently. Some factories do not want to absorb the additional cost so they stop production during the electrical shut down period. Without constant communication, you may not know about it.

Industrial Growth in the North

Another important factory is the shortage of workers, especially in the Southern China provinces. You may be surprised by the fact that China, a country of 1.3 billion people, cannot provide enough workers for all the factories. However, it is true. Factories need trained workers and it takes significant effort transforming unemployed young people from rural areas to skilled factory workers. The result is, trained workers are in short supply.

Northern China has undergone dramatic changes in its infrastructure over the last couple of years. Major investments have been made to build new factories on former farmland and the process continues. Compared to a few years ago, the changes in places like Ningbo, Wenzhou, and Xiamen are breathtaking.

Workers that previously migrated to southern China for jobs are now finding them in the North. You might recall the terrible events shown on TV at the Guangzhou railway terminal when approximately a million migrant workers waited for days to catch a train to their home provinces. Severe weather prevented the trains from running on schedule and hundreds of thousands got stuck at the railway station.

You can certainly understand that these people appreciate finding jobs near their northern hometowns rather than going through such an odyssey again.

One reason for the southern migration was for better pay. That enticement no longer exists. With all of the new development, workers in the North are now receiving nearly the same pay as in the South.

The factories in southern China no longer enjoy the luxury of workers competing for jobs. Wages are higher and they have mostly abandoned production of low price products. Southern production has shifted towards more complex and more profitable manufacturing. It should be no surprise that sourcing of really low-end products in southern China is becoming more and more difficult.

Chinese New Year

The Lunar New Year Holidays are an annual opportunity for workers to travel to hometowns and reunite with family. The opportunity usually only comes once a year. Factories close for at least a complete week and usually for 2 weeks or even 3 weeks.

If you happen to have production completing shortly before the Lunar New year Holidays or production starting immediately after it, you may be in trouble. Of course, no one will tell you, but from my experience I can tell you, try to avoid these periods because the quality deteriorates. The workers have their forthcoming holidays in mind and lack the concentration to do a proper job.

After the holidays, between 10-20% of the workers fail to return to the factories for various reasons. The result is, that again the factory is short of manpower and even if they manage to hire workers, they have to be trained. It could be your schedule that suffers. Be sure to take precautions if you are forced to run production during this time.

Sunrise segments to drive China exports

By Global Sources

Intelligent, eco-friendly and enhanced versions of conventional devices offer greater growth opportunities, securing revenue despite the challenging business climate.

High-value models will sustain several of China’s export industries in the months ahead amid various challenges, including product homogeneity and slowing overseas demand. Tablet PCs, smartphones and TVs, and semiconductor lighting, specifically LEDs, are the sunrise categories supporting the mature computer, mobile phone, TV and electronic component industries.

Output of these heavily export-oriented product lines will continue to rise in coming months, spurred in part by the 12th Five-Year Plan. One of the goals of the latest FYP is to “accelerate the cultivation and development of strategic emerging industries” such as energy-saving/environmental protection and innovative information technology.

Subsidies, lower taxes and other preferential policies, however, are enticing new entrants, hastening competition and the possibility of overproduction. Consequently, manufacturers in some categories are cutting prices by as much as 30 percent.

Tablet PC output accelerates

China’s 2012 tablet PC output is expected to exceed 25 million units, double from last year, as suppliers boost production to ride on the line’s global popularity. Worldwide shipments are forecast to reach nearly 114 million units by end-2012, according to IHS iSuppli.

 

Read the full article at Global Sources, a leading business-to-business media company that facilitates trade between buyers worldwide and suppliers in China & Asia, via Online, Magazines, Trade Shows and Research.

China plants boost automation to counter labor concerns

By Global Sources

Makers see long-term benefits in mechanizing tedious production processes.

Cost and efficiency benefits are prompting more China suppliers to switch to automated equipment in carrying out complex production processes.

Automation is helping to reduce reliance on manual work. This is critical amid the ongoing labor-related issues such as rising costs, high turnover and shortage in several manufacturing hubs in China. For one, the worker deficit is expected to persist in the next five years.

Shenzhen City Xin Lei Brush Produce Co. Ltd has raised efficiency by 15 percent through this strategy. Its full set of automated equipment, including a filling system and trimming machines, enables a single worker to complete 80 percent of a job done formerly by an entire team.

Using computerized painting equipment, Kaifeng Group Co. Ltd finishes 150 doors daily, up 50 percent from its preautomation output of 100. The supplier’s automated paint color mixing tool, meanwhile, results in greater color accuracy and surface consistency.

Meanwhile, automation efforts for Foxconn and other top-tier enterprises revolve around updating existing equipment or investing in intelligent but costly robots to replace workers.

Complete modernization and cost savings, however, will take at least five years, according to Liu Kai Ming, director of the Institute of Contemporary Observation.

 

Read the full article at Global Sources, a leading business-to-business media company that facilitates trade between buyers worldwide and suppliers in China & Asia, via Online, Magazines, Trade Shows and Research.