What are the Major Reasons for Factory Visits in China?

You are having quality and/or delivery problems and want to know what the root cause is. You will also want to know if the problems have been satisfactory resolved or if it can be resolved before it costs a lot of profit or time.

The reasons and solutions given by factory management may not be the full story. In fact, the biggest problems may not have been identified to you at all. There could even be a cover-up going on. You want to get these resolved in short time. Visiting the factory to directly apply your skills, digging deeper is often the best answer. This is a good time to bring your own interpreter along. You probably want to talk directly with the factory’s engineers. They often have the best background information and possibly already know the best solution.

Negotiate Terms and Prices for New Large Volume Orders

If you are placing large volume orders, most likely you visited this factory this factory before and know their background.

When you have large volume orders in your hands, you have stronger bargaining powers. Factories like large volume orders for several reasons. For one, they can buy raw material and components at reduced bulk prices. A long production run means less frequent production line changes. Also, tooling costs can be spread over the larger quantities.

Once the goods are engineered and in production, it means less engineering effort is needed. Often, long production runs reduce the frequency that production workers need to be trained how to manufacture new products

Keep this in mind during your negotiations.

In my opinion, this is one of the few opportunities to negotiate better terms and pricing. While still remaining competitive with other factories, the fact is increasing costs for raw materials and components makes negotiating the price for smaller order quantities difficult. Another fact to keep in mind is these same increasing raw material and component costs mean the factory will not place orders with their suppliers until your L/C is received. However, in exchange for the large order they will pass some of their cost savings on to you.

As an importer, you are liable if something happens with your products. If it comes to a legal battle it is essential that you can prove to the court that you took all necessary precautions, including evaluating the factories on regular basis.

It is just as an important task as inspecting goods before shipment and inspecting them again upon arrival at your warehouse.

Posted April 1st, 2012 in China Factory Visits.

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