Chapter 12 – Your First Meeting and Important Discussion Points

The first order of business at the meeting should be exchanging business cards by following the Chinese business etiquette. If you missed this important step go back to chapter 5 and review it.

Beginning the Meeting

A good place to begin the discussion is by introducing yourself and your company to the meeting attendees. This can be followed by an explanation of why you are visiting. If you shared this information before arriving, keep it brief. If they are not aware of why you are visiting or if some in the meeting might not know, give more detail.

Depending on your goals, you will have completely different discussion points and the factory may ask more staff to join the meeting or others to leave.

If you have your own interpreter with you, this is the time for him to translate your speech so that everybody understands your requirement and company policies.

Goal 1 – Visiting a new factory for the first detailed evaluation

Since you want to make sure that the factory is the right business partner, you will have to ask them many questions to verify it. Be sure to furnish them all necessary background information so they can fully answer your questions.

You want to show them your Company Catalog and explain your company’s policies. Part of your company’s policies is your corporate identity artwork concept, which you need to explain thoroughly. This includes Sketches, Drawings, and Photos of packaging and branding information along with anything else that sets your company’s products apart from the others. Here you must go into detail to be sure the factory has a clear picture of what you need.

The factory might not be able to meet your requirements, but they may tell you where you can find products meeting your exact needs. This can be very helpful information and save a lot of time.

Bring along ads from newspapers and magazines showing products already being distributed by others that you are interested in for your customers.

Be prepared with Color chips of any pre-selected colors. Ideally, these will be real chips that you cut from products similar to what you are looking to buy. You will probably want to leave these samples at the factory so they have something tangible to develop for the plastic injection molds. Otherwise, you will lose time and money by having to send them when you get home. Your supplier may also have a question regarding the color and you can discuss the details much better face to face.

You want realistic price and delivery quotations from the factory. To accomplish this you must inform them about your required Specifications. Your quality requirement is a very important cost factor. The requested quality standard is defined by your Acceptable Quality Level (AQL) which sets the limits of the satisfactory process average.

Finally, you need to discuss your entire shopping list, which is what the factories are mainly interested in. This gives them an idea about your company’s buying potential.

This is a lot of information, but if you prepared some copies for the factory you can focus on the main points in the first meeting. Ask them to study it during the day and return to the subject to answer their questions during the second and final meeting later in the day.

Goal 2 – Visiting a factory to discuss a new large volume project

The goal of this visit assumes a certain familiarity with the factory. Without knowledge of the factory, you would not want to place a large volume order with all the inherent risks involved.

You have to be very specific here. Give as much information as you can to be followed by written records, if possible, in Chinese and English. This is a time when money is well spent on an interpreter. Even if your interpreter does an excellent job translating your discussion, the factory’s engineers may not listen carefully enough or might not take sufficient notes. Assign your interpreter the task of translating a written copy of your requirements. Leaving your own written copy of instructions allows management and engineers to refer to the details to when they are needed.

Some technical issues cannot be understood by the sales managers because they usually lack a technical background. This stresses the fact that it is important having the right people attend the meeting. It never hurts to request engineers and/or production managers to be available when you first begin arranging the meeting.

Do not make the mistake of meeting the sales manager in the comfort of your hotel lounge for lunch to deliver the details of your project. He will never admit that he does not completely understand what you told him and the engineers will receive filtered information. Undoubtedly, lacking vital technical information that will cause complications with your project.

Several times, I have seen the engineers received more than their share of the blame from their management for improper samples, missed deadlines, etc. If they had the correct instructions at the beginning, the entire disaster would have been prevented.

At times, I have had important meetings attended by 3-4 marketing staff, up to seven engineers, plus the company’s president or vice president. Admittedly, it can be time consuming to get the entire message across to this many people. However, in the long run it is time well spent so that mistakes or complete project failure do not occur later.

Often, you begin these negotiations at the inquiry stage. Your customer at home wants more information before placing a firm order through you, the importer. You increase your chances of successfully landing the order if you can negotiate all of the terms, conditions, and price with the factory. Your personal relationship comes into play at this stage of negotiation.

Commonly, a large retailer will request several importers to submit a proposal for a large purchase order. If you think this is the situation, ask the factory if they have received similar requests from other importers. If they have and you have a good working relationship with the factory, it can set the wheels in motion for you to receive the winning bid over your competition.

If you have treated the factory fairly in the past and have not pushed unduly hard when their back was against the wall, they may reward your good relationship with the preferential quote that seals your deal with the customer back home.

Goal 3 – Visiting a factory where you are having major problems with the quality and/or delivery schedule

Here you get right into the details by asking the management for a full explanation of the problems and what they are doing to solve them.

They should have had plenty of time to investigate the problems internally, after you first alerted them. It is totally unreasonable for them to request time to investigate at this point in time. You should expect them to be reporting solutions and progress towards fully resolving every issue you have identified. 

To give you a full understanding, I will illustrate with a personal example. One of our factories was scheduled to deliver a large quantity of products with a tight deadline. Three separate shipment date were involved. Unforeseen events delayed the start of production. This was compounded by the fact they only had a single mold for the plastic injection machine. It became obvious they were not going to be able to meet the first shipping deadline for this important contract. 

Working closely with the factory management, I was able to convince them to manufacture another injection mold. Although it increased their costs for this project, management realized that it would enable them to take on additional customers in the future.

By reacting quickly and proactively, production was doubled in approximately 2 ½ months. The project was saved by reacting quickly to get a timely solution in place.

The main point is that it is essential to visit the factory yourself or appoint a consultancy service organization like our company, as soon as possible, when you are facing major problems. Problems with large volume orders cannot afford delayed solutions. Not only does this solve the immediate problem but it also demonstrates that you mean business and expect the factory to take any problems with your orders seriously. 

Subcontractors may also be part of the problem. The factory may not be receiving the needed or correct raw materials, components, printed materials, etc. Do not hesitate to insist these parties directly participate in the meetings. They may only need to attend specific sessions but they definitely need to be part of the solution if they are part of the problem.

Make it clear to the factory that you expect a solution to the problem to be found during your visit. Do not give them the option of waiting until you return home before proposing and implementing a solution. Once you do return home, request that regular progress reports be sent to you.

Goal 4 – Detailed negotiates of conditions and prices for new large volume orders

It is common to negotiate better conditions and prices for large volume orders with the factory. If you can give them a larger than average order they in turn have a better chance of negotiating lower prices for raw materials and components if they order them in bulk quantities.

Here is an example of negotiating the details. If the factory needs an average of 50K electric switches per month they typically negotiate the price based upon 50K per month. If you come to them with an order requiring 200K electrical switches for a single shipment they will certainly get a better price from their supplier that can be included in a lower price quote for you. This might only be 2 or 3 US cents, but adding up the savings on all the components will give you a substantial price reduction.

Of course that also applies to printed material and packing material. Do not forget to ask for a price concession for the factory’s savings from reduced tooling setups and other production startup costs.

Just telling the factory that you need a 10% lower price is not convincing to the factory. They will give you the standard reply that they cannot afford it. The right strategy is breaking down the product into its components or materials to make your request more convincing.

Remember, every saved cent increases your profit margin. However, be realistic and do not overdo the negotiations because it could backfire. The factories might choose to save costs by reducing the quality of the delivered product.

Again, a real life example to demonstrate what could happen. Factories can increase the percentage of recycled plastic material marginally and you won’t realize it even during a final random inspection.

The plastic material becomes softer and the surface less glossy. It also leads to a lower melting point for the plastic. If it is used for home electrical appliances (toasters for instance) it can more easily deform when exposed to heat.

Another quality problem with plastic materials that you possibly have experienced in your own home is lack of UV stability. Lack of UV stability causes discoloration in plastics when exposed to sunlight over time. UV stability is a cost factor to the factory and they know it will not be caught until long after the goods leave the factory.

If you intend to import electrical appliances and electronic equipment to Europe, the goods must comply with the ROHS directives (Restriction of Hazardous Substances). Member states agreed that after 1st July 2006, any product new to the market will not contain any of the six banned substances in quantities exceeding established maximum concentration values. The six substances are lead, mercury, cadmium, hexavalent chromium, poly-brominated biphenyls (PBB), and polybrominated diphenyl ethers (PBDE).

The factory must prove to you that they are complying with these directives, but it is very difficult for you to verify it because of the high cost involved.

The point is to make you aware that the factory has plenty of options to reduce their cost when you negotiate unreasonably. First they will use legal methods to get costs down but they might resort to illegal methods if you push them too hard. Your working relationship should be a partnership that seeks a compromise rather than to continue squeezing.

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