Thorough trip preparations help you improve your chances for a successful visit. What are thorough trip preparations then? Of course that depends very much on the main goals of your visit which I already outlined in Chapter 2. What follows are general preparations fitting all five reasons for a visit.
Will the Electricity Be On During Your Visit?
Asking the factory whether they have electrical power available may seem a little strange, but you may not know that most Chinese factories are forced by the government not use electrical power one or two days per week. This government imposed outage rotates between industries and factories during the week (including Saturdays and Sundays) because demand outstrips supply. Heavy penalties are imposed if they break the rules.
Most factories have purchased electric power generators to overcome the shortage, thereby avoiding production interruptions. Still, be sure the power will be on when you visit or you will not be able to see production operations first hand.
Business Cards are Critical!
They are lightweight and can be used long after your visit to China so bring considerably more than you would normally think is necessary. In China, everybody expects you to give them at least one business card and if you are meeting with several people, you may handout a dozen or more at a time.
Sometimes manufacturers are reluctant to provide detailed information to somebody who “is naked” meaning “being without business cards”.
If you miscalculate and run out of them, you can use one of the print shops nearby to print them for you within a couple of hours.
The Chinese perform a small ceremony when exchanging business cards. Make sure to hand over and receive business cards in the typical Chinese way, which is with both hands.
If you are sitting around the table, it is a good idea not to put their cards in one of your suit pockets after they are handed to you. This is extremely impolite and indicates that you do not care for the person that passed you his/her business card. The proper way is to study them first (pretending to do so is OK) and place them in hierarchical order on the table in front of you.
How do you know who is the highest ranking person at the meeting? It is usually the first person introduced to you and this person is not necessarily able to speak English. It is proper to exchange business cards with that person first. In Chinese business culture, this gives him the face he deserves. This applies even if the sales manager will be the person you are in constant contact with following the visit.
It is a good practice to write a persons title on their business card if it is not preprinted on the card. Otherwise, you may find it impossible to figure out later. A person’s title printed on the business card is sometimes a little bit vague and you should ask to get it right. Also, you will not be able to distinguish whether it is a male or female name. Make a note of this for future reference. It might surprise you to learn even the Chinese will not immediately know, whether the name on the business card is from a woman or a man. There are so many different areas in China with special local names that Chinese from other provinces may not be able to differentiate gender by name.
Therefore, add Mr. or Mrs. on the name card to make sure that it will not be forgotten. You should also know that a person with the name YUEN Kai Shun is not Mr. Shun but is Mr. Yuen because the family name is always the first of the traditional 3 Chinese names shown on any business card. However, in Hong Kong people have adjusted after a 150 years of colonial rule by England. There they mostly mention their Christian name first and then their Chinese family names, for instance Peter Kwok.
Bring Your Own Stapler
Pack your own small stapler with you to staple the supplier’s business card to your notes or the product catalogs. This may seem trivial, but it is a great tip for staying organized while on the road and it can save aggravation trying to sort everything out after the trip.
About Cell Phones
I suggest you check with your cell phone provider at home to see if your phone will work in Hong Kong and China. Give your cell phone number to any business partner that is traveling with you and get theirs in return. Do the same with any suppliers that you prearranged to meet. It may be very difficult to locate somebody at the factory without going through their operator, but using their cell phone number will usually do the trick.
The call charges to Mainland China are very high and many visitors buy a SIM card from a China Mobile retail outlet upon arrival to reduce phone costs.
The call charges in Hong Kong are cheaper, but you can also buy a SIM card from one of the many local service providers.
The obvious disadvantage is that your Chinese business partners don’t have the new number yet and cannot reach you after you have changed to a SIM card. Depending how many calls you have to make, it might be better to keep the SIM card from your home country or do what many local people do, use a second cell phone with your Hong Kong or China SIM card. In that way you can be reached by the staff at your office and suppliers at any time.
You Will Need a Digital Camera
A digital camera is one of the most important tools you will need during your visit. You will have many opportunities to shoot photos of products, production operations, and quality control operations. These will include close-up photos from details which cannot be seen in a catalog.
During your guided tour of the factory premises, many photos can be taken. Important examples include the working conditions on the conveyor belt and any special equipment you are not familiar with or that differs from other factories.
You can and should take photos of any unique new products that some of the suppliers will show to you in the mock-up stage. It may only be a mock-up, but in just a few weeks the tooling will be complete and plastic injection can start. You should always be on the lookout for new products that interest your homeland customers. Feeding them this important information can lead to a big sale.
Another way a digital camera comes in handy: Chinese people love to take photos and love if photos are taken of them alone or with their customers. Also, having photos of the people you met during the factory visit helps you remember who they are and what their title is. People always like being remembered when meeting a second time.
Do not forget to bring a spare battery with you because you probably will not have a chance to recharge the battery while traveling between factories. You may also need another memory card if you do not already have one of those 2-5 GB cards in your digital camera. Another way is to upload your photos to your notebook computer on daily basis. In that case one memory card will probably be sufficient.
You Need a Notebook Computer
If you have a notebook computer, bring it to every meeting. If you do not have one, consider purchasing one. That purchase will be worth the money you spend for it. Your notebook provides you with the necessary information for your business negotiations, plus it allows you to show background information about your company, and the packaging concept for your products. This is all very helpful to factory management.
Of course, you can input vital information during your discussions without the need to take hand written notes. That is made easier if you have an associate along, but with a bit of practice you can manage it alone. It is also so much more convenient than using a paper notebook. I have experienced and appreciate the changes that have occurred over the last few years.
- Before, people wrote everything on paper, the notes were then passed to their secretary for typing after returning from their business trip. Only then could the information be distributed to all the people needing it. You can imagine that it took at least 4 precious weeks from the start of your business trip until everything was completed.
- Some people wrote everything on paper and in the evening dictated the content into a small micro cassette recorder. Their secretary at home would then type it and distribute it to the people that needed it. You can imagine that it took 2-3 precious weeks from the start of your business trip until everything was completed. Alternatively, the micro cassettes could be sent by courier service, which saves some time.
- Nowadays, people type their vital information in their notebook computer and send it together with the matching photos at the end of each day to the head office. In that way, colleagues at home can interact and ask for additional information if something important was missed. Upon returning home from your business trip, everything should be ready for further processing and decision making.
I suggest a large capacity battery for your notebook computer. One that lasts up to 6 hours. If this battery type is not available for your model, bring another fully charged battery along. When you have meetings away from the hotel, you will find that there is not always an electrical socket nearby to connect your AC adapter to.
Sometimes suppliers will also pass you data on a memory stick (photos, line drawings, product descriptions etc.) that you can immediately download into your computer.
That is especially important if it is a new development and no samples or catalogs will be available for some time.
Remember, the most up to date information it is what you want to obtain during your factory visits.
You Need a Briefcase on Wheels
If you are not into weight lifting exercises, you had better bring a large briefcase on wheels.
It is torture trying to carry your heavy briefcase all day long (with your notebook computer, catalogs, notebooks etc.). Catalogs collected during your factory visits weigh a lot and you will be exhausted half way through the day from carrying them.
Comfortable Walking Shoes
Comfortable walking shoes make your life much easier when you walk around the factories and visit areas that may be some distance apart.
Your Company’s Catalog
If you have your own company catalog, bring a few sets along with you for the meetings with key suppliers. You don’t have to carry them all with you but have at least one set to show to your suppliers during your meetings.
From my experience, it makes a good impression and helps to cement the relationship with your supplier if you hand over one set during the most important meetings.
Remember you are your company’s ambassador and want to show your company in the best possible light.
Your Corporate Identity Artwork Concept
Creating your own corporate identity concept is very important. After spending a lot of effort on it at home, it would be a very good idea to bring it along with you to show it to the suppliers during your meetings. It enhances the impression you make and helps suppliers better understand your needs.
Sketches, Drawings, and Photos are Perfect Tools to Inform Suppliers
You should also bring along any sketches, drawings, or photos clarifying what you are looking for from your suppliers. Do not forget that you are at the factory to see something new and collect a lot of information.
Sometimes suppliers will tell you where you can find products and help save you a lot of time.
Also, bring ads from newspapers and magazines showing a product that is already being distributed by somebody else.
Hand over color chips of a specially selected color to suppliers. You can ask them to prepare samples for you, saving the time and cost of sending it after you return home. A supplier may also have a question about the color and you can discuss the details face to face.
What is a specific requirement? A specific requirement could be a more complex sales packaging. For example, a window box that is more expensive.
Another specific requirement could be an instruction manual in several languages that are often needed for Europe. Importers from EC countries sometimes request up to 12 languages in their instruction manual, which is more expensive than only 1 or 2 languages.
Another requirement often requested by Hypermarkets and Supermarkets is an additional semi transparent PP strip. This prevents customers from opening the sales packaging during shopping and removing part of the contents. Depending on the size of the sales packaging, two or more of these PP strips may be needed.
For electrical products, the plug is a substantial cost factor. The British BS plug is more expensive than the US plug.
The length of the electric cable is another cost factor. If your toaster must have a cable length of 1.50 meters, it will cost you more than one only 0.75 meters long.
Your quality requirements are a very important cost factor. The requested quality standard is defined by your requested Acceptable Quality Level (AQL) that sets the limits for the satisfactory process average.
Usually you have 3 defect categories
- Critical defect
- Major defect
- Minor defect
Here I will only provide a short overview because this subject is thoroughly covered in my other eBook How to Assure Quality of Imports From China.
If a critical defect is discovered during a Final Random Inspection, the whole lot will automatically be rejected and must be re-worked or re-produced.
Allowed Major defects range mostly from Major 1.0 – Major 2.5 but that depends on the products. Hi-tech products such as consumer electronics or small/large electrical home appliances range between Major 1.0 – Major 1.5. Allowed Minor defects range mostly from Minor 2.5 – Minor 4.0 but that also depends on the products. Hi-tech products such as consumer electronics or small/large electrical home appliances range between Minor 2.5 – Minor 4.0.
License and Royalty Fees
Other important cost factors are license and royalty fees that have to be negotiated with certain suppliers. DVD players/recorders, MP3 Players etc. are examples.
If you or the factory do not pay these fees and you get caught after importing the goods, it will be very expensive and could even ruin your company.
You should realize by now that you need to know all the details before discussing or negotiating prices with any factory during your visits.
Since you expect them to quote realistic prices, you need to inform them about your requirements in order to avoid lengthy e-mail negotiations later.
Your Shopping List
Hopefully, you have your essential tools together now but one other important list needs your attention. Factory visits are time consuming and can easily distract you from your original target of finding suitable products at competitive prices that you can sell with as much profit as possible.
To avoid being distracted, you have to prepare your shopping list of the products you want to source. This list should include at least the following details:
- Product description
- Target FOB price in USD
- Quantity of the first shipment
- If possible an estimate of your yearly quantities
- Requested earliest delivery date
- Destination port
- Packaging information if other than standard
- Number of samples needed
It is not wise to inform all suppliers about your target prices right away. You could end up with prices matching your target prices, but you may have actually been able to negotiate a lower price.
On the other hand, inform your supplier of your target price if they quote a price that is not even close to what you want to pay.
You should however always bear in mind that even with the abundance of cheap labor there are still limitations to a factory’s production and pricing capabilities.
You will find that out sooner or later when the 5th supplier informs you that a specifically requested target price is unrealistic.
Visiting New Factories for the First Time – Detailed Evaluation
There will likely be factories that you learned about during one of the Chinese Trade Fairs or factories that you contacted from your home country but have never visit in person. Naturally, you want to spend more time evaluating these factories to make sure they comply with your requirements.
Visiting a Factory to Discuss a New Large Volume Project
These pre-visit preparations mostly focus on the details of your project. If you are placing a large volume order, most likely you have visited this factory before and know their background. The wise importer will not place a large order with a factory they personally or their Importing Consultant have not fully evaluated. It is preferable to follow the evaluation with a small order to see if any surprises appear before moving on to a large order.
Visiting a Factory Because of Quality and/or Delivery Time Problems
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 satisfactorily 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
These pre-visit preparations mostly focus on the details of your project. If you are placing a large volume order, most likely you visited 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 quantity. 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 all of this in mind during your negotiations.
In my expert 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 costs savings on to you.