BENPAT INTERNATIONAL LIMITED email: firstname.lastname@example.org
Based on the principal of "China - the world's factory" we welcome new business opportunities. Cooperation and understanding each party's needs are the keys to doing business in the Far East.
Here I am happy to illustrate why it is important to have a good partner that represents your needs.
1. Identifying a product Before you decide to shift an item overseas, you should work-out whether it is an economical project. One of the hidden costs is shipping. It is more efficient to ship by the full container load (FCL). This will improve your economy of scale and also reduce the risk of damage, theft and loss. If you have ever seen how the local courier looks after your deliveries, you'd be amazed how many times a five kilogram (11 pound) box is dropped from China to its final destination. When you ship by the full container load, we pack it and you unpack it. It is sealed for the entire journey.
Case study: A US manufacturer decided to outsource spare parts for skateboards from China. He described his annual production as large as he made 20,000 complete skateboards per year. However, these were all made custom models. He thought he could save on the components like the nuts, bolts, wheels and bearings. Had they all been the same model, he would have saved a lot and should have considered having all the boards manufactured. Taking the freight and payment in advance into account, he would have been better off buying the nuts and bolts in the US because he could easily get stock from a local manufacturer who offered him credit and delivery was free. The problem with the bearings and the wheels is he needed the wheels in three sizes and four colours and such a range did not meet the minimum order quantities for the factory which demanded 4,000 pcs per colour style. He faced a similar dilemma for the bearings. Also, the final cost of combining the items from various factories added a further 20% to the cost. Sometimes one person's interpretation of bulk is another's version of small.
In some cases, it is important to maintain some domestic manufacturing in the form of product development. It is more efficient to prototype and test in your market where you can get the appropriate feedback from consumers and end-users. This will also ensure you know the product from start to finish. It will save valuable time and costs. China is great for mass production, but short production runs and international courier charges are expensive.
Case study: We had a client who came to us wanting to make a new soft surfboard for them. At the same time, we had been working on one but not finished. This client was in a hurry and willing to pay for moulds and set-up charges. He sent us all the information we needed to make his first sample. He had requested some additions to the item we could not offer and had planned to sell it at a higher price. In both cases we advised him we could not offer the addition to the design and suggested not to over-sell the product. The client had high expectations and we had warned him. However, he chose not to accept our advice or listen to us. In the end, the project failed.
2. Project Management After you have identified the product with the greatest demand, the next step is to work out the cost of making it elsewhere, the time it will take, and whether the same raw materials will be available. You can start by sending pictures along with dimensions and possibly cross sections to your prospective new partner. This will allow them to assess the feasibility and provide a quote. If you are happy with the reply you get, the next stage could be to send them a sample of the product and ask them to make a counter sample. Some call this stage "reverse engineering".
At this point you should consider signing a non-disclosure agreement to protect an idea or concept. If the item is under patent or patent pending, it is important to advise the supplier. During the course of the supplier making a new product, they (non-sexist language) will need to show it to third parties to discuss moulding, raw materials and packaging. The best way to guarantee product or ideas safety is to give the supplier lots of business. The main reason why a product is copied is because the client's order is too small and the factory manager will feel the only way to recover the development fee (time, effort and raw materials) is to make his own version and offer to others.
Poor monitoring at a factory can also lead to products being copied, but establishing a good relationship with the factory owner can help alleviate this. For instance, if the cost of sending the sample to the supplier is equivalent to an air-fare, jump on a plane and visit the supplier and talk face-to-face. This way the supplier will know you are serious and that you are just one day away if there are problems.
Once the product development phase is over, have the supplier prepare a production sample. If it is correct, sign it and place the first order with the factory. The first order is known as a trial order to ensure production meets expectations. Be sure the signed-off samples are in an easily accessible place. Also make sure the QC team is aware of what is and what is not acceptable. This is particularly pertinent when working with natural materials like wood and leather because of their variable quality.
3. Product Testing Clients who develop their own product are responsible for testing. Companies offering these services can usually be found in all major cities in China like Hong Kong, Shanghai and Beijing. If the product is normally sold in the USA and has been tested for approval there, it will need to be re-tested if it is being made elsewhere. If the same product is being exported to Europe, it will have to be tested to meet European standards. The client should advise the supplier which standards need to be met. A new test is required even when the client makes relatively simple changes such as colour or inner packaging.
Case Study: A US client was doing very well with a neatly packaged skateboard, helmet and knee and elbow protectors. His US customer introduced him to the head buyer from Europe which resulted in a major sale. The order went through and he was in the process of delivering 100,000 units which had been diverted from his US orders. The only problem is he did not read the fine print and failed to arrange testing for European standards. The items would have easily passed as the manufacturer was world class and met these standards as a matter of course. Luckily someone in the factory asked him about whether he needed to test the goods and while the shipment was en route, the client was able to get the paperwork and avoid paying storage fees.
4. Negotiating International Borders In 1997, Hong Kong returned to China. However the former British colony is referred to as a Special Administrative Region of the Peoples' Republic of China. This means there is an international border separating Hong Kong and China. Although the movement of people and goods is unprecedented on a global scale, foreigners require a visa to enter China. A person going to Shenzhen in China has to show their passport to Hong Kong immigration officials and do the same some 100 metres (yards) when they walk across a bridge into China. They also have to pass through customs checks on both sides.
Due to red tape, it is better to send samples to Hong Kong first and your partner will arrange to use a local courier service to take them across the border. The same applies for sending samples out of China. In fact, air freight from China is probably the most expensive in the world because of demand. It is better to have the sample sent from Hong Kong which offers a greater range of couriers and the prices are much lower.
Sea freight ports have expanded rapidly in southern China and many suppliers prefer to export directly from the Shenzhen port which sails to many international destinations.
Case study: A client arrived in Hong Kong the night before his appointment in Shenzhen. He assumed he could casually cross the border without a visa. Hong Kong immigration authorities allowed him across their check point because they don't care if the traveller has an onward visa or not. When the client arrived in China, he was denied entry because he did not have a valid visa. Furthermore, due to a dispute between China and his country, he was unable to get a visa-on-arrival. He then had to return to Hong Kong with a few delays along the way and apply for visa. He had his meeting the next day. Next time, he applied for a tourist visa at home which saved him a lot of hassles. (Try to avoid applying for a business visa as this means you will have to get some paperwork from your supplier)
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