Thursday, December 18, 2008

Getting to 'No'

I just came across a blog piece by Bill Conerly entitled "The End of Chinese Quality Products?" Bill speculates that in addition to increasing costs in China, we may also be seeing a general decline in the quality of products from China. He refers to some general posts from my friends at the China Law Blog, I believe this one is likely one he's referring to.

While I don't agree that we will see a general decline, I do believe that economic pressures may cause your suppliers to seek new ways to reduce cost. The result will certainly be a change in your product, and maybe a change that causes the product to fall outside your specification limits. This is a good time to review your practices in general. Do you have supplier agreements in place? Are you managing your supply chain?

Now, more than ever, it's important to understand getting to "no." I've stated before that "yes" in China means only "I hear you." You'll be delighted to hear that you'll almost never hear the word "no." Suppliers will often agree to your target price (please keep in mind that I'm usually dealing with smaller suppliers), and try to figure out how to meet it later, often with disastrous results. You need to understand your cost structure before entering into negotiations. If the price you are offered is lower than you think practical, you'd better dig into the details to make sure the product meets specification.

In these hard economic times, it's more important than ever to get to "no," if that's really the answer. If your supplier can no longer meet your required cost, it's possible that they will seek to reduce cost without informing you. Now's a good time to reach out to them and see what you can do together to keep your supply of product stable and in specification.

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