After several years of experience in Quality Control field, I have noticed buyers often commit the same mistakes regarding their importations from China or Asia. Here are tips to help you secure your production in China and Asia
Establish a contract in due form is the first step to secure your production in China or Asia
When contracting with your supplier, you should make sure you have specified the rules of the game before the order start and make sure those rules are understood and agreed. Many suppliers don’t respect them, but whatever you believe in contract power or not, still write a clear contract with your terms and conditions and make it sign by your supplier. Whatever the situation you are in, you will always get more power if needed with a contract signed by your supplier than without.
We see many buyers with few power (and big troubles) simply because they didn’t set the rules at the beginning with their suppliers or because they don’t enforce them.
Many buyers believe a PO is a contract and they are wrong about it. You can make a consolidated PO with a contract but you should not use only a PO as contract.
Quite often, supplier will write a very light PO including only the information to their advantage not to buyers one. Don’t be shy to update those terms and to submit them to your suppliers. Ideally, have a lawyer to review and correct your contract before submission.
Rush order and shipment are always things which add risks to the transaction.
I always suggest you try to increase a bit the time frame between :
I recommend you to tie your payment (and possibly setup some penalties, even you don’t enforce them) with some conditions based on the last inspection date allowed etc.. with your vendor not on shipment date but on “the last date of inspection allowed by you”.
If you are a substantial buyer for your supplier they would probably agree about it.
I recommend you to make them indicate in your contract and PO, the following:
- The date when the procurement start / the date when the procurement is over: quite often the production are delayed because manufacturer will extend their procurement time to try to get better price on bargaining with their sub-supplier for components (so they can increase their profit), which in the end result they have to rush the other step of the manufacturing process and don’t handle those with care.
Tell them (even if you don’t do it) that you would allow yourself to send some inspector to verify at the indicated date that procurement is really over on time via an Initial Product Inspection or an Incoming Material Inspection in China and Asia to verify the components quality. And put some penalties on this if it is not (you will rarely apply them, but still if it is written in contract they will be more careful). By doing this, they will let you know the real timing they need.
- The date when 50% of the production is over, put in your contract you also allowed yourself to send an inspector as a During Production Inspection . Put some penalties on the date…(even you don’t enforce it).
- The last date of inspection possible (the date when after this date, you will apply penalties for not being on time for inspection), which should be when 80%-100% of the goods production are over and indicate some penalties on it if the Pre-Shipment Inspection can not be performed on time.
We have frequent case where the buyer put the terms on the shipment date. However, as suppliers knows we usually need 24hours to send back the report, they will try to push the inspection date as close as possible of the shipment date so the buyer has a very time limited timeframe to take a decision. In a result the buyer is taken between two choices: ship quickly without seeing the report (and even they see it and defects are discovered, they have not a big windows to act: reworking, etc..), or miss the shipment and pay some penalties to freight forwarder.
If you contract based on the “last inspection date“, they can not play with time between inspection date and shipment date.
This is how the big companies (such as supermarket) are doing.
In the end, make sure your written documents (PO, contract, NDA, NC, etc..) are built properly.
I suggest also you don’t show them too much you are in rush order (even if you are), because knowing you are in rush, they have power on you to make you accept some things you would not accept in normal time.
I will add more information to this post later in the month.