China Law Blog

David Dayton over at the Silk Road Blog has for quite some time been churning out really good posts focused on China sourcing. The only reason I have not put this blog on our blogroll is because it is so difficult to navigate, due in large part (I suspect) to it being part of the company website. A few weeks ago, I told David (with whom my firm has worked on a number of projects) that if he would just make his site easier to navigate I would put it on our blogroll. He assured me he eventually would.

Then I blinked.

I went to the Silk Road Blog today and realized there is simply too much good stuff there to put form over substance, so on it goes.

I just love his post, "Random thoughts from 5 non-stop days in 7 factories in three provinces in China." The post is nine thoughts, with the following three being my favorites:

1. "Factory owner and millionaire, 35 years old, tells me that the road out in front of his factory he built with his own hands when he was in high-school. The local govt required all households to provide unpaid labor for specific lengths of the new road. His father was a teacher and away at school and his mother was over 40 and the only one home. So he had to miss much of one year of high school to fill the State-mandated labor quota. These are the type of people that you’re dealing with in China—you need to know that they can wait you out. They are not intimidated by your pressure. They know they can dump your product in the local markets if you back out. You need to understand that you’re probably not nearly as important to these many factories as you think you are." I have had clients think their Chinese supplier will never let them go and then have to pay a very steep price to learn otherwise.

2. "Except for Beijing, all airports built in China in the last 15 years are exactly the same. Some just have more gates than others. One large room divided by check-in and security counters, (cold) metal and glass, blue, silver/grey and white are the only acceptable colors, rounded-girders or stretched “mountain-tops” roof design. The same crappy shops with over-priced luggage and the choice of Haggendas, noodles, Dove chocolate, Pepsi, local dried fruits/meats and knock-off electronics. 90% of the travelers are Chinese men in dark suits, 8 % are foreign men in jeans and polo shirts, the other 2% are young women, almost no kids. All airport customer service employees are women, departures on the top floor, arrivals on the bottom." Never noticed this, but I am certain more than 2% are young women (even assuming a bias).

3. "Unless specifically contracted otherwise “good enough” is the going rate for production standards in China. Doesn’t matter what you're making. If good enough isn’t, you’d better make sure you spec out exactly what is acceptable." This is absolutely true.

Another excellent post, entitled, "Things That Make China Prices Rise," details a conversation Dayton had with a client unpleasantly surprised by China's pricing:

Just a few days ago I had a client ask me about some (factory direct) prices, saying: “I thought China was supposed to be a great deal?!” Well sure, it can be. But not everything every time is going to be blow-your-socks-off cheap and fast. It often depends on a number of different factors, some you can and some you cannot control.

For example if you’ve got small quantities and lots of SKU’s, as does this client, there really isn’t going to be a great bargain anywhere. One of the keys to “China pricing” is millions of the same widgets, not hundreds of different widgets.

Another key is having a real reason to be here—are you here just because everyone else is? Can you do smaller runs just as cheaply at home without the hassle of overseas production? Unless there is clear bottom line (or other) reasons to be here, you don't have to be here.

A third key is to do your research UP FRONT. Don't make the transition to China and then see if it is cost effective to have done so. Finding and qualifying the best supplier possible will save you TONS of money, problems and headaches later.

David Dayton really knows his stuff and for interesting and highly informative posts on China sourcing, I urge you to check out the Silk Road Blog.