Happy Chinese New Year! The year of the Ox officially began on January 26th and this year promises to be a challenge for everyone. The Ox is one of 12 animals that represent the Chinese Lunar Calendar. The Ox symbolizes prosperity, strength and ambition.
As the New Year has begun it is my belief that adopting the attributes of the Ox is necessary to deal with this recession that is causing problems for the entire world. The common consensus is that buyers all over are being very cautious. They must continue to buy goods, but are taking a more detailed and methodical approach.
Below is a list of tips that can with your negotiations with your new or existing Chinese suppliers. These tips should be used in conjunction with good Project Management, QC, and Third Party Inspection techniques.
1. Push for price discounts from your current suppliers. For example, steel prices have dropped by 20% from Sept 08 to Jan 09. There is talk that some raw material prices will start coming back up in February 09, but until that starts happening keep asking for discounts.
2. Because of the huge growth many Chinese factories have seen in recent times, most do not know how to react to a recession. They have become too heavy and complacent. They now face a big problem and some struggling. They have become more attentive to customer needs than just a few short years ago. Ask them to reduce their Minimum Order Quantities (MOQs) to help you deal with slower inventory turns.
3. Make sure your suppliers understand the current economic situation and ask them to focus on increasing efficiency and productivity. Help them by sharing your manufacturing knowledge.
4. Try to negotiate payment terms that are better for you. Maybe you can reduce or eliminate the deposit or increase Net 30 to Net 45. It is important to do this now because many factories will probably be asking to change the payment terms more in their favor because money is not being lent easily right now. So if you beat them to the punch, you have a better position to negotiate from. Also ask yourself why they want to change their terms and is this a signal that they are having financial issues.
5. Visit your suppliers, do inspections, check out their production line and ask a lot of questions to confirm their financial strength is good. This will give you an idea of how their overall business is going. Ask simple, small talk questions to middle managers and below who you think will answer you honestly. Asking things like how is overtime work been compared to last year, have you had a lot of containers ship this week, etc are good ways to get a true feel of what is happening at the factory
6. Using less expensive raw material is one way for a factory to save money. Make sure they dont change materials on you unless you test and approve the new material
7. Negotiate the best prices you can, but do not do it at the expense of the factory because you think they are desperate. If they agree to ridiculously low prices, they are putting their whole business at risk and your supply chain that you have worked hard to get right. Take a partnership attitude and work together.
8. Make sure your suppliers know and understand the status of your market. If they understand your situation, they will feel more relaxed about the slower/smaller orders and will be more responsive to your needs when you ask for help.
Take this opportunity to use the Ox as your motivation to face this challenging 2009 with a positive attitude. With proper Project Management, Third Party Inspection, and QC at your Chinese suppliers, your company will strive and stake market share from your competitors.
Sincerely,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com
As the New Year has begun it is my belief that adopting the attributes of the Ox is necessary to deal with this recession that is causing problems for the entire world. The common consensus is that buyers all over are being very cautious. They must continue to buy goods, but are taking a more detailed and methodical approach.
Below is a list of tips that can with your negotiations with your new or existing Chinese suppliers. These tips should be used in conjunction with good Project Management, QC, and Third Party Inspection techniques.
1. Push for price discounts from your current suppliers. For example, steel prices have dropped by 20% from Sept 08 to Jan 09. There is talk that some raw material prices will start coming back up in February 09, but until that starts happening keep asking for discounts.
2. Because of the huge growth many Chinese factories have seen in recent times, most do not know how to react to a recession. They have become too heavy and complacent. They now face a big problem and some struggling. They have become more attentive to customer needs than just a few short years ago. Ask them to reduce their Minimum Order Quantities (MOQs) to help you deal with slower inventory turns.
3. Make sure your suppliers understand the current economic situation and ask them to focus on increasing efficiency and productivity. Help them by sharing your manufacturing knowledge.
4. Try to negotiate payment terms that are better for you. Maybe you can reduce or eliminate the deposit or increase Net 30 to Net 45. It is important to do this now because many factories will probably be asking to change the payment terms more in their favor because money is not being lent easily right now. So if you beat them to the punch, you have a better position to negotiate from. Also ask yourself why they want to change their terms and is this a signal that they are having financial issues.
5. Visit your suppliers, do inspections, check out their production line and ask a lot of questions to confirm their financial strength is good. This will give you an idea of how their overall business is going. Ask simple, small talk questions to middle managers and below who you think will answer you honestly. Asking things like how is overtime work been compared to last year, have you had a lot of containers ship this week, etc are good ways to get a true feel of what is happening at the factory
6. Using less expensive raw material is one way for a factory to save money. Make sure they dont change materials on you unless you test and approve the new material
7. Negotiate the best prices you can, but do not do it at the expense of the factory because you think they are desperate. If they agree to ridiculously low prices, they are putting their whole business at risk and your supply chain that you have worked hard to get right. Take a partnership attitude and work together.
8. Make sure your suppliers know and understand the status of your market. If they understand your situation, they will feel more relaxed about the slower/smaller orders and will be more responsive to your needs when you ask for help.
Take this opportunity to use the Ox as your motivation to face this challenging 2009 with a positive attitude. With proper Project Management, Third Party Inspection, and QC at your Chinese suppliers, your company will strive and stake market share from your competitors.
Sincerely,
Greg Schultheis President AMROSIA Group Limited info@amrosia.com www.amrosia.com
About the Author:
Gregory Schultheis has lived and worked in China for more than 6 years. He is American born and living in China full time has allowed him to learn Chinese. He has consulted for big and small companies across the globe. To get a free consultation on Project Management and Third Party Inspection in China email us at info@amrosia.com
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