Firstly, I would just like to welcome you to the new Sourcing Allies website and hope that you will frequently return to find a fresh perspective on business in China (or a frustratingly well known perspective depending your experience with business in China).
A short introduction of myself, my name is Chris Schell and I am a Minnesota native that has been living, working, and striving to appreciate the difference in culture in China for more than two years with Sourcing Allies in our Ningbo, Zhejiang office.
My goal with this blog is to continually provide an informative perspective from a laowai that is fully immersed in the culture of China and translate the steps and understanding that is required to provide my customers with cost savings that Asia can provide.
I tell you that I would like you to produce a product (that you have the capability to make) and we agree to the technical aspects, cost, and payment terms. You make it and I pay you and receive the agreed upon product to sell to my customers. Both you and I have the same basic principal of trust that makes this possible. Simple as that right?
Anyone that has worked in China or other low-cost countries is most likely scoffing or asking the question that I heard every week for my first 6 months working in China: “First day in China?”
Often times (read 99% of the time) while sourcing from China, things don’t go as planned for either the buyer or supplier and this experience from both parties leads to a complete lack of confidence or trust in the other.
From the Western buyers perspective.
What don’t you get? Why is everything always late? How come the price increases every time I ask for an updated quote? I just don’t understand why this is so difficult. Words I have often murmured head-in-hands after receiving an update from our supplier that I know our customer is not going to like.
In the West, a solid business relationship can be started and sustained with a simple handshake and an agreement that the two sides will fulfill the assumed necessities that it takes for both sides to be satisfied. Our word is our bond and a man is only worth the weight that his word carries.
From the perspective of your supplier in Asia.
I understand your technical aspects, but not everything that is feasible in the perfect world of 3D design programs is applicable in reality. It’s late because I don’t make the metal and plastic in-house, I also depend on outside suppliers to provide me with raw materials. When you change the technical aspects of your product it also changes my tooling and production time and I cannot eat the cost of every change just to keep your business at my factory.
Businessmen in every country now understand the benefits of producing their products in Asia and there is no shortage of customers. So even though a customer has placed a PO at a supplier and they have agreed to the terms of the product, it is always a possibility that a supplier will just wipe their hands of your business, even at the expense of their reputation within your sphere, if they have deemed that they can no longer produce your product at a reasonable profit margin. But everyday there is a new customer waiting with a request for quote and a promise of their “next PO” will be for a million pieces.
In both cases, there are legitimate questions and cause for concern, and if not properly managed this can easily lead to an ugly and expensive end of a relationship between Western Customer and Chinese Supplier that once seemed so promising.
In this insightful article by David De Cremer, “Understanding Trust, In China and the West” for the Harvard Business Review, he gives us an interesting perspective on how trust is built differently in China and the West. But I would like to simplify it to terms useful to my everyday life in China.
The West: I give you my trust first because I believe that we have a common goal, but if you break my trust it is gone. Forever.
China: You first give me your business and fulfill your promises, then I give you my trust. Forever.
This difficult terrain is not easy to traverse especially when the life of your business depends on it, having a mediator that understands the complexity of trust in China and how it applies to our understanding of how business should be done is not only value adding, but essential.