Ok, so I really sound like I am China bashing but no. I want people to know what it is really like living here. And besides, I’m sure that my parents get a kick out of it anyway.
So I posted earlier today about a certain level of competence. A level of smartness to get things done. I just was reminded of this a few minutes ago.
Case in point: I had three widgets that needed to have a number stamped on them. So, I told the boss of the number stamping people to get to it. He himmed and hawwed because he was off in 15 minutes. Jesus H. Christ, really. He tried to get me to let him do it tomorrow but I needed it done tonight. He reluctantly started moving.
He grabbed the three widgets and went to the number machine. He tested it on a different widget. Good. But what he failed to realize is that the actual widget that I needed the numbers on was a different material, so his test was moot. He knows this. He has to. He deals with this BS everyday. But why he didn’t grab a test widget with the same material, I probably will never know.
Ok fine. He starts going at it and the first one is ok. The second one, well, he forgets to change the number from a “1″ to a “2.” Then he changes it and stamps it again. So.. now there is a 2 ontop of a 1. Awesome. If that crap didn’t happen all the time I might of not even wrote this post. But really this type of mistake happens so often that it can not be something that is just forgotten. How can you forget something you do or are involved with everyday.
The third was bunk. Total rubbish. The machine melted the widget and didn’t leave a number. “Oh well” he says, “it’s the material, the material is not good. It’s bad.” Oh sorry mister number boss guy. Next time we buy millions of dollars of material to make widgets, that our customers like and are happy with, I will most for sure take into consideration the fact that the little number machine doesn’t work very well. Instead of you fixing the machine, the factory will tailor the entire manufacturing process around your tiny ass little matter you got going on, possibly costing millions of dollars.
“Wow, that number really doesn’t look good,” To which he replies, “没办法.” (There is nothing that can be done)
Jesus. Quality problems. And you wonder why McDonald’s drinking glasses had lead. Or why some product made in China broke or sucks. Because there are hundreds of millions of workers just like this guy that really doesn’t give a rats ass. The ONLY thing he cares about is that pay check at the end of the month.
I apologize for the language, but you know.. It’s par for the course.
I found an interesting article today while I was trying to find the end of the internet. It’s about headphones, earbuds, and manufacturing.
It relates to a few things in China. Skullcandy is making a killing. Yes they are. They are slaying it. Did you ever wonder how they do it? It’s easy, in fact we could do it next week if we had the start up capital. I may make it sound easy, it’s not, but with the cash to start, things get easier.
When you move to China you gain a new perspective on things. Most of the time it has something to do with manufacturing or products. Things that you would never think of. Like Skullcandy, one of the biggest headphone companies. You ever wonder how a new headphone comes about. Easy, they roll to China, go to a bunch of factories, pick the new designs they like, throw a logo on it and done. Yes, I am over simplfiing it. But most of the time I bet this is what happens. To R&D a new headphone or eletronics costs too much. So let the factory come up with designs, pay for the right to use them for 5 years and your done. I believe that the higher end might be designed by Skullcandy themselves. You get big enough, have enough money you can start to throw some at your own designs. But hey, I might be wrong.
This happens in a whole lot of industries. Skateboards, snowboards, phones, etc. Lot’s of factories have to come up with OEM designs. That’s what Western customers want. They don’t want to have to design the product, they want to roll in, pick something and then go to foot massage. Can’t blame them can we?
Check this. You have 10,000$ you want to burn. You contact a trading company or you hommie in China, or a sourcing agent. They find you factories and designs for headphones or whatever product you want. You design a logo, pick a design, send the artwork and 3000$. 30% down. Depends on the contracts. Two months later you have your product. You have 2,000 headphones in 5 colors. 10,000 headphones total. You bought them for a dollar. You mark them up to 19.99$. Your still a two man show or something small. You built your own website, marketing, and Facebook page.
All you have to sell is 500 of them to break even.
This it the hard part.
China can make you anything, but China can’t help you sell it.
You can read the article that spurred this little gem HERE.
I was asked a question today. It involves something I had written in Feb. You can read the initial post here.
First I want to say, no, I wasn’t the one this actually happened to. It was from a blog that I read called Silk Road International. Silk Road International (SRI) is a U.S.-owned and managed international procurement agency based in China. They basically help people who want to make things in China. They find them the right factories, make sure everything goes well, yada, yada.
The question that was asked by one of my thousands of faithful readers was this:
I read on your blog where you helped a factory manufacture a hat or something in a new manner, which was different than the way they normally do things.
It sounded like you had ‘shown them the light’ and everything had worked out, I am assuming.
BUT in my experience, if you ask a Chinese factory to make something differently than how they normally would, while they MAY be able to do it, they then say that it will cost more, or that it will produce more defects which lead them to say they need to raise the price of the item…blah blah…. and some other BS.
So I was wondering if you encounter this quite often, like every chance they get, they will try to raise the price.
Its just quote frustrating to me, and I need to learn how to negotiate better with them. Any insight?
To answer this, first, I wasn’t the one who manufactured the hat. No worries because I can still answer this a couple of different way.
Insight. Yes. The first lesson you learn is this:
The white man lesson. Which boils down to a few things. One: The white guy has the money. Two: From an Asian’s perspective It’s ok to swindle that money out of said white man. Three: Business.
Ok before I get bombarded with emails about this let me explain.
One: China has only been really involved with the global economy for the last 30 yrs. Shenzhen this year is celebrating their 30th anniversary. Shenzhen is massive, I mean massive. So many factories, apartments, etc. Just thirty years ago there was nothing. I mean nothing but mostly farms. So the Chinese didn’t really have money till now. So the white man, westerners that came to China for the cheap labor and places to manufacture had money. Hell even a teacher here that teaches English make more than 6 times the minimum wage. So the white man (foreigner has money).
Two: It’s ok to take that money. Let me explain this the best I can with what I understand. No I am not an East Asian Culture Major nor have I spent thirty years here, but I’ve read a good amount on China and this topic. I understand it as this. And it also comes from “The Art of War” by Sun Tzu. You can read about it here. If you are a dumb person, I can then take your money by what means I can. In the Western world I may be called a cheater but in Asia I would be a smart businessmen. So, for the dumb foreigner that rolls in to try to make money and China then gets shafted, well, you’ve been Shanghai’d son. I’ve read stories about people coming to invest in a business, actually see an office, people working, etc, and then leave, send a bunch of money and bam, not hear anything back. Because it was all a scam. All actors hired to work for a day in an office space. Pays to be smart I guess.
Three: Good business. The yuan is rising, labor is rising, everything is rising. The factories have money now. They can afford to hold out for a better price. They have more power then ever.
So how does all this relate to the question. Well, since most likely the person asking the question is a white guy, you have money, control the money or something like that. A factory is going to try to squeeze as much as they can out of you with whatever tactic they can. You change a process or the way they do something. It may or may not actually matter but, it give the factory a reason to ask for more money. You can A: stand your ground and tell them that you still have a specific NG amount and it’s not your problem if they do it a different way. B: You an give and give them more money. C: You can meet them half way. Give them face by giving a little. They want power and money, you want good products. Raise the NG rate. If there is a no good rate of say 2-3%, then maybe raise it a bit to allot for the change in processes. It would depend of what you can deal with. But giving them more money. I don’t see how that would help or compensate for the new process. But raising the NG rate would probably soften the factories fear about you rejecting a bunch of products because they just started a new way of doing something. I would for sure QC in the beginning of the production cycle to see what the NG rate is. Just to get an overall picture. If you need to make a million things and out of 10,000 there are 100 bad ones, your looking at a estimated NG rate of 1%. That’s not bad. Well, really it depends on the industry and what not. If the change in process gets you a rate of 2%, but saves you time and money to offset burning twice as much bad product, then hey, that’s awesome. Just have to ease the factories fears. They don’t want to lose money by you rejecting product. You don’t want to pay them more money up front. Raise the NG rate to something realistic, come to an agreement and then QC. Or something like that.
The second part of the question or implied part. Factories are having to raise costs. Labor is going up, materials are going up, the yuan is raising. Foxconn is going to almost double the wage it pays. That’s going to have to for sure come from somewhere. Mainly the clients. Apple, Sony, etc. There are a million reasons that a factory would want to raise it’s prices. Millions. Hell, it got hotter, I have to use ac, how to I find money to run it, well, the next customer get a bump in price of 3 cents to offset my air usage. You think that’s funny. Ha, I hear stories like that. No one here, NO one here wants to pay for anything. At all. Period. They will use any method to get their money back. For example. Factory A gets some material in, accept it and then find out that it had some slight defects. They cannot return it back to the vendor, they have accepted it. So what do they do, well, Factory B need some material. They sell it to factory b and package it really good. Factory B looks at it, good stuff. They accept it but didn’t notice that the material has a slight defect. However they have accepted it. They cannot return it to factory a. They got shafted and or cheated depending on your perspective. Or, factory a was daft, skillful and clever with their tactic. Yes this is a true story. So Factory b has to pawn it off again, or eat the cost. But they won’t eat the cost. The customers at the factory will get a slightly damaged product or a price increase. One way or another factory b will make they money back to offset the cost of that bad material, believe me.
There is no real way to combat this but to know your industry inside and out. Know all the prices for everything. Say you are making a snowboard binding. You have to know the material costs, plastic, eva, mold costs, hardware costs, everything. Know everything. Then when you get a price increase that’s not reasonable. Price increases are going to happen, it’s just a matter of controlling them. You can cite facts that the materials haven’t gone up, etc. You don’t want to embarrass you Chinese counterpart. Hell, maybe they just want to show power over you and raise the cost to see what you will do. Give them some face, some power, but only with what’s acceptable to you bottom line.
I was just thinking about this also. They may give you a higher price because they haven’t worked with you before. They are taking a risk taking you in. You could be over demanding, etc, etc. They want to make sure they you mean business, and so on. Maybe counter this be giving then more money, but wirte the contract so that it’s rear end loaded. They want an extra 5,000, fine, but they get that 5,000 after the products ship. They get the money, and you get peace of mind that they just don’t want an extra 5,000 of easy money out of you. If it’s in the rear end they have to actually produce to get it.
I’m no export in this. I just call it like I see and read it. You have to do your research, know you industry, and negotiate the best you can. Hell, you may even save them money by making the product line move faster. Will they tell you that, no. Just be smart. Read all that you can.
Some good blogs that are most defianently better they this one are:
Do you homework, due diligence, etc. Don’t be dumb. I know that’s easy to say but be ready to walk away, don’t put all your manufacturing in one place, have back up plans, and don’t be naive. Someone before you was, and they probably think you are too.
Hope that answers your question. I’m not an expert. I don’t pretend to be. I just like to make things, design, write, photograph, and eat Oreo cookies when I can.
Ok so here a story about quality here in China.
Factory A gets contacted to make a new product that they have never made, but basically it’s just a small version of what they have been making for years. Their quality is not good. They have been getting better but it’s still not even close to American quality or the top-level factories making the same product. They have fixed certain issues with tolerances and materials. Improving everyday.
New client sends a sample from another factory, factory B. This factory is worse than factory A. So Factory A sees the sample product and now gets it in their head that actually they are a really good manufacturer because they are better than factory B. But what they don’t realize is that they both suck and factory B just sucks more. The sample contains the same issues that factory A has been fixing. Now factory A starts to question why they have been fixing these issues, why they have been working harder, and striving to do better, when factory B doesn’t have to. They also start to think that they are the best manufacturer ever because their product is superior to factory B.
This all leads to a feeling of content and laziness. The quality starts to go down hill because they think that they have finally made it and don’t have to fix any more issues because there are people who are worse off then they are. They don’t feel the need to innovate and now buckle in for a period of doing nothing and coasting along. Quality goes back down, eventually is just as bad or worse as factory B and the cycle starts again. Factory B becomes A and A becomes B.
The above happens too with product samples from the best factories. Products that are the best come into a factory and get torn apart. Why do we have to fix this issue and spend so much time on it if the best company in the world sells products that have the same problems or worse. Well, think of it like this. Ford gets an Audi to check out, they buy it and bring it into their factory. Ford’s engineers take it apart. They start to question why they have been putting so much time into specific aspects of design or manufacturing. Why do we have to make the car quieter inside? The boss (Ford) wants a db level of 70 but the Audi has a measurement of 80. Audi is more expensive than Ford, and supposed to be a better car. Why then are their cars louder and more specifically why do I have to work harder to achieve 70 when the Audi is 80. That’s the thinking.
What the factories and factory workers haven’t the slightest clue about is that, better product attracts better clients, attracts more clients, and more money. The top-level companies can sell defect products or slightly sub par products because they are the leader. They can get away with it. But when you are the underdog. You have to work twice as hard to climb the ladder and know one in China understands that. If they do, then they are the top-level companies. Because that’s what it takes.
I’ve read a lot of news lately about China trying to innovate. It’s going to be really hard. Really hard. The above problem compiled with a thousand others that are culturally specific are going to hinder them. Don’t misunderstand me, America is not the best, China is not the best. But one can hardly argue about the difference in education and it’s relationship with innovation and technology.
But one of the biggest problems is employee attitudes here. Boss in America, make it 70, employee, yes sir. You pay me I work. Boss in China, make it 70, employee, can’t do it, too hard, why, you don’t pay me enough, can’t be done, etc etc etc, argue, argue, yell, yell, dinner drinking, ok I’ll make it 70.