Negotiations with suppliers


Negotiations with suppliers

The mark of a Chinese sourced product is the combination of cost advantage and appreciable quality standards. But to make the most of a sourcing opportunity, you need to maintain a solid relationship with suppliers. Remember that Chinese business culture is different and that Chinese suppliers are integral to the success of your business. You will need to design a separate business strategy in order to conduct business and maximize you earning potential.

What else can I do to minimize product quality problems? How can I overcome the cultural and communication barrier? What is the most important thing to consider before creating a relationship with a supplier? There are several common questions asked by those breaking into the import/export business. Even western venture capitalists have asked some of these same questions. We’ve got some of the answers right here.

When things go wrong

Oftentimes Chinese suppliers are said to produce superior quality product in the early stages of production, and then deliver shoddy defective product as the end result, refusing to take responsibility for the whatever went wrong along the product’s journey to successful completion.

Should this happen to you, remember that part of your strategy includes maintaining the relationship. Keep the lines of communication open and clear so that you can negotiate the defective pieces. During the negotiations, you may be told that the previously agreed upon cost of making replacement product was too low. Don’t make a big deal about it, just move on to other points, but stand your ground. Eventually your terms for replacing the faulty product will be met. On this do over, you may want to make sure that your product is to your specifications and quality standards by sending your production engineer to inspect the manufacturing processes and procedures.

Structuring the relationship

When fostering a budding healthy relationship with your supplier and trying to avoid any further problems, you will need to stick to a structured pattern of terms and conditions. Consistency is key. You will need to be aware of the following:

  1.  Be sure that the supplier is competent and capable of matching not only your business style but also your production level and your clients’ pattern of demands made from diversified profiles.
  2. Create and maintain a realistic quality control (QC) plan to avoid product quality issues.
  3. Issue payment through a letter of credit via bank wiring with predetermined terms and conditions.
  4. Only issue payments when the quality of the product is to your satisfaction.
  5. It is a good idea to have an OEM contract in place just in case the supplier doesn’t want to abide by the preset terms.

Tactful treatment

There are other precautions to take that can safeguard your position in the trade other than learning how to negotiate with suppliers. Think rationally and act practically. Consider the following:

  1. Have a back up plan. Don’t leave the success of your business at the mercy of your supplier. Your supplier will most likely want your future business, but don’t neglect the relationship with your Australian vendor, for example, who may prove to better serve your business for the sake of an unreliable Chinese supplier.
  2. Short to moderate-term commitments. This helps to better take care of the costs incurred with outsourcing.
  3. Provide your own management sources to monitor the quality of your product.
  4. Have a contingency fund for any emergencies, like rework in Australia or unexpected air freight costs.

Maintaining and creating a successful relationship with those in your supply chain begins with respect and helps your business to run smoother.