Made in China

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Kristen Le Mesurier | January 18, 2008 – 0:25PM

Journalist Kristen Le Mesurier recently visited Shanghai to study supply chains. She writes exclusively for Mysmallbusiness on how SMEs can recognise and avoid the pitfalls when dealing with the world’s largest manufacturer. Just about everyone has heard a horror story about importing goods from China.Between June and September last year, three of the world’s largest toy manufacturers, including Mattel and Fisher-Price, were forced to recall more than 20 million toys worldwide because the toys’ paint was found to contain lead.

While these high-profile incidents are unlikely to stop the thousands of business owners looking to shift manufacturing offshore, they should serve as a clear warning: nothing short of an intricate strategy is needed to make manufacturing in China a success.

The experts warn that challenges arise at every stage in the sourcing process. Reputable manufacturers are hard to find. Some factories promise more than they can deliver, some ignore the order specifications altogether, and others simply pocket the cash without producing a product.

Trading companies are known to masquerade as manufacturers; product regulations are often misinterpreted or not followed; quality needs to be monitored during the production process and tested before the goods are shipped; contracts with dispute resolution clauses need to be negotiated; and delays are common at any stage in the process.

On top of all of this, when things go wrong there are few roads to recourse. Once container loads of goods arrive in Australia it becomes too expensive to send them back. The alternative, pursuing Chinese manufacturers through the courts, is time consuming, expensive, and hit and miss.

The bottom line, according to the experts, is that all of these variables must be controlled. Chinese manufacturers must be micromanaged.

Yet here is the frightening reality: few business owners follow any kind of strategy when outsourcing to China.

Lisa Goodhand, trade consultant and director of AJL Global, says the cost savings give business owners tunnel vision.