Five years ago, my wife and I purchased a refrigerator that was made by a name brand domestic manufacturer. This company’s reputation for quality was stellar; we’d had good experience with their products before, and were confident that this new appliance would last for years without problems.
This time it was different. After a few years, the stop pin that kept the right door from opening past 90 degrees broke. The plastic ice maker release lever snapped off. The freezer fan started howling.
What happened? I’ve read that this manufacturer has demanded that their suppliers decrease their costs by a set percentage on an annual basis, or risk losing the business. Since prices can’t be lowered past a certain point without sacrificing quality, it’s not hard to see what happened: their suppliers compromised the quality of the raw materials. As a result, the finished product started breaking down not long after the warranty period expired.
I often tell new customers that we don’t “scrape the bottom of the barrel” when it comes to sourcing their product. This doesn’t mean that we don’t do our best to meet our customer’s target prices; we know they’re approaching us to take advantage of China’s average labor rate of $1.63 an hour so they can successfully compete in a tough market place. What it does mean is that we don’t try to find a shady manufacturer that will make fantastic promises they can’t keep. “If it sounds too good to be true, it probably is,” applies in every country.
Any one can quote a low price. The question is, can they deliver quality product on time at a competitive rate?
It’s not uncommon for a Chinese manufacturer to quote a low ball price just to get the order.
Once they get it, however, the wheels start coming off. Maybe the first sample takes too long to produce. Or it never comes at all. There are delays in production. Maybe the factory comes back and asks “for a little price increase.” Or the parts come in not looking exactly like they should.
The answer is to buy quality product from reliable manufacturers at their best prices, which is our mission.
Scraping the bottom of the barrel is risky business.
Remember that refrigerator I told you about? I’ll think twice before making a purchase from that company’s products again. I bet you would too.
Update on the Currency Bill
In last month’s newsletter, I reported how the U.S. House of Representatives had passed a bill in September that would penalize countries who were found to be “currency manipulators” with higher duty rates. The unspoken target of this bill was obviously China.
As of today, nothing has happened. I suspect that the bill might not get voted on in the Senate until our newly elected leaders are seated in January. We’ll keep you updated in future issues of this newsletter.
The Chinese New Year Holiday
Chinese manufacturing companies will shut down from the week of January 25 through February 15 for their Chinese New Year holiday. This means that the month of February is lost for making shipments. Allowing for a production time of 60 days, any orders that need to ship out before
the holiday begins in January should be placed by the week of November 15, at the very latest.
Please keep this in mind when planning your inventory needs.
The Exchange Rate
Yuan to the dollar, as of today: 6.62 to 1
Rate when the Yuan was depegged from the dollar on June 19 of this year: 6.82 to 1
Change: .20 (2.9%)
Recently, a recording artist named Steven Curtis Chapman put out a song named Cinderella. Written in the context of a father–daughter relationship, Cinderella beautifully captures the short time we have with our kids, and how we should treasure each moment. If you have daughters (I have three of my own, in addition to my son), or if you are one, this song will touch your heart.
You can listen to Cinderella at Steven Curtis Chapman’s website for free at:
Since 1991, Global Trade Specialists, Inc. has helped companies of all sizes get their products made in China from manufacturers of quality products. We are an American company who works with three trading groups in China with immediate access to thousands of manufacturing companies. We source most products made from metal, plastic, wood, stone, glass or textiles; from prototype to production. Many of our customers are first time importers; we walk you through the entire process.
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