Production In China For SMEs

International Manufacturing Contract lawyers

Nothing earth shattering here, but nice, really brief, and pretty accurate analysis on what it takes to set up production in China. And anyway, I feel I should run something good on my hometown (Seattle) newspaper.

The “article” is actually a Q & A with Susan Schreter who writes a column entitled “Inside Entrepreneurship. This one deals with “setting up production in China” and the question is as follows:

Q: I’ve designed a novelty landscaping product that serves multiple functions. It wouldn’t surprise me if it becomes a $200 million company. What should I know about finding production sources in China?

Ms. Schreter calls in Fred Crosetto, who warns that “the American style of developing cordial, win-win relationships with business partners is not widespread in China” and advises being wary of Chinese companies that “seek every opportunity to change terms at will.” Crosetto correctly notes that “the most vulnerable American marketers have too much good will, too little understanding of China and too little patience.”

Crosetto recommends the following:

1. On-site and constant oversight of production. Check.

2. Good relationship with good partner. Check

3. Make no assumptions. “Americans cannot let their Chinese producers make any assumptions or production decisions, no matter how small. What may be obvious or rational to Americans may not be to Chinese producers.” Check.

4. Be realistic. Protect against your product getting “knocked off.” Check.

5. Be careful of the small order. Chinese companies favor consistent, large-order business. Check.

He then suggests producing “prototypes and first product samples in the U.S.” and then when ready to buy from China, “to keep initial order sizes down to make sure you don’t tie up too much cash in inventory that may move slower than you project.”

His final advice is to ask questions and seek out advisers with long-standing experience producing  in overseas markets.

I would add to that foreign companies should also make sure they have a good manufacturing contract with their Chinese supplier and that their IP protections are in good order before going into China.

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