Seven China Manufacturing Red Flags

manufacturing red flags

Interesting and helpful post by Jacob Yount, entitled, Be Aware of these Red Flags in China Manufacturing. The post lists out and explains the following seven red flags that should alert you to the potential for problems down the road:

1.  Unbelievably good pricing. If a manufacturer is quoting you prices considerably lower than other potential suppliers, you have “found a supplier who has misunderstood the inquiry or who doesn’t know how to quote.”

2.  Quick agreement to tight delivery time.  See number 5 below.

3.  “We’ve never done this before.” Yount rightly describes this as “a typical answer in China whether in manufacturing or if you’re in a restaurant ordering a dish without heavy garlic.” This is really another way of warning you to watch out.

4. “It’s difficult. ” Yount describes “It’s difficult” as worse than “we’ve never done this before” as it usually starts “after the sampling is underway or worse, after mass production commences” and he remind that “the Chinese way of breaking bad news isn’t to directly tell you but it’s to give foggy hints and hope you proactively fill in the blank.”

5. No questions asked and no arguing. According to Yount, a supplier who does not have questions is usually “a supplier who is not thinking about the project. This leads to incorrect quotes and a lot of invested time going down the wrong path.” I really like this one because my firm’s China lawyers are always saying the same thing about Chinese companies that sign whatever China Manufacturing Agreement we give them. Our concern when that happens is that the Chinese company is either not very savvy or simply does not care much about violating agreements. We like Chinese companies that come back to us with thoughtful proposed changes to the agreements we send them.

6. Keeps ignoring a specific request. “If you keep asking the supplier to confirm a specific request and they are confirming and commenting on everything but that specific request, that is not a good sign. They see what you are asking, but they either do not understand it or they understand and cannot do it. A non-confirmation is not a confirmation.”

7. Updates are few and far between. Usually this means “there is some bad news they are saving up to give you at the end.”

Any other ones?

14 responses to “Seven China Manufacturing Red Flags”

  1. I see more and more Chinese suppliers with a very bad attitude. They show their customers “we don’t care about your orders, you are small and we don’t make much money off you”. They are completely rigid and reject any suggestion from the customer. Very unpleasant.

    • Some of these problems are structural issues. I think more companies in China are facing difficultly maintaining systems vs staff turnover, changes in business partners, or issues in their supply chains.
      So what you may see as a bad attitude, is really just them not tell you everything that’s happening.
      I think the only answer that really works in China is having people you can trust on the ground.
      Even though China may look like it has scale, it’s still a developing country in the sense that they don’t have the depth history in dealing with the modern industry complex.

      • “I think the only answer that really works in China is having people you can trust on the ground.”
        That cannot be overstated in my opinion.
        You can have all the agreements, specifications, data sheets, and any other relevant requirements in the world, but if you don’t have someone – a damn good someone – on the ground to enforce (an art in itself), (re)negotiate, and (re)monitor, then it can be very difficult.
        Besides having real knowledge about your product and who can garner respect, this person should also be able to understand (and clearly explain to you) the underlying cultural nuances and regional differences tugging at each situation.
        Part diplomat, part tiger, and part Shaman.
        The time and money spent to find the right person can pay off many times over.
        We provide equipment for GM in China and use a combination of US and China supplied material, so I have learned these lessons the hard way.
        I’m new to this blog – great source of information.

  2. Yount is dead right. I see it from both sides having sourced here before becoming a manufacturer myself. Competition here is intense and the price of going broke is high, like jail or living as a fugitive. The price of screwing a few foreigners is low. Read “The China Price” by Alexandra Harney for more insights. In essence, you get what you pay for. How surprising is that?

  3. Spot on, as manufacturing continues its die off in China one would think suppliers would up their game to become more customer service oriented, sadly this is not the case. More scams, more substandard product and a basket full of excuses rule the day.

    • Necessary controlled shake out, not die off. China is not going away as the world’s manufacturer. The infrastructure life cycle of China can’t yet be seen as infantile, as opposed to the degradation that can be seen in the USA. Think rust belt, 35W collapse, Detroit and now rail capacity. (Who is the buyer for all that LPG?) Median age of the manufacturing employee is at least 8 years younger then the former manufacturing juggernaut. China has stockpiled corn for at least three seasons and has not purchased US corn in over a year. It generated the demand of the last economic boom on TWO CONTINENTS in the last ten years. Since when is what is happening “here and now” the safest place to operate from in China or anywhere else?

      • sorry, necessary controlled shake out? Do you just go with the official BS that the party spews to the western media? They aren’t engineering any slow down they are just claiming it …that’s a fundamental element of China’s problem. Lies. Seems you are in the business of company formation and so have a vested interest in the “no problem here” stance. Low demand in the West from the recession created it and their government stimulus package aggravated it. Billions poured into the stock market and real estate…two big no nos. Huge debt from projects left unfinished because they made off with the money to the USA or any other location. Huge debt swept under the rug… the dog is dragging them on the leash mate. China is going away as the factory of the world, right into SE Asia, back to the USA etc we are decoupling from them as we speak and when China goes down (and it will) we will largely be isolated from that. I have worked in the manufacturing sector here for 8 years…the die off started in 09…was hidden from view…head on down to Dongguan and Shenzhen for a look see. I’ve been living in the mainland 20 years and this place is heading down the wagon rut that Japan laid out on their triumphant rise…history rhymes….and shit changes.

        • Question
          1) Yes, I believe the air of unprofitable SOE’s are being let out. My fear is not knowing how big that air bag really is. I have been inside the empty buildings, and a couple of “headquarters.”
          2) You should pay attention to the BS, even if only for the fun factor of the mystery.
          1) I agree that there are, inherently, many unsurmountable problems. My fear is fiduciary duty when I don’t know what they are exactly, or the size of their subsequent ripples, waves or tsunamis.
          I agree that a majority of the large MNC manufacturing FDI is long over. But really? SE Asia and the US etc have capacity to serve or replace the scale of the world/China market. True that the developed nation consumer wants/is allowed less. They are the minority.
          You are right sir. The triumphant rise is over, history repeats and the west is just beginning to eat bitterness. Have no fear. Because of education, China will not be allowed a win of the game in our lifetime… a draw maybe?

          • a giant bag of air that will blow the hair back of this nation…severely polluted as well.
            paying attention to the BS is how one spots lies, don’t get taken in by them….
            when all the waves in the zen pool are alike ordinary people get bogged down.
            The migration out of China started back in 09′ that’s what led them to claim they were engineering a shift to a consumption based economy….which isn’t happening due to a cratering of the economy and a “crack down” on corruption plus obnoxiously high tariffs on western goods that the Chinese want to buy. Consumption is sparked by demand by the consumer, not by draconian measures to take down Western companies’ market share….smacks of nationalizing and protectionism…which has always been the problem here.
            The west has been eating bitter for 6 years now…they’ve almost finished. China on the other hand has yet to pour the glass of water to wash down the pill….a draw? not likely.

Leave a Reply

Your email address will not be published. Required fields are marked *