What Are the Hidden Risks Importing Products From China? [Podcast ep.31]
What Are the Hidden Risks Importing Products From China? | Ep. 031
Click above to listen, read below for a full transcript
I wanted to share a recent interview I did on another great podcast called The Business of ECommerce. Charles Palleschi, the host of this podcast, asked me some really insightful questions that really drill down into the day to day specifics of Sourcing Products from China.
We covered MANY different topics, including :
- How being on the ground in China creates opportunities
- How having “trusted” third parties is essential
- How to protect your IP in China by registering your trademark
- How and when to negotiate on price with the factory
- How “What you don’t say” could be your biggest problem
- How to build your team in China?
Link to Original Podcast Episode - Business of Ecommerce with Charles Palleschi
Simple. Free. Advice. No Obligations.
Listen to all our podcast episodes here.
Middlemen Outdated, Building Trust with Suppliers is Crucial | Ep. 024
Some Avoidable Costly Mistakes When Sourcing From China | Ep. 021
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- Business Insiders David Hoffmann with Gary Vaynerchuk and other successful leaders on how to respond when employees royally mess up.
In this episode of the business of eCommerce. I talked with David Hoffman about what are the hidden risks importing from China. This is a business of e-commerce, episode one Oh seven
Welcome to the business V commerce, the show that helps eCommerce retailers start and launch and grow their eCommerce business. I’m your host, Charles Palleschi and I meet today with David Hoffman. David is the founder of global TQM, is an expert in Chinese sourcing, supply chain, private label and brand licensing. I asked David on the show today to chat about what are some of the hidden risks importing from China. So, Hey David, how are you doing today? Very good. How are you doing? Good. Awesome to have you on the show. I love the topic of some of the risks importing from China. I think it’s one of the things a lot of people kind of tell folks just to kind of jump into it, but a lot of people don’t talk about the other side, of like, what you can run into and there are a lot of potential risks. So first, where are you? So I’m in Boston Hill and I know we kind of had to get a time-zones lined up. Where are you located?
So I’m located in Hong Kong. I’ve been living out here for about 16 years. I’ve got offices in China, so I spend a lot of my time between Hong Kong and China. So we bought a 12 hour time zone apart.
Okay. And that was, and where are you originally from?
Originally? From South Africa.
Okay. And you moved there for this specifically? Right.
We will be purchasing a whole lot of products from China and I’ve got the top utility to move out to Hong Kong, which at the time seemed like a, I had nothing to lose and everything to gain. And you know, my plan not to come back here for one year and 16 years later just got absorbed by this world in this industry. And here I am.
So that was 16 years ago. You’ve been there and this has been the, what you do is focus?
Yes. So, so we, we do a lot of sourcing quality control in China. You know, I’ve started different businesses and you know, those businesses that all started because I’ve always had this habit and base in China, you know, being able to source products, deal with manufacturers and really get the right quality product. And that’s always been for our own businesses in my own business. So then, you know, from here it’s just kind of accelerated into, you know, helping more and more people on the ground in China. And as such, I haven’t been able to leave.
Yeah. I’ve heard a number of folks that once they start kind of scaling in the sourcing but let’s say there’s two partners, there’ll be like one partner that stays local and then one partner goes out there, you know, X number of times per year and almost like it’s their part, their home away from home sort of thing. I feel like it’s kind of common, yeah. Is that something you recommend? Are there other ways around that or like what are some of the best practices when you want us to do it?
Yeah, it’s a great point. I think why that happens and it’s almost that again, as you get bigger in a business it becomes a necessity. I mean there are different ways to do it, but I think the core of it to me is really it’s about, you know, having the relationship with your suppliers and really being able to, you know, oversee what they do and work closely with them. And I think, you know, what you’ll find while a lot of people end up living out here is just because of that, you know, they need to vent in proximity to suppliers, oversee the details. Cause you know, this whole business is a lot of attention to detail and distance unfortunately creates, you know, a barrier for lots of problems to occur just by being on the ground. We can manage it closely. You are closer to opportunities as well as new opportunities arise.
You can react quicker and faster. So I think it’s, it’s like any business, you know, the closer you are to things the easier they go. And because all the manufacturing is done in China now as you scale up, it does kind of make sense to either be here, I have a partner here or you know, if you, if you can find a liable company to outsource to, it’s an option. But you know, one of the things I always say to people, and I worked with a lot of companies of different sizes is nothing replaces your work and your input into these things. So, no matter what type of resource you’re working with in China, you’re ultimately on your own, that and you know, take control and really lead the project and lead and project manage, you know, your product development.
Yeah. But let’s say you’re a retailer and you have, you know, a family and kids and they go to school and all sorts of things and you just can’t like pick up and move there. Is there something in between some alternative that you kind of see folks successfully doing or is that you really need it like a man on the ground sort of thing?
I think you do need that. You do need a man on the ground, you don’t, you don’t necessarily have to be the one on the ground. I think I mean, I don’t want to speak specifically about outcomes, but as an example, you know, we offer services on the ground in China, but you know, our business model is really such that we help you build the relationship with your supplier. And you know, you know, we don’t believe in, you know, kind of having middlemen in the supply chain process. We believe in, you know, just nurturing those relationships. And, you know, I think having somebody that you can send to the factory to check on things or, you know, even just a, a Western mindset, we’re always to the voice that you can talk to, communicate with, can check samples quicker and faster for you.
You know, it’s very helpful. And I think if you can create a really healthy three way relationship where you know, things are very transparent, you know, absolutely, you can outsource a lot of that work. And I think you can, you know, make the process such that you can still do your checks and balances and you know that if that means you know, more Saul polling and checking, you’re checking more and more samples and not rushing things and just taking time to do it. It absolutely can work and you can send people out to the factory to check it. You can inspect your products before they leave the factory. But I think it’s about patience and not really not a rushing things and assuming things are going to be done right. You know, just checking each step along the way.
What do you say to folks that, cause I know this happens all the time, they start talking to a factory and the factory says, yeah, we have someone here that kind of does that. Someone in house that does that interfacing for you where they’ll send you samples, they’re on ’em WeChat and they’ll send you you know, photos right there over the phone, you know, and they say, you know, with our factory, you don’t need that. What do you say to folks who do that? Is that viable or is that still not the way to go?
No, I, I think firstly I think it’s absolutely okay to communicate and interface with the factory through Weechat to get there, make proposals and all of that. And I encourage that because that’s part of the relationship and also how they conduct themselves is a good kind of litmus test for you to see how they’re going to, you know, deal with you. But I, I think it’s, I mean, I’ve been burned so many times and I know so many people that have, and as long as truly intentional, deliberate, you know, mistakes happen there’s misunderstandings, you know, I say without seeing samples, without checking production before it leaves the factory without getting you know, depending on the product type, getting the the compliance checked independently, there’s crucial. You can’t rely just on your manufacturer to provide that for you. You know, ultimately, ultimately you have to own their responsibility because when there are problems you know, you’re the one facing your customers, your reputation.
It’s your online business or, or even just bricks and mortar retail business. So, no, I think it’s really essential. There’s always two potty chairs or you’re checking out with the trusted party that you know and not because you got to kind of trust people because mistakes happen. I think that’s really, really critical over time. I think as you build a relationship with the manufacturer and you know them well and you’ve met them a couple of times and you’ve had a smooth run off shipments and quality, you know, you can ease up and try any road. I don’t think the relationship in China is, two different relationships anywhere else. It’s you build relationships over time and you know, trust and confidence is something it’s earned over time and you know, that’s when you kind of, you’d kind of feel more relaxed than you do less, but you still need to do some basic checks always. Because even with the best of intentions, mistakes happen and I just think that’s really important.
Yeah, there’s always this dream of everything being completely like hands off and just going to submit an order. It’ll land in the U S it’ll go to some three PL and orders of stock coming in and the magic will happen.
Exactly. And that’s why when I came to Hong Kong, I thought I’d come for one year and move on 16 years later for that exact reason. Yeah, exactly. Exactly. I realize I actually need to build a whole infrastructure around all these things. It doesn’t stop, but you’ve got to own it. Yeah.
So what are some of the hidden things that people aren’t, so these are some of the things that people know, like quality issues, things like that. Are there some more hidden things you need that you wouldn’t necessarily think of? As a new regular?
I think, I think some of the things that I’m kind of facing more and more is I mean of course quality, but I think, you know, what happens a lot of that time is it’s the things you don’t discuss with the supplies that sometimes matter the most because I find people will often press on a price but without clarifying a specification first. So you press on a process supplier might meet the price and then you realize later that, Oh, they took a shortcut or they reduced the quality of material, let’s say to think massage chairs. It’s all kind of always the things that you don’t think about that otherwise it creep up, you know, to catch you. So, you know, like I always kind of say that process is the first thing to negotiate. Like do a holiday round of sampling, first checking, understanding the space from multiple factories first.
And then when you really know what you want and you’ve seen the samples, you know, there’s the time to negotiate on the price because you know, you could get 10 samples from 10 people and they can be substantially different in, in, in words what you expect. I think one of the other things I’m finding a lot more is, you know, we’re having a lot more conversations with people in terms of protecting their trademarks in China. And that’s something I advocate a lot. Because if you register your trademark in China first, you know that, you know, we’ve had cases where supplied and manufactured trademarks that they see do well overseas. Or just, you know, you know, idolize sellers in China, you know, you are interested in themselves and although like a lot of people say, I don’t sell in China, what happens a lot of the time is the Chinese sellers will go and sell it online on Chinese marketplaces, on China, Amazon, China, and it’s lawful because they own the trademark for that market.
So, you know, I’ve been telling people a lot more and more to reach to your trademarks in China just to protect your manufacturing base, irrespective of whether you selling there and then, you know, just, just watching out for those things you don’t know. And having patients, you know, I’m finding people trust, you know, in relationships too quickly because of lack of patients. And I think often it’s just their communication and time that it takes to nurture things. And, you know, don’t expect a perfect song put on the first route. But it’s really the case cause I, you know, I just find manufacturers actually are better at mass production that aren’t making handmade samples. And a lot of the time if it’s very custom, they’re making handmade salt with it aren’t perfect. So I think, you know, understanding those kind nuances and adept him with that patience. You know, some of the hidden things too, to kind of look out for and just think about.
Yeah, I like that concept of registering in China. So even if you’re not selling in China, you’d recommend registering a trademark there.
Absolutely. Without a doubt.
What those little tips, is there a large costume in that or is that something similar to the U S or what’s kind of the process?
It’s a couple of, I mean, there’s lots of companies that do it. We even do it for people. It’s, I want us to help them with that. It’s a couple of hundred dollars in two, $300, depending on how many classes. But it’s one of those things where I’ve had online centers where the factories register the trademark and sell it in China. And you know, it’s quite disturbing but you can’t really do anything about it. And I just say it’s like when you read sort of business, your tech and insurance and certain things you do, I just always say register your trademark in China because you know that there’s a misconception that intellectual property is not manageable in China. It actually is, if you’ve got the Chinese intellectual property, you know that the conflict really comes in and people have got the overseas RP and then I try to enforce it in China it becomes a much more costly, long exercise. And you know, I say for two to $300 a lawyer is going to charge you five to $10,000 to deal with the issues. So for me it’s, it’s, I’m negligible if you’ve got a good brand that you’re building is doing well with it, just registered in China, even if you’ve got international trademarks, it’s just going to shortcut a lot of issues in the long run. And it’s becoming more and more of an issue with the marketplace is going global.
Yeah, that’s a good one. And you don’t hear people saying it that often and it sounds like if you have someone that can help you do it, it’s a relatively cheap and easy process. Right on. [inaudible].
Exactly. And I think that, you know, the obstacles are, you know, you do have to check the, there are Chinese regulations that too many short trademark qualifies for registration in China and you do have to do some of that application in Chinese. But you know, it’s not hard. I mean, we’d do it for people. It takes them within seven days. They got the application in and you know, then can take anywhere for a year to get the registration through. But the key is once the application is in, you are already protected because in China is the first one to register or to apply. So, you know, jeez, no one else can come in later without being contested. So I’m just a huge advocate. You know, anybody I’m dealing with, I’m saying, please do it. Whether it’s with us or someone else, just get it done. And it’s really
Okay. That’s a, that’s a good tip right there. So if you’re listening, it sounds like one of those things you like, you almost just have to do at that point. It’s well worth the small investors.
It sounds like you have to do that and you’ve got to hope you never even need to use it. But it’s, it’s just if you do have to use it as that, it would be, it would have been a no brainer. And I think the way the world’s changing now, like people always tend to me, Oh, what visit, protect my IP in China and stop factories from copying my products. And I go, you know what debt a lot hard, enriching your trademark and your trademarks that your brand, you know, it’s your reputation, it’s everything. You stand forward, your customer service. So would you protect your personal name, right? It’s your integrity. So I set up a base way to protect yourself from Chinese manufacturers or copying is protect your trademark and brand name first. Because you know, people products have cycles. That comment go under the, you know, the next bad comes and you know, that’s a much harder battle to fight. But you know, our reputation is standing there, you know, nobody can copy easily and that’s your brand. So I say it’s the single biggest way to, to simplify things.
Gotcha. Yeah. Good tip though. So changing gears a little, you mentioned about the sampling process. I feel like there’s some confusion around that where I hear a lot of times someone new kind of doing this, someone’s the factory is asking them for cash upfront before the sample or the sample during the PR, like this down paint, like all these different things. What is, what’s like the right path? Like what’s the best practices, how should this work and what should someone expect going into this?
So, I don’t think there’s a golden rule from every single supplier that they should follow. I think it comes down to anything. If you can imagine, if you put yourself in like a lot of people, I said, put yourself in the supplier’s shoes. They’ve probably got hundreds if not thousands of people approaching them all day every day for samples, you know? So when a supplier kind of asked me to pay for a sample, I actually always say no problem because that’s how they’re going to give me the attention. You know, it shows that I’m serious, right? I’m putting skin in the game. If a guy’s asking for samples for free and I want to pay or want to pay later, you know, what was, you did get a hundred or 200, 300 people asking you for things. You go to the guys series and says, well, I’m willing to pay for the sample.
I think you know, over time when you’re dealing with it more and more, they started giving you samples for free because you’re a customer you’re already buying. So I think, you know, upfront you’ve got to give them a little book, a little bit of give and take, paid for the sample, get it. You know, I think it’s reasonable that if the samples, no good or it’s broken or damaged, that they replaced it or substituted. But you know, I generally say the one thing you don’t want to shortcut is sampling. I don’t think you can touch a product without pulling it multiple times. I think if you get a bad salt and pull, it’s par for the course. It’s kind of an investment in what on, I think that the cost of the sample is far less than the pain of ordering the wrong product and not checking it out properly.
And I just, I just see that as he saw him pulling as, as I can invest in product development and R and D and just, you know, quality control. You just have to do it. A lot of manufacturers by the way will say if you place an order, we will refund you the sample cost and they will. But I think just mentally, you know, I just see sampling as a necessary evil. I shouldn’t say evil, a necessary requirement. And it’s, it’s a cost of doing business and it’s a mass cheaper cost of doing business. What is harmful is that we get all our samples sent to our China office and our clients also use our China office because then that just saves a lot of time and Korea costs. So like we say to people, you don’t get jobs sample sent out, offers our team, go through it, check them and do like a scar call with you, hold them up and discuss them because you know, it takes effect you one or two days to send them to a local China office and you know, and they’ll often cover the freight cost, you know, because it’s quite cheap.
So very often the factories will cover their cost and you pay for the sample and then you don’t have to worry about carrying it overseas. You know? And then you kind of get people like us to go through it with you, check them and you know, once you’ve kind of done that filter and you say, okay, if that one’s good and that one’s good, send it. If those aren’t good to send it back to the factory and try to get a refund, you know, or in some cases a factory, like if you’ve got a local office to send the samples to the side cases, a factory, will you get some cases, you’ll get away at the factory, give you a sample because you can always say, well, if you could send it to my China office if it’s no good, I’m going to send it back.
If it’s good, you know, I’ll pay for it within a couple of days and you know, it’s like a 50, 50 chance, I will accept it some way and accept it. So, you know, I find that like whole sampling process we do for our customers is lucky. It’s like incredibly hard for them to save so much time because you know, you get samples, they’re not good if you ship them overseas, you know, that can take a couple of days if not weeks. And then you know, it’s no good. You start the process again and you’ve incurred that cost. So I like to check what was in China on round one and round two and then when you’ve narrowed it down, you know you get the right ones sent through to you. I think it’s, I think it speeds up the whole cycle time and I think overall it pays for itself because you’ve said it all that Korea and all that time you’ve saved. So that’s generally high approach that,
Yeah, I feel like that’s one of the biggest things with the sample time, the sample process where folks are, when they’re getting into it, they kind of just want it to happen and don’t realize the amount of back and forth and time it’s gonna take is a lot longer than I think a lot of people have expectations.
It’s long and it’s important. It’s the details, right? I always say to people that don’t expect a perfect sample because that’s what you’re doing, right? You’re building a brand. You’re that buffer between what the end consumer sees and all the hard work that goes on in the manufacturing process, right? You want to see every detail. You want to see the finish, the quality, the texture, the fields, the performance. You need to see that you know there is what your job is and and, and you know to expect it to be perfect is not realistic. Rather embrace the process and go, well I’m glad I found all the problems because they didn’t produce a lot of it.
That’s, that’s one of the points where right there, that kind of little thing you said to point out, that’s what your job is. I think a lot of people think that’s it’s the factory’s job, but that’s someone else’s job and they don’t realize that ER, your value as the retailer, part of it is that quality is that quality control. So the factory, that’s where the line ends is the factory produces a product, but quality control is the retailer’s job and I think it’s blurry.
Who does a cuss, who does a customer, the consumer comes back to the retailer and I come back to you. You’re going to face them, you’re going to refund him. You’re going to create them. They’re not going to say, who did you buy from? And how did this happen? No one asked. No one had asked those consumer, when you get a kid,
Amazon, they don’t ask
If they end, the factories never say, well you credit your customer, we’ll create it. You don’t worry. It’s very re
Yes. So I think the sample process, that is the biggest thing. People just kind of rush through that and like just what they think somehow it’s not quite right. Like maybe they get the first sample but it is not quite right. And they kind of just say, okay, because they want to be done, but don’t realize there’s gonna be some back and forth. Like how many times, what is kind of a short sample process versus a longer one? Like are there other times if somebody gets one there, perfect, let’s go, let’s do it. Or should you apply for four or five back and forth?
It’s such a good question. I think if you go, if you’ve gone back four or five times, it’s perfectly normal and acceptable. Sometimes it’s more, you know, sometimes we even break it down, you know, it could be generally okay. And we might, so I’m looking at your headphones. Maybe the cable on the cables are uncut, you know, you know what, just send me the cable. I want to see the cables that you, you know, you’d think you’d say could just send me that Bart, send me that piece. And then you’d say, okay fine, I’m happy with all these parts I’ve seen. Now you know, you build it into a spec and it says [inaudible] please confirm you’re going to produce with these parts and we’re going to expect it that the mass production, you know, it’s got oil, all these different parts we’ve approved and signed off and are happy with, you know, that’s what we want to see in mass production. And that’s why you have to have somebody that chicken, that mass production for you who understands the processes has been through it with you because you know those details are hard to pick up unless you’ve been through that journey
And who understands what you’re looking for very specifically because you know, let’s say it’s a clothing product, the feel of the fabric, like the texture, that sort of thing. There’s some very subtle differences there that you can’t get unless you’re physically holding it in your hand, touching it, seeing the way it looks in the light. Like there’s all these little kind of nuances that unless you have someone on the ground that realizes, Hey, I want, yeah, right. Like I want it to look a certain way in the light verse. Not only I wanted to fill smooth, not raffle, whatever that is
100% and even that’s
Like a process. It’s like working with the team, right? It’s like, you know, at the beginning you’ve got to hand hold and nurture that team so much more until it gets to a point where you go, remember how you showed them, fill those fabric, fill those fabrics. That’s a texture I always want. And then they know and they can visit half a dozen factories for you going forward and say, that’s good, that’s not good. And they could of benchmark good at, you know, frame of reference that they could compare to, you know, slowly Stoney, building your team of people that understand what you like and what you need and what you want. Yeah, I like that. What other kind of, what are the gutches do you see new real retail is running into that they start this process and they completely don’t see. And I know like the sampling is one of the big ones, but are there any other ones that retailers, they’re not even, they don’t even know what they don’t know sort of thing.
There’s a list. Delivery dates, I think like they just demand a delivery date and they don’t, you know, packaging, packaging I think is a huge one. Packaging and labeling, I think that attention to detail on that’s so critical. And you know, I see guys take so much time on it, but then they demanded delivery, then they forget that there’s a production schedule. You know, so like, you know, I, I always say like as far as I’m concerned, until you’ve actually signed up all your artwork and packaging, don’t even expect the delivery date because it’s just common sense. The supplier can’t order those materials, right? So if I can’t order those materials, how are they going to finish production? So like I always, you know, he was out, well, last time that I’ve rushed production and get it done next week.
It just doesn’t make sense. Well he would order those materials, get them in, then start production, you know. So I think that people misunderstand the timelines. And, and underestimate, overestimate what effect you can pull off in a short space of time without, without making a mistake or compromising some quality some way and not just quality in the product as quality. It could be quality in the workmanship. You know, Tom stressors make people make mistakes, order raw materials, put dollar on artwork through me. We’ve had loads of times where we’d spec the goods and we go, but you’re using the packaging that the, the, the version one, not version two, you know, and they go, Oh, we made a mistake. We were under pressure. We sent the wrong one to the printer. So there’s a lot of other quality issues that come out of Tom stresses. So I think, you know, really planning those things and doing the property makes a massive difference.
Yeah, I like the idea of understanding that that delivery date you, so you can’t even get that date until the contract is signed. Like they’re not, don’t even expect the factory to try, like don’t even press them on the days because they sold it.
Right. It’s like if everything runs according to clockwork, you know, that’s going to be your production date and people just use it kind of as they bottle, right? That’s there. There’s the yardstick, which, which is important, especially running promotions, both if it’s a first time factory and everything’s new, you haven’t checked a sample before. You haven’t done compliance checks on the product before. You haven’t done packaging and artwork and anything like that. It’s just not realistic. You have to budget that time. It’s, if it’s a repeat order, I think it’s a lot different, you know, then you can say, okay, look, you know, to the exact same repeat order, production run, nothing’s changing or there’s some minor changes. But yeah, and I think you’ve got to budget that extra. And he always says, don’t worry, I’ll get the artwork done in five days. It’s never five days because it’s human nature. You see packaging, you see the design, and then you go, Oh, this is better. That’s better. Change has changed that and that’s fine. You know, you want it to be right. But understand that pushes out the production schedules.
Yeah. I think what people don’t realize is they see an estimated date and they think that’s from like today. But what really happens is that’s from when the factory gets everything they need and then it’s still only an estimate at that point. But so don’t even like, yeah, like you don’t want to base everything on that. It’s just an estimate. It might be the first time they’re producing with this material or in this method, so they, right. So you don’t want to be pushing them that hot on that date because they might hit the age but make the product, you know?
Yeah, exactly. And I think it’s okay to keep them under pressure, but that dope, you know, I’ll say you can’t fool yourself. Right. It’s okay to keep them under pressure, but you have to understand there, I’m going to probably, I’m probably not going to get this in 45 days, it’s probably going to be 60 days. It’s going to ship and as long as you got your own internal time frame, you know it’s okay. You know, keep pressure on the 40 days, the 30 days or it has been committed and when things go wrong, you know, a lot of pressure that doesn’t hurt any targets and milestones never hurt anybody. Right. And getting things that, especially the batteries, but I think don’t, don’t trick yourself into believing that you must have your own internal timeframe and then you’d just, you know, you push production as fast as you can realistically.
Yeah. You’re going to have to add buffers, right? Because even if it’s not the factory, there could be shipping issues that could be issues with customs that, who knows, it just goes like you hear all the time, price is going to held up in customs and they’re in some customs black hole for indeterminate and you can’t even, you can’t even get a date. Customs will never know
Exactly. They do what they want when they want. Don’t understand it. But it’s true. You can’t, they just get stuck in limbo.
Yup. So just ask offers.
Yeah, you’re right. And I think also people don’t realize, you know, the fact she wants to ship the goods and you know, it’s in their interest to produce the goods and ship the goods and get them out. They don’t want to give you a hard time, you know? So when these things do happen, I think you do need to, you know, understand them and work with the suppliers to, to work through and actually build a healthier relationship.
Yup. Yeah. That’s a good point. So yeah, last question, although it’s a big one, but kind of in the interest of time, I want to make sure we get the second is when do you start negotiate? When and how do you negotiate on pricing with the factory? Because like you were saying earlier, I see people do that way too soon in the process on, yeah, they’re basically asking for a sample and a price they want and the factory doesn’t even know what they give you a price on it. That,
And you haven’t even seen a salt, but how can you say it’s too expensive? Cross? Yeah. You see I always negotiate from information is King. That’s how I look at it. Right? Information knowledge is King. So you know, I say you use the fact sheet to educate yourself on the materials you use. Speaking to a couple of factories, right? So do you get in different process? It’s okay to send a factory. Why would somebody else put me a lower price and then this, it looks the same. They will. That will be the first one to tell you about is that this material? Is it the spec? Is it the thickness is a, you know, this finish. Right. And, and that’ll help you educate and that gives you the knowledge you need. Or I’ll give you the ammunition you need down the line. So, you know, I just kind of record and collect the information like, and then I think I start negotiating once I’ve got a whole bunch of samples and I’ve seen what I’m getting for the process quoted and I know what’s gonna work for me more than this.
You know, and I say what works for me in terms of what I’m going to land at, what can I sell it at? And you know, you know, I don’t want to be stupid about it. Prospect, go to him in Austin for Simon. I know it’s not achievable and kill the deal. So once I’ve got their knowledge, I’ll always negotiate from a position of strength and knowledge. You know, I want to be in to say, guys, you know, I’ve checked five products that 100% identical, the space are the same, you know, I need a dollar or $2 office. Right. That’s when it’s attached to the guide shape because you got to be able to back up what you’re saying. Cause the guys that know what they’re doing will see straight to you. They’ll go, no you don’t. There’s no way you got the same product as me, you know, at that price.
So you’ve got to know the details, then you can negotiate, you know, and then you know, and you can also then find ways to cut down the prostate dog. What can you do to lower the price? Right? We need to be at this price point. What’s not going to compromise the quality, you know, rather agree on different packaging or different the, if a different material with say, look, it’s a different material, but we think the performance is the same and you can make the educated choice. So I think understanding the materials costs of those materials and having different products to benchmark, then you start to negotiate.
Yeah, I like that about, you’re almost working with the factory to try to get to a target cost in some of these, right? Where it’s not just give me the cheapest price. It’s not just like you’re beating them up for the cheapest price. You’re more saying, you know, we’re trying to get to, you know, 20, 23, 36 for this unit. And right now they’re coming in a bit higher. How do we, how can we get there? Yeah cause I’ve heard people do that with packaging and things like that where maybe instead of having the factory package it, you can actually just have them come as like have them come in bulk to the U S and then break them apart here or a different [inaudible]
What happens? I say, and I must tell you, a lot of people don’t realize what a big cost difference of packaging makes. You know, I know firsthand, we deal directly with other printers in China and I know if I do a production run of a thousand or 5,000 boxes on a product, my price is so significantly higher than that. We do a production run on 50,000 units. Even. I was surprised. I was blown away. I said wow, how can it be that much of a difference? And it really is. So you know, quantity makes a huge difference. So you know, if it’s smaller quantities rather than make compromises on packaging where you know, you can lower the cost if there’s, if it’s important. Depends on the product and how important the packaging is. And if it’s e-commerce packaging, sometimes less important as long as it passes drop tests. But visually, you know the products purchased in theory before they arrived at the door. But you know, it’s a balancing act. But I do think packaging is one area that costs can really be saved a lot, you know? And then just also understanding spics and materials and products.
Yeah. For people to kind of skip on the packaging and then have this like 50% damage rate and ups is pushing back but they’re saying, you know, these weren’t packaged correctly, so then you
Drop tests and vibration tests on everything before they go.
Oh yeah. How do you do that? Exactly.
Yeah, so at 50 we, we’re dealing with our suppliers, we give them our specifications, we taught them, I think we use one is TA, I stand for correction. I’ll give you the right details, we’ll note later. But I think we use one sta, which is our international drop tip job shipping test standard so that they’ll make the packaging according to them. And then we actually send our people into the factory, inspectors, they do drop tests and production and inspection. They’ll take X number of units, we’ll do drop tests on them that they’re dropped in fast sides from one meter higher, six corners, and then you open it up. The product shouldn’t be damaged. A box should have minimal damage. So there’s a standard is actually quality control standard for drop tests and we do it on every single product, but we tell the factory upfront before we place the order because it’s not fair to place the order in the factory. Then going post that inspection standard and they go, but you never even asked us for that because it is a cost difference. But I think, I’m sure you’ve experienced it, there’s no cost worse. It reworking product and having damaged goods in the warehouse off to ship. You know, that’s the worst case scenario
And it’s the damaged goods. And then you have to send a second one with a, and then you have to go to ups and try and negotiate your insurance claim. And that’s a, maybe you get it. Maybe you don’t, this whole whole, it just opens up this
Exactly. That happened inside of me that 20 cents extra for the packaging didn’t seem like such a big deal. Yeah.
Yeah. So the factories know like when people to people that have had this happen, right. Does the factory know what’s going to work for the drop cast and what won’t and it just something that the retailer just didn’t ask them or it didn’t kind of specify or it was the factory turn to skip on it. Like what usually happens with this kind of breakdown?
Yeah, it sucks. Yeah. I find there’s a mixture of factory. Some factories will know straight away and they go, Oh okay, if you want that, you know, we have to use this beta packaging and then some just know straight away, which I like because it’s a reassuring and he’s, they know some just got a, okay well we’ll try and we’ll check and it’ll test and they don’t know. And I think, you know, kind of set the truthful, honest out of them is the important part. But you know, I think as long as they agreed to it, when you placing the order before you paying a deposit or opening your letter of credit, I think as long as you agree on that in your spec, and I always say you front load everything, our front, all my quality control, chase, our front load, all my specs and requirements, all the checks we’re going to do on it, all the compliance document are front loaded boards because I would much rather that they tell me at that point our look, we can’t do this, we can’t do that or we don’t know how to do this cause he’s, I don’t know how to do it.
I can often help them get it done and I go, well look guys, we’ll help you do it. But you know, maybe it’s going to cost some money and we discussed that. But just front loading things and nine up front is the key to everything for me.
Awesome. That’s super helpful. I yeah, no thank you for that. If folks want to learn more about you, kind of ask you some questions, kind of contact, contact you about the company, where the best way to do that.
So, we’ve got a website called global tqm.com. Yeah, that’s why the word global, tqm.com and then I mean on there there’s actually a button and we can just schedule a free call and if they, if anybody wants to just schedule a free call and just they can mention your show in the notes when they book the call and then I’ll take all those calls personally. You know, I love talking to the customers and then we can talk them through just free advice, and seeing where and how we can help them. We are more than happy to as well.
If you’re offering free advice, I definitely are to be able to take the Ash, cause it sounds like this is one of those things where just having this knowledge of what not just what not to do even is super, super important. So people should definitely take you up on that.
Yeah, I agree. It’s what you, it’s what you don’t know that bites you. Yeah,
Exactly. Exactly. Awesome. Well, thank you very much for coming on today. I definitely, definitely appreciate that.
Oh, wonderful. Thanks for having me.