Anyone that has worked with Chinese manufacturers or suppliers for a period of time will no doubt have experienced times when they simply do not want to give you supply chain information.
We recently discussed the problems caused by a lack of visibility into one’s supply chain as this is a worry that clients commonly come to Sofeast with.
In this post, you’re going to see an example of how unwilling suppliers can cause difficulties and some suggestions on how to mitigate or fix this problem (no client information is given to protect their IP and identity).
“We need to get NSF certification for our new drinks machine, but our Chinese supplier won’t give us information about its components. Now we’re stuck. How do we overcome this?”
In this case, not getting the NSF certification isn’t an option, it’s necessary for going to market.
In order to obtain food-safety certifications, certifying bodies need to understand what the constituent parts of a device are made from so they can assess whether it contains elements that could be harmful to health (they commonly use a banned list of elements such as lead, mercury, etc). If a supplier won’t turn over information about what components are made from and who supplies them (they consider these to be ‘business secrets’), there’s no way to comply with the certifying body’s demands. This results in an inability to obtain the certification and, therefore, sell the product in key markets.
So, the issue here was that the supplier wasn’t prepared to give any sub-supplier information as they often consider this to be a part of their private network in China and not something to be shared. It can also stem from the fear that their customer will deal directly with sub-suppliers behind their back, cutting them out of the deal.
Our project managers contacted the supplier to discuss the issue in Chinese, but they simply weren’t prepared to disclose any information. They were under no obligation to share, either, as they were not contractually obliged to provide the Bill Of Materials to our client.
So, the solution was to stop working with the current one and source a new supplier who was prepared to share the required information.
We also suggested that a new manufacturing agreement should be drawn up to be signed by the new supplier and client (we provide a tried-and-tested agreement to our clients on request, although please also refer to a lawyer if you wish). There are many reasons to use a manufacturing agreement, including to protect your IP, but another is to clarify your expectations such as having supply chain transparency.
Switching suppliers can be a difficult experience, but if you have reached a total deadlock it may be the only alternative as in this case…just be sure to put protections in place that will prevent the same scenario from occurring again! We created a FREE eBook to help you switch: How To Switch To A Newer, Better Chinese Manufacturer? [eBook].
Other helpful content
You may also find these posts and podcast episodes helpful in this case:
- Manufacturing Contract: Fear And Its Impact On Payment Terms
- Correctly Using A Non Disclosure Non Use Non Circumvention Agreement [Podcast]
- How Do Sofeast Help Source New Chinese Suppliers? [Process Breakdown + Costs]
- How To Push a Chinese or Vietnamese Supplier for Supply Chain Transparency
- DIY Sourcing From China Part 2: Negotiations, Terms, Leverage, & Quality Standards [Podcast]
- Are You Using A China Manufacturing Contract To Protect Yourself? [Podcast]