END to END Supply Chain Management From China
Part 1 & 2 Video’s Below (at the bottom)
Below are 2 short animated videos to briefly explain why and how END to END supply chain management works as well as it does in China.
Having said the above, the videos show an outline and not the details of details. There are many sourcing and buying advantages that we felt just couldn’t be to put in the vid’s not because they are secret, more that once your suppliers and competition get wind of how it works, they will adjust their purchasing to suit, thus one may miss END to END’s true advantages.
What are the main END to END advantages?
As brief as can be – When any foreigner sets foot in China, there’s a premium to pay (averaging 20%+) and theres no way around this other than being Chinese. As one might assume, locals naturally get the best deal, yet with China there’s a whole different set of rules and behind the scenes principles that once made aware of, can save you 1 – money, 2 – improve quality and 3 – the option of returns.
1 – Money
Every buyer wants the best price, “that’s natural” yet it’s unnatural to add a third party to the sourcing chain and then expect to save more money, yet thats exactly whats going on. Behind closed doors almost all of China’s “licensed export factory and facilities” price hike for export and employ agents, middle-men, and middle-women. This is so because rarely does the real manufacturing powerhouse of China speak, read, or write English, and theres another truth. China are not your ally, they are not business partners and no matter which way one looks at it, if you’re not Chinese, then it’s unlikely you’re their preferred buyer. Thats the truth. However, the truth is conveyed without malice and without politics. Indeed, if you are to stand any chance to buy at the best rate and obtain the fullest service (including the option of returns), then all one need do is seek to understand the mindset of seller, i.e. China.
While China account for a high percentage of global exports, there is a clear line of command that every single factory must follow.
Export factories and export facilities are licensed, heavily regulated and governed by Chinese government. That means localised or regional factories cannot export goods to foreign countries, unless that is, their products go via an export factory or export facility which will almost certainly contain extra costs! It’s also common practices for a branded product to be traced back to a local low end factory which really means a lot of in-betweens, i.e. more costs. It’s also the reason why 10 containers from 10 may arrive in perfect, then the 11th (or it maybe the 111th) arrives less than perfect. When this happens, (which it does from time to time) it’s generally down to a farmed (sub-contracted) product who changed their local sub-supplying factory. This is big business in China.
Not all, yet a fair few of high end Chinese factories can be likened to high street super-markets who sell their own and other peoples products. As stated, not all, yet a large number have a tiered system with tell tale signs such as employing “just one or two English speaking contacts”. Or it might be a business operating from Hong Kong or Taiwan, yet this is merely a shop (factory window) to the real factory located deep inside China’s “regional centres”.
There’s a rule that the Chines use with each other and it works with precision accuracy. Unless you visit the plant and see the actual product being made, then theres a good chance it’s farmed (subbed) on to someone who can make it less expensive than they can. Why? because it increases profits and keeps the entire wheel of China functioning. This is just how it works. Often the mindset of “why make it when someone else can takes precedent” and if your not there to oversee things, then you can never be certain this is not going on.
END to END works because it just gets down to the source in the first place. While Tier 1 and Tier 2 cities were in vogue during the 90’s and 2000’s. Regional is and always has been the core of manufacturing, and for the savvy minded frugal buyer, today there are several new tax free regional zones that have been created to make it easier for China to supply the world. Our advice it to jump onto this as the upside is that these zones can literally strip out several percent of innate costs that otherwise would be factored into the sell price. Be quick as cost reduction incentives is pro-ported to be a 5 year life-span.
2 – Quality
It’s long been known that China operate a tiered system – A, B and C quality, through tier 1 and tier 2 cities – yet there’s an unofficial third…. i.e. regional
Everyone wants A quality, yet once you come to understand how China operates, asking for A is just not as simple as it sounds ……
To deepen the rabbit hole, it’s easy to assume that tier 1 cities such as Shanghai, Shenzhen and Tianjin standardise in A quality, and that regional, local, or small one man band factories knock out C. Yet nothing could be further from the truth. Often the regionals can reach A, while many tier 1’s still push out B and the truth is, whether it’s a tier 1, tier 2 or regional factory, most can offer A B or C yet what deters the outcome is the factory owner themselves and what your willing to accept . That’s what really deters the outcome. In order to deal with each other the Chinese are world class with psychoanalyses and its the main platform and foundation business is built upon. The general rule of engagement in China are not too dissimilar to that of the laws of the jungle. The words “Caveat Emptor” spring to mind and are used synonymously throughout China.
For example: A real life story from many years ago….. Back in the late 2000’s I recall being offered a brand new boxed Apple iPhone 3GS and the retail guy selling it said “look and check, it’s a grade A……..” grade A was USA, grade B was UK, Canada, Australia etc, and grade C was rest of the world – he said!
Indeed,,, after checking and checking it was a grade A – and as the saying goes, the rest is history.
When manufacturing, grades are bigger than big in China – they are massive and should not be overlooked or underestimated when manufacturing or souring.
One more thing – If there was a perfect buyer, it would be the person that re-orders from afar, the buyer who mails from the computer only visiting China or the facility occasionally and with notice are loved by the Chinese. Both these words “occasionally” and “notice” give the green light to allow the factory to silently switch product supplier, marginally change grades, or slightly increase pricing. Not suggesting they all do this, just saying it’s more than common.
The solution which has since become known as END to END means that for every order, for and every step in the manufacturing or sourcing process it’s “overseen in real life“. This roughly translates to the opposite of “while the cat’s away“. You get the meaning here? Being onsite at all times, especially when an order is being processed is not just a nessesity, it’s a prerequisite to obtaining grade A quality at all times, obtaining material consistency at all times, and avoiding imperfect or damaged goods leaving for port.
You may well be familiar with China in so much that as a general rule (apart from the odd isolated case) RETURNS don’t exist, and they don’t exist because it’s not embedded into the Chinese psyche. To accept something back after it’s left – Especially once it’s paid for just doesn’t compute and if you hamper on this avenue, then be prepared for “fireworks”.
Nevertheless, it’s not all doom and gloom as END to END really means learning from experience, then rectifying the wrongs, while expanding on the rights.
If the factory or supplier does not accept returns, then that’s not unusual yet it’s also a sign and not a supplier I would personally engage with. Having said that, purchasing from afar means passing responsibility not just for your goods, but more importantly it means passing the value of your saleable goods (what you will sell the for) to the hands of someone you bearly know. For example, lets assume a purchase order worth £25K can be cold for a profit and net you back £30K, then what is really being said here is that once you write out a purchase order and hit the send button, it’s like putting £30K in the hands of a stranger 6000 miles away and then hoping they will take full responsibility for it. Naturally nobody would do this, yet everyday, all around the world unattended orders are flowing into China.
END to END overseas the product in real life (from beginning to end – from birth to delivery) and makes absolute certain that no order leaves China unless it meets the requirements and standards of it’s purchaser, and as of writing this today it’s is a system that has worked with precisions accuracy for over 17 years. It’s a system more often than not Chinese apply to each other, therefore why wouldn’t you apply it to your own business? Costs a small voice in your head says,,,, costs!
At first one may think that to utilise END to END adds one more cog in the wheel, and one more link in the chain so to speak …… However the reality is such that END to END reduces the number of people, costs and links in the system. It streamlines the entire purchasing process by manufactures regionally, purchases locally and not through export, it excludes agents middle-men and women, it pulls multiple vendors into one central sourcing place (which doubles up as distributor) and it’s all done locally. END to END then passes on the cost saving factors from localised tax and government incentives, and savings from shipping to rail. It’s a truly transparent system that really means you need only one vendor in for thousands of products and you’ll get them cheaper, more consistent and quicker than you ever did before – Enough said,,,,, we hope you enjoy the vids as much as we did making them.
Part 1 – END to END Supply Chain Management From China
We strived to keep them as short and to the point as possible, Part 1 is 1 minute 50 seconds long and part 2 is 3 minutes and 14 seconds long.
If you like them, please stick a like/thumbs up, or just let us know – Both videos took over 100 man hours of editing each to create from the ground up…… And if you really really like them, know that we make them for businesses just like yours and they don’t costs hollywood block-buster fees.
Part 2 – END to END Supply Chain Management From China