Managing Factory-Client Dynamics in Modern China

Managing Factory-Client Dynamics in Modern China

In order to maintain a competitive edge in manufacturing today, businesses are forced to consider sourcing their products from China. Most Fortune 500 companies already do this, and now with the growing number of sourcing agents and improved communication with China, smaller companies are also capitalizing by manufacturing in China.

Forming a strong and professional relationship with any manufacturer you work with is a must. However, developing the type of business relationships Western companies are accustomed to with Chinese manufacturers is a delicate operation. This should not be a deterrent from working with manufacturers in China, but it is vital for business to understand how to forge and solidify these important relationships.

Let’s look at the different perspectives between a foreign business as a buyer and a Chinese manufacturer as a producer. The buyer usually wants to form a long-term partnership for reasons of convenience, reliability and to guarantee low manufacturing prices. Most businesses would love to find a few reliable Chinese manufacturers they can count on and partner with them. Buyers will think of this relationship as a “win-win” relationship for both sides since they are getting their product reliably and efficiently and the manufacturers have a client promising to buy product consistently and at sufficient volume. While Chinese manufacturers would not necessarily mind this sort of relationship, they do not fully share this point of view and will not immediately jump into a long-term partnership.

Managing Factory-Client Dynamics in Modern China

The manufacturers are generally skeptical of foreign buyers and their “long-term” partnerships. TheĀ China manufacturing agent know that many buyers promise to buy regularly and in huge volumes but realistically they often can’t deliver. The manufacturers are also aware that many buyers will inflate their purchasing power in order to negotiate a better deal and that ultimately buyers are more loyal to the dollar than a particular factory. This means the buyer will switch factories if it makes fiscal sense. Therefore, the mindset of Chinese manufacturers is more of a short-term view of business relationship when compared to buyers. This short-term view seems rational when viewed from a Chinese manufacturer’s perspective.

So, how can a business act appropriately and get a manufacturer to maintain a reliable relationship for a longer period of time? Think and act more similar to a Chinese manufacturer at the beginning of a business relationship. This means that you should build your trust with the manufacturer one step at a time and not try to immediately form a long-term partnership.

The key is finding a factory of the right size that can manufacture your product at a consistent volume that you can guarantee. The following strategies will ensure a good relationship with the manufacturer and lead to a fruitful partnership.