Adrian and Renaud talk about the current trend of moving manufacturing operations away from China, either partly or completely. This really started to gain pace due to the US/China trade war and the punitive tariffs imposed by the US government on some 'Made-In-China' goods, and, in some ways, the coronavirus pandemic hastened it, too, as companies sought to diversify supply chains to reduce risk.

So is this exodus from China going to continue into 2021 and does it affect you? We discuss the trends and some of the realities of transferring some or all of your supply chain to other countries in this episode.

00:00 - Introduction / What has caused some companies to move operations away from China in recent years.

02:47 - Is the trend of moving supply chains out of China still realistic and ongoing? It's still a trend amongst many companies to be researching and planning to make this move in 2021 or beyond. How large companies have been most successful in moving, mainly, assembly out of China into countries like Vietnam up to now. 

04:44 - What challenges do smaller companies face when trying to make the switch? Smaller companies, such as many e-commerce sellers who private label products from an ODM or OEM, have been much slower to move operations due to their agreements with their manufacturer. They often have little say in what the Chinese manufacturer does, so, even if they want to diversify out of China, it's either impossible or slow progress if they can't find a similar manufacturer to work with in, say, India, who provide the same product. Also, smaller companies may not have the budget, especially after 202, to finance such a move of the supply chain overseas after working with an ODM/OEM, as this could include needing to pay for new tooling, product development, and more (which the Chinese supplier provided to them as a part of the package).

07:31 - Why companies who have designed and developed their own products are at an advantage when it comes to moving some of their supply chain out of China. If their manufacturing contract is written correctly they should own their molds and tooling and can transfer this from a Chinese supplier to another supplier either in China or a different country. But even if assembly can be done in Vietnam, for example, it may still be necessary to have some of the supply chain in China, such as certain component suppliers.

08:46 - Imports from Vietnam to the USA have increased by almost 40% in recent years. Does this mean that it's possible to do assembly and get components there, too? In fact, not really. Many of the facilities opened in Vietnam are either close to the Chinese border or in port cities where components from China can be readily shipped in. This may change in future, but, for now, Vietnam doesn't provide a full supply chain infrastructure in most cases.

10:52 - Is assembly and packing done in SE Asia a way to circumvent US tariffs? It depends on the amount of value creation in the final country, but it can sometimes be illegal. The issue is the lack of sub-suppliers for components and materials outside of China.

12:49 - Has India benefited from any companies moving some operations out of China? We discuss some Taiwanese companies moving to Chennai as it has an existing network of suppliers and workforce from its electronic and automotive industry there, although a lot of components still come from China. The conflict between India and China does not help matters in India right now, as the Indian customs are processing Chinese imports very slowly which increases risks for manufacturers there. So when you look at the costs of having an extended supply chain across China and India, does this make avoiding tariffs on China-made-goods worthwhile? It may not, so you have to research this.

16:21 - Foxconn's new factory in Northern Vietnam. Why is it here and how does it benefit Apple? How about components - are they still going to be coming from China? 

18:24 - What does a Biden presidency mean for American companies moving forward? Discussion on if the US/China trade war will continue and how it could change, if at all?

22:44 - How have Chinese exports to the US and other countries started booming in 2020 due to the coronavirus pandemic and how is the logistics industry struggling to cope with the strain? What types of sectors have really benefited, even with the US/China trade war in effect? 

27:08 - Are companies from other countries aside from the USA also trying to move supply chains out of China? If so, why? The US tariffs still affect companies who manufacture in China for the US market, too, even if they aren't American companies, so it's still a cause. The coronavirus shutdown of China's manufacturing sector in early 2020 also prompted many global companies to start the process in order to diversify and have less risk in future due to being less reliant on China. However, due to the inability to travel, many companies plan to move but have put the projects on hold for now which, of course, benefits China...for now.

31:02 - If your business sells in the China market, is it wise to move operations out of China? There is some debate about this point. Importing into China is complex and bureaucratic, so this could cause you a lot of hassle in future. It may well also be that the Chinese authorities will not take kindly to brands who are very active internally moving supply chains out of China. This is a source of risk to be aware of and assess if that's your company.

32:25 -Wrapping up and festive wishes from Renaud and Adrian! 🎄 

• The pros and cons of moving manufacturing operations to Vietnam, India, Malaysia, & Thailand.

• Connect with us on LinkedIn

• Visit our website at Sofeast.com 

There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here:

• Apple Podcasts

You've tuned into part 11 of our mini-series guiding you through effective vetting of Chinese suppliers that will help you to find the best possible manufacturer for your products (listen back to the entire mini-series on vetting Chinese suppliers here 👍). In fact, this is the final part of this mini-series!

In this mini-series, you will already have learnt about due diligence, factory audits and visits, exploring testing facilities, and much more when it comes to vetting suppliers. But how do you carry on getting the results you expect from your new supplier once you have been working together for a while?

In this episode, Adrian & Renaud discuss some of the common scenarios you may face in your new relationship, such as needing to switch from an underperforming supplier to a new one or facing an unexpected price rise, and what you can do to combat or overcome them.

00:00 - Introduction / Who needs to listen to the series on vetting new suppliers and why / certain things to be mindful of when working with a new Chinese supplier.

04:15 - How and why to develop a backup supplier. Benefits of doing so in terms of reducing the risk of losing supply of key products/components, how to manage a backup, who is and is not going to find keeping a backup appropriate, and much more.

12:45 - When to switch to a new/backup supplier if things are going wrong with your current one? How it can either be the buyer (didn't vet suppliers and chose a bad fit or didn't explain standards correctly and clearly) or supplier (simply not fulfilling what is expected from them or that they agreed to) that causes a situation where switching to a different supplier is necessary and examples.

16:27 - The typical 'vicious circle' a buyer can fall into with a bad supplier even though they should leave.

20:51 - Dealing with unexpected price rises. Having thorough data about material costs etc can help a buyer push back against a price rise. Having a backup supplier provides leverage if needed when negotiating, as it means you can leave the supplier if they don't modify costs.

22:45 - Developing suppliers based on their quality performance data. Assessing how consistent and reliable the supplier is and their quality systems. Small factories will need a lot more hand-holding and more inspections earlier in production. Larger manufacturers probably won't require such vigilance early on, and, if you're able to negotiate favourable payment terms where you pay after receiving items to your country, repeatedly running a lot of inspections may not make sense.

24:57 - Tracking supplier performance and reviewing it over time - Keep track of performance statistics such as quality inspection pass rate, average defect rate, on-time shipments, serious issues found after shipment, and more. This is also the case with lab testing, too. If a supplier shows that they can be trusted, reducing lab testing frequency may be possible, too.

• Here's how to keep a backup supplier in case things don’t go well with your main option.

• Connect with us on LinkedIn

• Visit our website at Sofeast.com 

There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here:

• Apple Podcasts

Sofeast's CEO, Renaud, and Adrian from the team discuss the 'Bill Of Materials.' Why is this document SO important for importers, what does it contain, how does it help the development and manufacture of products, and why and how must it be kept confidential where possible? These questions, and more, are all answered in this episode! 

00:00 - Introduction.

01:22 - What is the BOM? A rough introduction to the document and its purpose. A list of the components/materials/accessories/packaging/markings/fasteners/etc that make up a product, each with its own row in the BOM. A lot of information about each individual part is included per row. Why it's a confidential document that some suppliers don't want to share (as it includes their sources and product development info) and how this can leave importers in the dark about what goes into their products and if changes have been made if they're not granted access.

06:39 - Problems that can occur if you don't have the BOM. OEMs and ODMs may make changes without telling you, this causes trouble with quality and compliance. It can also cause compliance issues because if they change the makeup of the product between batches, you could unwittingly be importing non-compliant products (we discuss product compliance here). If they commit to a BOM you're aware of these issues are less likely. 

10:46 - How the BOM evolves throughout the product development process & what's included. The BOM follows the new product development phases, going from concept BOM which is simple and gives a rough idea of what's included, through to a prototyping and manufacturing BOM which is complete and is continually updated with quantity, component status, price, testing results, issues, new requirements from the customer, product engineering info, CAD drawings, colour, texture, finishing, and more.

17:02 - The need for a review process on the BOM to make sure any mistakes are found. Mistakes with the BOM could lead to incorrect parts, quantities, or wrongly specified parts being purchased. Checking and updating the BOM accurately is also connected to traceability for if issues are found later on with products.

18:51 - What does a Bill Of Materials look like? A good resource here is Renaud's video walkthrough where he explains an example BOM row by row. A few words on BOM format.

19:50 - How and why do we protect the BOM's confidentiality? The BOM includes pricing and it is not ideal for everyone to get an idea of how much components or full products truly cost. No company wants to make their margin that obvious. Components may have their markings removed or obscured to stop competitors finding out your suppliers and being able to more easily replicates products and features, but if a BOM was to get into their hands this would allow them to skip many months of development immediately.

26:57 - If a Chinese supplier doesn't want to provide the BOM, what can you do? This is a matter of leverage and negotiation. If the supplier is afraid you will leave they may relent and provide the BOM or at least a partial BOM which will give you a lot of the key information you require.

28:21 - Other reasons why a BOM is important to both buyers and manufacturers. A buyer will also find a BOM from the supplier helpful in order to track down quality issues coming from a sub-supplier which allows you to send an inspector to the sub-supplier to check on how they're working and push them to improve if problems are found. Without the BOM, of course, this isn't possible and improvements can't be driven.

33:33 - Closing recap about the importance of the BOM, its function, and contents.

A number of blog posts and resources about the Bill Of Materials here for you to digest:

• How To Manage the Bill of Materials, from Initial Design to Mass Production

Got any questions or ideas for future episodes? Let us know!

• Connect with us on LinkedIn

• Visit our website at Sofeast.com 

There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here:

• Apple Podcasts

Sofeast's CEO, Renaud, and Adrian from the team discuss the forthcoming Chinese New Year holiday which is officially between Feb. 11th to 17th 2021 (CNY day is Feb 12th). We'll look into how and why this holiday has a serious impact on lead times, quality, supply chain risk, and managing suppliers; greater than at any other time of the year.

Renaud also shares some tips and strategies that importers can implement to plan and prepare for CNY, as well as mitigating risks that may arise from your suppliers.

00:00 - Introduction.

02:18 - Discussing what the Chinese New Year holiday, or Spring Festival, is and some of its unique features. 

05:28 - What staff turnover around CNY tells you about the factory. A high turnover is indicative of an employer who has work to do with treating and/or paying staff well.

06:40 - Some problems which typically occur after Chinese New Year. If staff have left, new staff aren't as efficient which may lead to quality issues. Even new quality inspectors may not pick up problems as well until they're familiar with your requirements.

07:17 - Points of stress for importers before CNY. The pressure to clear a backlog of orders and staff starting to leave early for the holiday makes the pre-CNY period quite treacherous for importers. Orders may be delayed, quality may be affected, there is no time to rework defective batches, suppliers may not focus on future orders urgently, etc.

11:00 - The length of time that different factories may be closed for. Assembly factories will typically be closed for 12-15 days, a relatively short time. The problem is with component and material factories. These guys can be closed for up to a whole month.

12:32 - Summarising the problems and risks at CNY. Also includes shipping backlogs, where demand drives up shipping costs and there is enormous demand for quality inspections just before CNY, too, when everyone is (rightly) worried about poor quality.

13:42 - The dates for Chinese New Year 2021 and pre-CNY wind-down.

14:36 - An additional risk for importers: Supplier bankruptcy. It's at this time, the end of the year in China, that suppliers who have been struggling financially may decide to file for bankruptcy and shut down. They may or may not pay off outstanding wages and debts, but either way, it's going to leave you in the lurch. Due to the financial stresses of 2020, this could be a larger problem in 2021 than usual. Big tip: DON'T wire any advance payments for the period after CNY to a supplier just before the new year holiday.

16:31 - Preventive measures that importers should follow to navigate the CNY period securely. Plan ahead diligently, get inventory made Oct/Nov, avoid production too close to CNY due to quality issues, if things may be in a rush, negotiate with suppliers to have smaller orders made better (if possible) to release some pressure on them, arrange post-CNY orders with your supplier so they can coordinate with sub-suppliers in advance in order to get things running faster after the holiday, increase inspection work on products and components/materials pre and post CNY.

21:27 - Will CNY 2021 be any different to usual due to COVID19? At the moment, due to the very low cases of the coronavirus in China, it looks that it won't be particularly affected, unlike in 2020. However, importers should be aware that if the virus spreads due to the holiday, factories could be hampered or shut down in the new year if cases are found.

25:24 - Contingencies to deal with supply chain risks (such as viral outbreaks). Keeping some extra inventory if possible, having more than one supplier per product gives a safety net and this even better if they're located in different areas of China or even different countries (such as one in China, one in Thailand), suppliers can hold some stock or components, etc.

27:48 - Risks other than a pandemic to be aware of. This could be a fire in the factory that puts them out of action, financial problems causing them to go out of business, having IP stolen, disastrous manufacturing and quality issues, and more. Importers would be wise to consider arranging a backup supplier. Plan ahead and have a risk-based approach to cope with risks that you rank from worst to least if they should happen.

• Renaud wrote about how to manage issues caused by the holiday here: Chinese New Year: how to manage the disruption?

• Connect with us on LinkedIn

• Visit our website at Sofeast.com 

There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here:

• Apple Podcasts

Sofeast's CEO, Renaud, and Adrian from the team discuss everything buyers should know about quality control plans. A QC plan lists all the quality-related checkpoints to be passed during/after a production run. Depending on the buyer's situation (which include factors like order size and value), it can include process, product, or legal checkpoints. Approving QC plans is an essential step before production is allowed to start as you'll see as we go through the topic.

There are three types of quality control plans we'll be discussing:

1. The product quality control plan to include in a contract with a Chinese supplier which demonstrates the buyer’s expectations for the supplier regarding quality, inspection, and production activities.

You'll learn when these plans are appropriate, or, conversely, if there are buyers who don't require them.

00:00 - Introduction.

00:56 - What are QC plans and why are they important to agree on before production starts? A summary of QC plans and for which kind of orders they'd be most appropriate.

03:09 - Discussing the 3 types of QC plan and the different contexts they're used in.

03:48 - 1. The product quality control plan that makes up a part of the manufacturing contract. Defines legalities around access to the facility, testing, product compliance expectations, who pays for testing, what happens if products fail quality tests and don't reach the quality standard, and more.

07:18 - 2. The process control plan. This is a core tool for the automotive industry but can be used by any buyer if their orders are large or expensive enough to warrant a deep investigation into planned production processes in order to ensure quality throughout. Plan what is expected at each production step, how it can be checked, and what to do if an issue is found, and document all of this in the plan. This also applies to upstream suppliers if you're taking quality very seriously.

13:13 - How to identify suppliers who are capable of adhering to a stringent process control plan? 2 ways, process audits and a tip from Renaud to do it in a simpler way.

15:02 - 3. The QC plan for when developing a new product. This clarifies your needs and takes the form of a number of questions, which we list and discuss in this section, about quality in a type of checklist that the manufacturer really needs answers to have answers to (or be able to answer) before proceeding. It forces both buyer and supplier to think deeply on how to assure the best quality possible when manufacturing a product which is new on the market. (You can see an example QC plan for a new product in this blog post which this episode is based on).

22:46 - How Chinese suppliers' culture can be to disregard planning ahead for quality and instead focus on fixing issues later as they occur. Hint - this flexible approach isn't a good thing, especially for new, complex products.

25:01 - The dangers of not going through the QC planning process with Chinese/Asian suppliers. They will be very encouraging which can lead some buyers to trust in their expertise, but this can be a trap because it's on YOU to define a quality standard and expectations for the supplier to follow, not to be led by them as their ultimate interests may not align with yours as less specific requirements give them more opportunity to cover themselves should they do something wrong.

27:35 - Are all 3 QC plan types appropriate for all kinds of buyers? The product quality control plan (1) should usually be implemented for any size of order if possible, as it's good to have quality expectations in your contract with the supplier. The process control plan (2) is usually more appropriate for buyers with high quality requirements who place large orders (in the tens of thousands of pieces at least). The QC plan for new products (3) is appropriate for buyers developing and launching new products onto the market. 

30:55 - Why buyers with large order MUST have a quality standard. For instance, POs in the hundreds of thousands of dollars.

31:12 - What should buyers of existing products (such as off-the-shelf items to be rebranded) be focusing on when it comes to quality? QC plan 1 for the manufacturing contract's terms is still helpful, as is creating a quality standard and documenting any quality issues from the supplier on an ongoing basis. But as a distributor, you will be unlikely to have much of a say about their manufacturing processes or new product development method.

• You may like this blog post: How Quality Planning Drives QC and Process Improvement

• Connect with us on LinkedIn

• Visit our website at Sofeast.com 

There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here:

• Apple Podcasts

You've tuned into part 10 of our mini-series guiding you through effective vetting of Chinese suppliers that will help you to find the best possible manufacturer for your products (listen back to the entire mini-series on vetting Chinese suppliers here 👍).

If you've been following this mini-series, you will already have learnt about due diligence, factory audits and visits, exploring testing facilities, and much more when it comes to vetting suppliers. But if you're at the point where you are ready to start asking for quotations, there is still quite a lot to be learnt about the potential suppliers on your shortlist and that's what Adrian and Sofeast's CEO, Renaud, get into in this episode.

00:00 - Introduction and why getting quotations is a helpful part of the vetting process.

02:39 - When is the right time to start discussing pricing with a potential supplier and what can we learn from their prices? There's a difference between off-the-shelf products and more unique products that you're developing new for the market. For the latter, protecting your IP is important so that your product's unique features remain confidential.

05:41 - When to discuss pricing if you have confidential IP to keep secure. The risk of IP leakage (see additional resources below) here is a real threat. A useful strategy is to only release IP to properly vetted suppliers and hold off on speaking about pricing until this has been done (this means going through the whole vetting process outlined in this mini-series before sharing product details and requesting pricing).

You may also choose to omit the unique IP from your designs submitted for a quotation at an early stage in order to get pricing back which will be roughly equivalent to the true cost a supplier can provide when they see your complete product design - this helps you gauge market rate and get an idea of which suppliers are suitable on cost.

10:47 - What you should also discuss with a potential supplier when you're in a position to request pricing. Getting pricing means sharing technical information, but you should also be asking about business terms such as payment terms, incoterm, how shipping is handled, packaging, if the supplier stores your products in the warehouse and then ships them to different countries in batches, etc.

11:32 - How working with the wrong manufacturer on prototyping is a recipe for disaster. Worst case scenario for the maker of a new product is that by working with the wrong Chinese supplier on developing your product and creating its prototypes, you're effectively training them to become your competitor with your own product idea. This shows why vetting suppliers to select the 'right option' is so important.

13:47 - A summary of steps you can take to protect IP. Narrow down the right profile of manufacturer for your needs. Screen out poor candidates. For complex products and large orders, performing advanced due diligence is a must. For simpler products where changing supplier is easier and protecting IP may be less of an issue, some screening is still required. After this, have your one or two shortlisted suppliers sign an NNN agreement and make it very clear what is confidential and understand who works on it and is a party to this IP. Assure they don't share confidential IP with sub-suppliers unless they also sign the NNN agreement. Look out for telltale signs of suppliers who don't take IP security seriously, such as staff members sending important business emails from personal accounts!

18:06 - What can we learn to show us that a supplier is capable? How well does the supplier understand your requirements before quoting? Do they ask questions to get the right information that helps them provide a very accurate quotation and not surprise you with additional extras later on? You also need to make sure you give the supplier the right information to help them, though. So paying attention to what the quotation is based on (such as your quality standard, your intended warranty, etc) is a key indicator of whether the supplier truly 'gets' what you require.

25:03 - Mistakes buyers make when requesting quotations from Chinese suppliers. Negotiating a low price at an early stage before the supplier has all of the information they need may seem like you're locking a good deal, but if the supplier hasn't sourced components and don't know how long production will take, for example, price rises later are almost inevitable and will cause you a lot of trouble.

26:26 - Why doing product design and prototyping outside of China/Vietnam etc is a good way to protect IP and streamline the vetting process. Instead of vetting a supplier, then going through the product development and pre-production stages with them, you can do that abroad while you vet them and go to them with very specific designs and prototypes to get accurate quotations and start work quickly. This also means that the Chinese supplier wasn't involved with the design and there's less chance of IP leakage. This would typically be the model when using a contract manufacturer and such preparation helps show you as a serious and credible customer.

30:35 - Are the extra costs for developing products and prototyping abroad worth it? This depends on the expected volume and how much capital can be spent at this early stage. If you don't do this, working with a Chinese OEM could work, but assuring you own the IP is going to be a key concern before doing so, otherwise, you can go into partnership with them if sharing ownership of IP is acceptable and you're unsure if you can get investment elsewhere.

33:42 - How buyers need to be very clear when communicating requirements in order to help suppliers give them a solid quotation. Chinese suppliers may not be very organized, so you need to be sure to help them to help you by being very organized yourself - not sending them full information, or sending it piecemeal will definitely slow things down and cause misunderstandings.

34:50 - Closing tips for buyers who are new to manufacturing in China in order to have more success when negotiating price with suppliers, etc. Don't be tempted to try to drive down the price to the extreme, even if it makes you feel like you're a top negotiator (this will no doubt increase later or result in very poor quality).

• We discussed manufacturing contracts as a source of protection and clarity for your supplier to understand your expectations in this episode of the podcast. 

• Connect with us on LinkedIn

• Visit our website at Sofeast.com 

There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here:

• Apple Podcasts