Quick Question Tuesday, Part 2. Should I Visit My Supplier In China, And If So, How Often?

Should I Visit My China Suppliers?

As lawyers, we spend a lot of time fielding good, bad, weird, interesting, deep, superficial, and all types of other questions from people. We're generally expected to be oracle-level wizards, a lot like people are treating AI now. In this series, we'll share some of these questions that people ask us, along with our answers. For longtime China Law Blog readers, this "Quick Question" reboot will feel familiar.

In this post, I answer questions relating to visiting your factory in China that provides you with your product.

Should I Visit My Supplier in China? If So, How Often?

Question: I have been buying from various Chinese manufacturers for many years. COVID was tough for our business, but we made it through. We are still looking at moving some of our supply chain out of China, but our Chinese partners are aggressively trying to keep our business by giving us discounts and "preferential" rates. Our relationships with our suppliers have never been better. We have never visited our suppliers' factories, but I think we should. Do you agree? If so, how often should we visit them?

Short Answer: In today's globalized and turmoil-ridden international market, you should prioritize building and maintaining strong relationships with your suppliers. This is especially true regarding China and other countries where relationships reign supreme over written contracts. This is especially true today where Chinese factories are increasingly worried about their foreign companies leaving them for Mexico, India, Vietnam, Thailand, etc.

Your company's specific answer to these questions depends on various factors, including the nature of your business, your track record with your suppliers, the scale of your operations, the complexity of your supply chain, and your internal growth and cost projections.

Why You Should Visit Your Supplier in China

1. Building Strong Relationships Face-to-face interactions are invaluable in establishing trust and rapport. In the Chinese business culture, personal relationships, or "guanxi," (关系) play a crucial role and are often relied on when a contract fails. Meeting your suppliers in person on their ground demonstrates your commitment and respect, which can lead to better cooperation and more favorable terms. It can also protect you if your supplier is struggling and needs to cut corners with some of its customers.
2. Quality Control Visiting your supplier allows you to oversee production processes directly. You can ensure that the quality of your goods meets your standards and address any issues on the spot. This proactive approach can prevent costly mistakes and delays down the line. Having one of your senior personnel make regular visits will get you farther with your supplier than if you merely send a third-party representative.
3. Understanding Operations Seeing the production facility firsthand will give you insight into the supplier's capabilities and limitations. You can assess whether they have the necessary equipment, technology, and workforce to meet your requirements. You can use soft skills to read the room and pick up on many details you would otherwise not learn. This understanding can help you make informed decisions about future orders and potentially increasing collaboration.
4. Negotiating and Problem-Solving. Face-to-face meetings facilitate more effective communication, especially when negotiating terms or resolving disputes. You can clear up misunderstandings quickly and reach solutions more efficiently than solely communicating via WeChat, WhatsApp, email, or some other electronic medium.

How Often Should You Visit?

The frequency of your visits depends on several key factors.

1. Business Size and Order Volume For businesses with large order volumes, complex products, or new product launches, you should plan on two to four visits per year. For new relationships, you should plan an initial visit to establish the relationship, and at least annual visits to review quality control and the production process generally.
2. Product Complexity If your products are highly specialized or require intricate manufacturing processes, you will need to make more frequent visits. An owner or C-suite executive should plan to go annually, and your technical lead(s) should plan to go more frequently. This ensures that your China supplier adheres to your specifications and maintains high-quality standards.
3. Supplier Reliability Once you have established a long-term relationship with a reliable Chinese supplier, you may not need to visit as often. However, for new suppliers or those with a history of inconsistencies, more frequent visits can help mitigate risks. When your supplier starts to have problems with inputs, financing, or labor, you want them to know your company's name, your key personnel's name, and have the value of your relationship at the top of their minds. That keeps you away from the list of less-desirable or less-threatening customers who are more likely to be affected first.
4. Market Conditions Changes in market conditions, such as fluctuations in demand, shifts in production or shipping costs, or financial market conditions in China might necessitate more frequent visits. You should stay informed about these changes so you can adapt your supply chain strategy accordingly.

Practical Tips for Visiting Your China Supplier

1. Plan Ahead Schedule your visits well in advance to ensure that the supplier is prepared. This also allows you to make the most of your time by arranging meetings with key personnel and inspecting specific areas of interest. When your attorney drafts your contracts, ensure that you also have the option to make surprise inspection or audit visits.
2. Clear Objectives Have clear objectives for each visit. Whether it's quality control, negotiations, or understanding new processes, knowing what you want to achieve ensures that your visit is productive. You need to expect to spend a significant amount of your time there engaged in social activities. This is especially true for owners and C-level executives.
3. Documentation Document your visits with detailed reports and send a summary to your supplier's key contacts after you return home. This helps in tracking progress, identifying recurring issues, and planning future visits more effectively. This also reminds your suppliers that you are not the type of customer who will let small or large deviations slide.

Conclusion

Visiting your supplier in China can benefit your business, especially in the post-COVID landscape where relationships and adaptability are both rarer and yet more crucial than ever. By prioritizing face-to-face interactions, you strengthen your "guanxi," ensuring better cooperation and reliability from your Chinese suppliers. Regular visits not only facilitate quality control and a deeper understanding of operations but they also improve negotiation outcomes and problem-solving efficiency.

The frequency of your visits should be tailored to the specific needs of your business, considering factors like order volume, product complexity, supplier reliability, and market conditions. For new or complex relationships, more frequent visits are advisable to establish and maintain high standards. For established and reliable partners, annual visits may suffice, with additional visits as needed based on market dynamics.

Remember to plan your supplier visits, with clear objectives and thorough documentation, to maximize the benefits of your trips. These steps will help you maintain a robust supply chain, ensuring that your business remains competitive and resilient in an ever-changing global market.

Lastly, don't forget to lead with your NNN (see here), protect your IP ahead of your visit (see here), and make sure you are using robust China-specific dual language contracts (see here).

Quick Question Tuesday, Part 2. Should I Visit My Supplier In China, And If So, How Often?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.