Procurement Thinking for China

Many of you have seen here that coming to China just for low cost sourcing is not thinking maturely enough about China.  Let’s think about that a little more.

I paste part of an old post from the China Sourcing Blog as they have said it well.  Find the whole post here.

In our view, the key to taking full advantage of a broader spectrum of cost and feature innovation present in the Chinese market is to move from a customer-supplier model of price-based sourcing with strictly dictated specifications and standards to a partnership-based approach where the supplier takes an active part in the overall project and in specifications design. This would entail a structured and patient exchange of ideas, a deeper understanding of Chinese manufacturing practices and standards, and above all, an open mind from both the customer and the supplier. Commercial practices would also require modifications. Contract management with Chinese suppliers generally relies less on contract enforcement and more on relationship management, so many of the standard contractual clauses traditionally used by international procurement teams are either not applicable or not enforceable in China, and thus create unnecessary burdens on suppliers and ultimately increase the total costs of the contract.

Ultimately, a sophisticated foreign buyer of Chinese capital equipment will probably need to adopt a number of Chinese standards, practices and approaches – all without compromising quality, environmental and labour protection standards, or good governance.

China is a continent sized manufacturing base with from 0 to 30 years of maturity depending on where you are.  It should not be seen as all being the same. Some places could give you pretty low cost. Other places could give you pretty good professionalism.  Also, China is not what it was a few years ago. It is something more and less.
Finally, as they note above, the Chinese supplier is more sophisticated now and we need to involve them more as they are able.  We must further have a China contextualized system to maintain quality, trust, and progress over time.  Then the possibilities here can grow and bring great benefit far into the future even after China has ceased to be a low cost country.
What have you seen?
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Posted in: China, Sourcing

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