Monday, July 4, 2011

Why are Chinese Manufacturers are so Short-Sighted?

One thing about Chinese manufacturers that is universally true: they always focus on how best to maximize the one current job you've sent them. They would find all kinds of ways to cut corners, either by reducing the quality of material or less labor, etc. They would never look down the road where a solid working relationship will in turn bring in additional jobs.

This is why most of their customers are usually one-time customers. They spend the great majority of their sales and marketing efforts trying to get new customers. Client-retention rate is very low for them; the concept might even be foreign to many.

And because they have to compete with thousands of other similar Chinese manufacturers to get new customers, most of them will likely employ the same tactic: promise the world, get the order first. Once the order is secured, they'll then try to see how they can maximize their margins. By this I mean the good old Book of Shanghaijacked Tricks will be fully utilized. After they collect, they'll move on to the next victim.

I'm sure this is a growing process for them. After all, despite being the second largest economy in the world, China is still a "developing country." As many native Chinese will tell you: "Our hardware is state-of-the-art, but our software has yet to catch-up." In this instance, "hardware" means the infrastructure. China has all kinds of modern high-rise buildings, high-speed rail, highways, etc... But the "software," or the people itself, is still very under-educated if not unethical. In this sense, I think it'll take China another decade or two to bring its citizenry up to par with the standards we are used to in the "developed" world.

From a different perspective, I can't really blame them... Why...? Easy. We buyers do not have the loyalty that we usually extend like when we buy from domestic vendors. We encourage high performance by sending repeat business. But when we go overseas, everything is out the window. We shop around on every single job, whoever provides the lowest price wins. To us, all Chinese factories are the same, so why not save ourselves some money? This type of behavior had perpetuated how these Chinese factories behave. They now reciprocate our lack-of-loyalty by only focusing on one single job. Whatever down the road has a less than 50% chance of happening, so why even bother.

So, why do we do this? Why can't we extend the olive branch to these Chinese factories and show some loyalty? I guess the fact that having broken our own psychological barrier to buy direct from oversea sources might have something to do with it. Since we've agreed to assume all the risks, why not try to save as much as possible? Right?

While on the surface, this type of reasoning is not wholly faulty. But we must understand the same old adage of "you get what you pay for" rings true in U.S. as it is in China, or India, Vietnam, anywhere in the world. The fact that we are willing to assume more risk does not negate this universal rule of law. So, next time when we go shopping for a new Chinese factory, let's ask ourselves on how much risk is reasonable, and how do we make compromises on pricing so we can get better quality in return, on both the product and level of service.

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