In this case study, we look at the problems an Australian client of ours experienced while manufacturing in China and how we helped them solve those problems by reducing costs, saving time and improving quality.
Background
This client, based on the east coast of Australia, imports steel frames. The business is two years old and started out manufacturing the products locally.
Business progressed quickly, and after the first year the owner began using a Chinese factory to manufacture and import the frames at the rate of one container every month or two. The business owner became frustrated with the dealings and outcome of some shipments. He knew he needed some assistance if he wanted to grow the business to the potential he knew it has so he did a search online, found Vara Allied and reached out to see if we could help.
Multiple Problems Dealing with China
Our client had encountered a number of problems during the 12 months he was manufacturing in China. These problems fell into three main categories:
Problem #1 Pricing Fluctuations
Despite there being less than two months between the first and second orders, the price of the product rose a whopping 30% for his second order. Price of steel and other raw materials do fluctuate, but the supplier was unable to justify why the rate had jumped by that amount.
Problem #2 Inconsistent Quality
From one container to the next there were significant variations in the quality of the product. Our client complained about the quality of the steel and achieved a 10% discount on his next order, but it meant he had to place another order with them to realise the discount.
Problem #3 Communication Difficulties
Our client found it challenging to communicate with his Chinese suppliers. Getting any information out of them was difficult. One order was delivered one month late with no communication or explanation. The biggest problem for our client was not that it was so late, it was that the factory stopped communicating so he had no idea if the order was coming or not. Our client also didn’t know if he was dealing directly with the factory or an agent; it’s notoriously difficult to tell when doing doing business in China. The lack of communication about the price increase was also frustrating.
Compounding these problems was the fact that our client was time poor. He didn’t have time to keep following up the factory and getting nothing in return.
Outcome of Using Vara Allied
The client briefed Vara Allied on the history of the company and the product requirements. We already had an excellent relationship with a steel manufacturer in China, so commissioned that factory to produce samples.
Photos were sent back and forth between China and Vara Allied, and we talked regularly to iron out quality issues. Vara Allied organised the samples to be shipped to Perth in mixed load containers with other clients’ orders to reduce the cost then sent them over east to the client for inspection. Once the final sample was perfect, our client went ahead and placed the first $20,000 order with Vara Allied. While the order was in progress, Vara Allied visited the factory as part of a more extensive trip to China to check that manufacturing was on track.
By changing suppliers, our client saved 10% on his first order. However, the most significant saving was our client’s time and reduced frustration levels. Vara Allied looks after everything for our client including the manufacturing, shipping, insurance, paperwork and customs.
Our client has more time to work on growing the business, safe in the knowledge he has consistently high-quality products from a reliable manufacturer. The business is on track to grow exponentially and order more product.
Has your Business Experienced Similar Problems?
Our client’s experiences are nothing new. We hear similar stories of frustration from people who are dealing with Chinese factories or an agent with little success. If your business has manufactured goods in China and suffered from inconsistent quality, poor communication or unexplained pricing fluctuations, see Manufacturer Sourcing for more information, call Vara Allied on (08) 6115 0118 or contact us for a quote. We’ll let you know if we think we can help with your type of industry.
