Dealing with Problems with Your Supplier

You will eventually have problems with your suppliers. China manufacturing gets portrayed, for better or worse, as having proportionately more problems than the West. Whether or not this is true, the Chinese way of dealing with these problems is vastly different than in the West.

My significant other once made me read a relationship book that taught that in every relationship you make emotional deposits and withdrawals. As long as your account has a positive balance, your relationship will be healthy, and if you make more withdrawals than deposits, it will be unhealthy. The same is true with your relationship with your supplier.

Assuming you are a relatively small company, you must understand that just by placing a relatively small order you are making a relatively small deposit into your relationship with your Supplier. One of the problems I see often is that Westerners over-estimate the size of the deposit their small order represents. Small orders are often fine, but you must be sensitive to how much you can withdraw. If after you receive your first order you complain to your Supplier that one of the boxes you received had a small tear in it and you would like to receive a replacement you have effectively drained your account with your Supplier. They will likely stonewall you and/or refuse to deal with you in the future. In fact, I would suggest that if you ask for any compensation for a relatively minor issue within your first few orders, you will drain your account with your Supplier.

The more withdrawals you make into your Supplier/Buyer account the more deposits you can make. Good types of deposits are:

• Big orders
• Meeting your supplier
• Mailing a small gift during Chinese New Year
• Paying promptly
• Sending limited emails/phone calls back and forth

And by the same token, types of withdrawals:

• Asking for compensation for a small problem
• Sending more emails than necessary
• Asking for unreasonable discounts
• Using any language that causes your supplier to lose face

I've used a bad “Relationship Self Help Book” metaphor but the above really comes down to the Chinese long term view of relationships. For us in the West it can be agonizing the length of time it takes to make these deposits (often years) but it's necessary when doing business in China. For those who are impatient, often they get surprised when their emails no longer get answered by their supplier: a clear sign the bank account has been overdrawn.  However, if you keep a positive balance in your Buyer/Supplier relationship, you can potentially get preferential treatment over their other clients, who may be your competitors, and you can make larger withdrawals.