Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Throughout my almost four decade career in business, the growth of foreign trade on an export and import basis has been remarkable for the amount and pace of change.  Over these years, we have witnessed nothing short of tectonic upheaval in economic terms.  One example is the migration of manufacturing jobs from west to east by the tens of millions.  

The economic structure of the western industrialized world has shifted away from making goods and more to delivering service. For the professional buyer, sourcing from so called “low cost countries” has long ago moved from common place to mandatory.  China is a curious and unique low cost source country. 

China 

This manufacturer to the world is also a leading economic power, surpassing Germany in 2009 to become the third largest country in GDP after the US and Japan.  China is not a “free market” country.  Rather, it falls into the State capitalism category

Its reputation for manufacturing prowess has attracted the attention of the rest of the world.  But Chinese suppliers must be developed and managed if the west is to optimize the foreign trade potential.  

Large international corporations often maintain sourcing offices in China.  This serves the Chinese supplier by building the relationship, educating the customer in Chinese culture and traditions, and getting the parties to better understand how the other reasons and decides.  For those who remember when US business started outsourcing to Mexico, the intellectual experience has parallels.  For instance, the Mexican employment rules seemed odd and inscrutable to me as an American but once I understood that the rate of pay was not near as important as the number of people working, the cultural barriers were easier to overcome.   

The sophisticated western customer western has business processes in place that the Chinese supplier does not fully understand. Some examples are supplier certification, supplier evaluation, quality, capacity, and financial audits, management policies, reference checks, plant visits, logistic verifications, and in today’s environmental sensitive world, RoHS  compliance and ISO 14000  registrations.  Instead, the suppliers trumpet their low prices. 

Small to mid size western businesses  

The mid to small size western buyers cannot afford a sourcing office in China, nor are they willing to risk jumping on the low price.  The global recession has created a buyer’s market.  Low cost countries like India have seen the gains made by China and are redoubling their efforts so the western customer has more choices. 

Add to this mix the well publicized troubles that the world has experienced with Chinese products, both in quality and toxicity, and the western buyer is understandably cautious.  This is a perfect example of how a low price can create an enormously high, even fatal Total Cost of Ownership.  

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The economic slowdown has softened demand thereby increasing the sales activity by Chinese suppliers.  I have received hundreds of such broadcast emails, many of which must be retrieved from the spam folder. They are all pretty similar inviting the customer to buy from them without expressing any knowledge of what the customer does, its needs, requirements and the like.  Their sole aim is to sell via the internet on the lure of price alone.  This naive and silly attempt to do business indicates the supplier’s philosophy of using a scatter gun to spray the entire western business world with tiny bits of irrelevant information in the hopes that some (however miniscule proportion) will respond.  They should be using the accuracy of a rifle in their marketing and sales efforts to carefully target the prospects and serve them in a way the customer understands. 

For the mid and small size western customer, the gulf to the Chinese supplier remains to be bridged. 

Agents 

Another form of contact, and a far more effective one, has been personal contact from Chinese agents who want to specifically target market sectors such as machine parts, rubber and plastics, consumer goods, and many others.  Typically, these agents claim to represent an associating of suppliers and claim that all the suppliers are fully qualified.  At the same time, they are not certain what the western customer’s qualifications standards are.  Price again appears to be the main qualification. 

These agents often want me to approach western customers to negotiate sales.  When I point out that the qualification issue must be proven, the negotiation starts to fall apart.  They invite me to come to China, visit the plants, interview the people observe the processes, and video record the entire month’s worth of activity. 

For those interested in buying from China, please contact me at RobertMenard@RobertMenard.com