Outsourcing in China Today

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Of course, if you request "delivered duty paid," where the supplier manufactures the goods and gets them all the way to your warehouse for you, that's even less hassle for you, but the cost will be even higher. Often, many people find that China suppliers know the best way to get the goods to the ports. Then importers use third-party firms called "logistics service providers" to get the goods from the port, through customs, and eventually to their warehouses.

What about quality control? How do you put processes in place when your engineers and designers are so far removed from the manufacturing plant?

It's absolutely critical do to two things: get samples made up, with packaging, and review them thoroughly. Second, submit very precise and detailed requirements and instructions for manufacturing your product with the purchase order. The supplier may not have made this product for the U.S. market before, and it could be that the requirements for power cords are different than the supplier is used to. So the more specific you get, the better a job you're doing of avoiding problems late in the process. Because by the time you notice that a problem has occurred, it's too late. You're kind of in trouble!

What about inspections?

Many importers hire a third-party company to do inspections in China so that the mistakes are caught before the product arrives in the U.S. market. If you have the details written down up front, and there's an inspection that turns up a problem, you can show that you've clearly given instructions. Some of the recent problems that have occurred wouldn't have happened if some of these companies had more appropriate inspection processes in place. There's not enough of that happening.

What's different about Chinese business etiquette compared to American business etiquette?

The biggest point to realize is that Americans are very used to fixing a price, agreeing on it, and then that's the deal. Other cultures, including China, are coming from the perspective that when you agree to a price, that's the start of the negotiations. There may be requests for changes along the way, and Americans aren't used to that.

Again, one way to help manage that is to have everything clearly defined up front, in writing, as part of the purchase order. At that point, what may move is materials and deadlines, rather than price, which is still hard for American companies to accept. But I've had the opportunity to talk to a lot of the China suppliers, and I've heard the other side of the story, too. They complain about buyers who put 30% down when their company is in the middle of bankruptcy and then go out of business. So the supplier gets stuck with a huge inventory of manufactured goods that they can't sell. That'll bankrupt a supplier.

It sounds like importing is not for the faint of heart.

There are a lot of challenges on both sides. The key is to take things step by step. Start with having samples made. Then put in a small order. There are a lot of processes to learn, but none of them are rocket science. A lot of folks are doing it successfully, and it's accessible for folks with patience who are willing to learn. I think it's important for businesses to recognize what they're getting into, and to recognize that some product categories, like food and toys, require you to do more work than others. Folks in those categories will need to better understand the steps they need to take to avoid any particular problems, and use the recent incidents in the news as an example of how not to do it.

Karen E. Klein is a business journalist who covers small-business issues for several national publications. She writes her Smart Answers column twice a week.