It is said that if you are not importing today, you are losing margins to your competitors who are importing. And if you are not exporting, you are losing perhaps half of your potential sales.
We’ve all been reading the recent news on the recalls on products from China. It seems that a new products gets added to the list every week. Lately, we’ve seen recalls on tires, toys containing lead paint, seafood, pet food ingredients, disposable chopsticks, toothpaste and even SpongeBob SquarePants products!
It’s no wonder why everybody now reads the country of origin on product labels in grocery stores – you never know what you’re getting! People have a right to be nervous, especially when it comes to food, pets and children. Can China recover from these recent incidents? Do you think the label Made in China will ever be as respected as Made in Japan?
It is now more important than ever to make sure you do things right. This includes identifying reliable vendors/partners, minimizing costly expenses, smoothing the import process and prepare for unknowns. I’d like to share a few insights from my 15 years of Asian manufacturing, importing and exporting to perhaps make your business more profitable.
In reality, today’s recalls are not China’s problems. Yes, the vendors are guilty of cheating. But the substandard products should have never reached our shores, let alone our shelves. They are domestic procurement problems: quality control skipped a beat somewhere along the line. The cheating vendors simply are not being held up to inspections and standards.
It is important to make sure your partners know from the start that you deal in world-class products.
Four Rules to Import By:
➢ Know your vendors/partners
This is the most crucial step as well as the most difficult. The process is to identify potential vendors, evaluate samples and work process, visit their factories and test samples. Only after making several personal contacts should you decide on vendor and place orders.
➢ Know your products
Work with your experienced vendors to improve your products. They will have ideas for you, so ask. They are also experts on packaging, so take advantage of their expertise on both product and container packaging.
➢ Know the import process
The more you know about shipping, duties, customs classifications, inspections, etc., the more money you will save. Your freight forwarder and customs broker may be very good at what they do, but you will need to monitor and guide them through your particular products, shipping methods and local delivery. They know they are there to help you.
➢ Work with excellent logistics partners.
Even though you may contract with a freight forwarder to package your process, you still have a say in many parts of the process, including ports, customs and local delivery. Again, they are the experts in these areas, so ask them for alternatives. Once you import enough, you can work with a logistics company that will facilitate the entire process, including warehousing and fulfillment.
Back to the question: Can China ever recover? I think so.
The truth is that the recalls are a very, very small part of China’s exports. Exports for the first half of this year to $547.6 billion, which is a 27.6 increase over the 2006 first half. So far the value of items directly affected by recalls is about $700 million. That is less than 0.1 per cent of last year’s total exports and an even smaller fraction of this year’s estimated $1.2 billion total. In fact, toys, the main segment affected, account for less than 2 per cent of China’s exports.
China would do good to follow the Tylenol model. In 1982, someone in the Chicago area laced some Tylenol capsules with potassium cyanide. Johnson and Johnson, the makers of Tylenol, issued warnings to hospitals and recalled all Tylenol products within 6 days of the initial reports. A few days later, it was discovered that only capsules were tainted, so the company offered to replace all capsule with solid tablets to all customers. They also took several steps to change the packaging, which is why we now have triple-sealed medicines.
Johnson & Johnson’s handling of the Tylenol scare is now regarded as a model of crisis management. Before the tampering, Tylenol sales were 35% of the market, in days during the scare the market share dropped to 8%, but within a few years it had earned over a 50% market share.
By being pro-active China could clear it’s name. But more importantly, the American companies who’s names are on the products need to move quickly to make the public feel their store shelves are safe. And fix their quality control.
Salt Lake City management consultant John Catalano’s strengths lie in the areas of planning, marketing, trend analysis and organizational development. John has over 34 years of hands-on management and marketing experience, including 16 years international sales, marketing and sourcing. He has 16 years of international business experience, working with German, Dutch, French, Japanese, Chinese, Australian and Singaporean companies.
Catalano is a member of the American Management Association, a licensed real estate agent and holds a Certificate in Import and Export Management from the Bay Area World Trade Center. You can contact him at john@jgcatalano.com.
Tags: china, inspection, lead toys, management systems, mattel, product recall, quality control, recalls
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