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After establishing a sourcing office in Shanghai in 2004 by China Sourcing Group, a number of difficulties appeared concerning delivery time. To eliminate the cases of a poor-quality job, the Shanghai management group decided to take measures to improve their delivery standards.
Challenges Associated with New-Product Development
Creating new products is one of the keys to the success of company development. While product sourcing is a profitable venue, it also presents some dangers for young companies. The basic challenges connected with product sourcing include education and culture, protection of intellectual property and copyright, communication, contracts and legal procedures, compliance with certification, and standards, quality, and delivery timing (Johnson).
A search of the proper supplier is the core challenge. It is a bad idea to trust the samples and not check the factory by oneself. Frequently, problems appear in the manufacturing process, which cannot be seen in a few samples. Thus, it is necessary to check the production before starting buying from a place (Johnson). Another thing that can lead to disappointment is the deterioration of quality. If a factory provides a company with an unsatisfactory order and does not agree to take accountability for it, the company is doomed to lose money (Johnson). In the future, it may end up having a lot of products of bad quality, which no one will buy.
Another major challenge concerned with Chinese partners is that they disregard other countries’ intellectual property (IP) rights (Harris). Even if a Chinese company works in cooperation with another organization, it considers the IP solely it’s own. To eliminate such risk, it is necessary to pay to the Chinese partners for product development (Harris). This way, they will not think that IP rights are only theirs.
Challenges Associated with On-Time Delivery
On-time delivery presents a major problem in the manufacturing process. If a company fails to deliver their product promptly, it risks losing its customers. The deficiency of logistics is one of the drivers of poor delivery rates (Selko). Inadequate logistics leads to lost or broken packages, unpleasant communication with the delivery team, slow return process, and absence of specific commodities such as a possibility to try on the things one is buying (Selko).
What is good about e-commerce is its expansion rate over the last years. The factors causing such an increase are a growing number of online purchases, increased online safety, and more buying power (Selko). What is bad about this is that low-quality logistics can undermine the success of e-commerce.
Major causes of Shanghai Group’s late delivery are concerned with insufficient compliance, new product development, rejections of quality control inspections, shortage of parts, and difficulties in communication (O’Connor). The compliance problem is connected with many states having regulations on the use of unsafe materials. Manufacturers needed to adhere to these regulations, which involved not only goods but also the packaging. Late delivery due to compliance regulations is of two types: downstream and upstream (O’Connor). Upstream demands include the customers’ precondition to providing certification and vendor audits prior to agreeing to accept a factory as their supplier. Downstream requirements are connected with clients and importing states becoming very scrupulous about the presence of dangerous materials in products because of an increase in environmental awareness (O’Connor). Thus, the suppliers are obliged to prepare a compliance certificate.
Challenges presented by new product development are connected with late delivery. Additional difficulties are presented by the involvement of new processes and vendors (O’Connor). According to statistics, a big part of untimely delivery is caused by the late appearance of new designs.
Parts shortage is a problem since the parts may be expected from various places. If at least one of the vendors is late, the company cannot finish assembling the products on time (O’Connor). Inspection by quality control is a usual process before shipping the goods. If a product does not pass control, its shipping is delayed, which causes problems for the manufacturer.
Difficulties in communication are caused by the absence of an all-inclusive IT platform at China Sourcing Group. Thus, gathering information is sometimes a problematic issue.
Suggested Actions for Improvement of On-Time Delivery Rate
Since poor delivery rates are partially caused by poor logistics, a good way to improve on-time delivery is to develop logistics methods.
Another suggestion is to provide effective product shipment (ITI Manufacturing Staff). Good export could be performed much faster if the companies had a direct connection with Chinese suppliers.
Personal meetings with Chinese manufacturers will speed up the delivery process (ITI Manufacturing Staff). When communicating with their partners directly, foreign company representatives would feel more responsibility for providing quality goods within the proper time frame.
Sourcing of new products is a profitable enterprise, but it requires a lot of effort and has many regulations. The biggest challenges concerning China’s sourcing include IP rights and on-time delivery. Poor delivery is caused by such facts as compliance demand, communication problems, quality control rejection, parts shortage, and new product development. While these challenges may seem difficult to overcome, it is necessary to deal with them if China Sourcing Group wants to organize successful cooperation with the US.
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Harris, Dan. “China Product Development: What You Need to Know.” China Law Blog, 2016, Web.
ITI Manufacturing Staff. “Resolving Common Concerns with On-Time Product Delivery.” ITI Manufacturing. 2016, Web.
Johnson, Tara. “The Business Owner’s Ethical and Social Responsibility to Quality Product Sourcing.” CPC Strategy. 2016, Web.
O’Connor, Neale. “China Sourcing Group: Delivering on Time.” Asia Case Research Centre, The University of Hong Kong, 2011.
Selko, Adrienne. “Logistics: a Challenge for China’s E-Commerce Growth.” Material Handling and Logistics, 2014, Web.