Start Expecting Production and Lead Time Increases from Chinese Suppliers
When dealing with suppliers in China, production and lead times are always an important factor to consider in your supply chain and inventory management planning. Typically, buyers start seeing increased lead times with their suppliers starting in around mid-July or early August.
For those without a calendar, this means that you can expect to see these increases starting NOW!
Factories are starting to see an increase in order volume due to the Holiday rush that happens every year. And when they state a certain lead time, they have to factor in much more than just the time it takes to assemble your product. They have to account for raw material orders from sub-contractors, storage of materials, quality control, compliance testing, etc. In short; there are multiple factors in play when factories calculate and quote you production lead times.
You Can Increase Your Odds for On-Time Delivery
No matter if you’re working with a factory directly or using a 3rd party management service, you can expect these delays in almost every product category. Successful buyers will have a plan for this and it usually consists of the only two things you can control:
2. Purchase Agreement Delay Clauses
2. Purchase Agreement Delay Clauses
You should have your production calendar flagged so you know that delays and lead times in Chinese manufacturing always increase during the summer. This way, you can ensure that your inventory is not affected by any of these potential increases in production or delivery time.
The second thing you can do is to make sure you have a delay clause in your purchase agreement. Since the majority of suppliers here in China will take your order, no matter how backlogged they are, it would be wise to at least attempt to ensure that your production is completed without delays.
A simple paragraph in your purchase agreement (which should be in English and Mandarin) stating that if your production is not completed by the agreed upon date, that $XX will be deducted from your balance as a penalty. And this penalty will be applied for each additional day that it takes to fulfill your order.
As we have stated before, as well as many other blogs that deal with Chinese manufacturing, it’s extremely difficult to enforce any type of contract in China. However, in our experience, customers who spend the time and resources to make certain they have valid purchase agreements are usually much less likely to be taken advantage of.
Put yourself in the supplier’s shoes: you have 10 orders that will potentially be delayed. How do you decide which one to complete first? Probably the order that has a purchase agreement with a penalty clause for production delays, right? Especially if the other orders contain no such language, or even more likely; don’t have any sort of purchase agreement or sales contract at all!
What Have We Learned?
You should have a plan every year to ensure your products get to their final destination in with plenty of time to spare. Whether you’re ordering your holiday inventory or planning a new product launch, you’ll want to make sure you place the order before the factory lead times become an issue. You should also make sure any contracts or purchase agreements contain some sort of penalty for delays (in addition to defect penalties as well).
Doing these two small things may tilt the scales in your favor. Especially when a factory has to choose which orders to complete on time and which to push back.