Frequently Asked Questions (FAQs)

1. We have reduced our purchasing costs significantly over the last few years but we still need to do more just to remain competitive. We know that some of our competitors are working with Chinese companies but we feel that it is too risky for us - how do we do it?

Working with Chinese companies has its risks. DABA Services has developed an approach to get companies up and running rapidly with Chinese manufacturers. It is suggested that a gradual ramp up is used instead of a big bang approach. Of course, some companies need to take more drastic action just to survive.

2. We have heard that it takes many months, if not years, to get up and running with Chinese suppliers. How do we collapse the timescales?

You are right, establishing a good working relationship does take a very long time in China. The Western system works using legal contracts. In China, business is done on the basis of trust (known as Quanxi in Mandarin) and is much more important than legal contracts. DABA Services has established these relationships with a small number of respected companies and you can be buying from China in a matter of days.

3. Product quality is an issue with Chinese companies. How do we make sure that we get world class quality levels from our Chinese suppliers?

Chinese manufacturing companies have notoriously low quality levels. DABA has identified a small number of “good” companies and has worked with them to improve their quality system and practices to bring them up to international standards. In addition, DABA can provide various independent quality inspections (including final inspection and raw material inspection). You should consider the fact that many “quality” Western and Japanese products are now actually made in China – next time you buy a mobile phone or TV just look at where it is made!

4. What types of parts and products are suitable for manufacturing in China?

Although must types of products and parts can be made cheaper in China the really big savings are with high volume parts and products that require labour intensive operations. Having parts or products that are stable and are not subject to frequent design changes also helps but is not essential. Even with airfreight costs, tooling and molds can offer huge financial benefits.

5. How do we make sure that sourcing from China will not increase our overheads in Purchasing and Finance?

DABA has established a network of companies that will provide a “door to door” service for you. This includes quality inspection, Chinese Customs Clearance, Shipping, Insurance, British Customs Clearance and delivery to your factory. DABA will provide an “all in” quote with the service elements that you require so that you can compare costs with local suppliers. DABA does all the “administration” for you.

6. How should we start making stuff in China?

DABA suggests that you start in a small way to gain confidence in working with Chinese companies. Identify parts that you currently purchase from local suppliers and get quotes through DABA from Chinese companies to quantify the benefits. DABA can “hold your hand” through the negotiations and delivery of the parts to your door.

7. Are there any special Contract Terms?

Chinese companies are reluctant to do business with new overseas companies on a credit basis. DABA Services has secured more favorable terms than is normal in China with the main suppliers. Even so, you should expect to pay a down payment and use Letters of Credit.

8. What are the next steps?

After a few months you will become confident in working with a small number of Chinese suppliers. There are a number of potential next steps and the most appropriate course of action will depend on your unique circumstances. Getting a Chinese company involved in your design process may be the right move. As your new low cost suppliers have changed your business economics your make vs buy criteria should be reviewed. Sourcing sub-assemblies or the complete outsourcing of products could give you the edge over your competitors. You could go as far as establishing your own operations in China (Representative Office, Joint Venture or Wholly Owned Foreign Investment). Your next move should be more than just “cost down” it should offer you sustainable competitive advantage.

9. What does DABA Services provide?

DABA Services has close working relationships with four “quality” companies. It is these connections that will allow you to quickly source engineered parts and products from these companies. The proven quality of these companies also de-risks the sourcing of parts and products from China. Most of DABA’s costs are paid by these companies on an Agency basis and are therefore at no cost to the British companies. DABA also takes the hassle out of managing the global supply chain (customs, shipping, insurance, etc.) and provides a door to door service.

10. How do I contact DABA Services?

Email: info@daba.co.uk or phone +44 (0)161 833 9895.

 

© 2006 DABA Services Ltd.