Dear Frederick,
First off, because I’m a visiting consultant here, I only visit the forums about twice a week to answer questions, so my apologies for getting back to you a little late. The good news is with great guys like Ranger and Aussie here, I get to say “What they said.” quite a bit, which makes my job easier.![[em2]](http://img.alibaba.com/images/eng/style/icon/emoticons_laugh.gif){kind=icon}
From listening to your story, it sounds like your product is fairly complex with 30-45 components. “Quality fade” as Aussie puts it, is definitely going to be an issue. And the fact that it’s art with 30-45 components per piece is not going to make QC easy. Here’s a few suggestions to ensure you’re getting what you pay for, keep your Walgreen’s account, and be positioned for future growth with this supplier. 1) Do your operations audit by a qualified QC company. Ranger’s company is great, I’m sure. A good listed company to consider is Intertek Group PLC. This should help you set a baseline of your supplier’s production capabilities and let you and your QC company know what you’re getting into. (Your audit company can be different from your QC provider.) 2) You and your partner Ralph being there to kick things off is definitely the way to go. Be sure your QC team or contact is there during this time as well – maximize your time with them and your supplier. Make sure your QC contact is an advocate for your interests and is fully aware of the quality issues. I’ve found a very helpful tool in QC is describing what is NOT acceptable quality, and recording the common QC issues you find during your time there. Give specific measurements and acceptable variances on details that are critical to the quality of your product. Put together a QC guide notebook and a standard procedure for inspection that you and your QC rep are in agreement on. 3) Schedule another QC inspection about 30-40% through the production process to make sure your standards are being maintained. Do AT LEAST a 10% sampling.
4a) If you find a defect rate that is beyond your tolerances plan on having a QC person actually work the line of the factory and do intense inspection for several days. I have one client who literally has her QC agent inspect 100% of her product before they back the container. The agent lives there for two weeks prior to shipout and assists in packing the container too.
4b) If your defect rate is acceptable in the initial inspection, plan for one more random inspection, and then a final inspection before packing the container.
5) Calculate cost of inspection as part of the cost of your product. If you find serious quality issues during inspection and your QC costs start adding up, you should be able to negotiate with your supplier to cover some of these costs since these extra costs are a “product” of their company.
6) Plan on random inspections for the life of your relationship with this supplier. It’s worth sleeping well at night.
Regarding a top mainland lawyer, look at Guantao Law (www.guantao.com) I have a contact in Shanghai I can recommend. My opinion of law in is that it is a good preventative tool prior to transfer of funds, and now it’s getting strong at protecting your IP too. So, it is a great tool for drafting up contracts with penalties for nonperformance. Chinese law, in my opinion, is not a good tool when it comes to filing suit and getting compensation for damages or other economic losses. I know many foreigners who have sued Chinese factories, a handful who have won in court, and not a single foreigner who has collected. Your contract should be an agreement that you and your supplier mutually put together and are both agreeable to execute. Don’t try to sneak a clause in there or it will cause more trouble than good.
Please let me know when you’re in Hangzhou. I’ll be going to Yiwu soon and maybe I can treat you to dinner. I went to university there for 2 years. Beautiful place!
Take care,
Rob
