E-Sourcing Forum » Supplier Identification in China

Supplier Identification in China

August 14th, 2008 at 04:49am David Bush - Iasta

Knowledge@Wharton had an interview with David Lee, of Boston Consulting Group, on the topic of China sourcing, covered on Supply Chain Brain. The interview is very in-depth on the issues with managing the sourcing process where China is involved. One particular area of focus was regarding supplier identification and outreach.

Chinese suppliers do not always have the same capabilities and the quality level can be highly uneven.

But on top of that, we have a very non-transparent supplier market. We don’t have, for example, a lot of the supplier databases that you would like to have in the Western world. When they first come to China, the first major problem a lot of companies face is: Where do you find a good supplier? There are definitely a lot of suppliers out there, but whether you can find a good one will be a big question.

In the West, things are relatively easy in terms of identifying the supplier market, so you can always go to some database and download a list of suppliers that are capable.

In China, there’s no such database. Everybody says they have some database, but our experience has been that most of the databases are about 50% wrong and then another 10% to 20% are outdated. So, you never really can find a very good supplier database.

Often, you need to do a lot of legwork before you can do the sourcing activities. This becomes very dangerous and very difficult for a lot of people who have no experience working in China. We have seen in a number of companies, when they do China sourcing, instead of casting a wide net to find the right supplier, they usually follow whoever your competitors are sourcing from and go find those suppliers.

I think these are very accurate and educated statements. The concept of embedded/integrated supplier networks in an eSourcing tool comes up frequently. Many practitioners think a supplier database will be a pot of gold, revealing all the best suppliers that China has to offer. This is simply not the case, no matter what database is being used. I agree with David Lee that traditional Western countries have good data that is accurate and can be trusted, but LCCS countries have very unreliable data.

Most sourcing projects involving LCCS suppliers should involve a multi-faceted approach to building a quality supply base. First, static data can be used to cast a wide net. After that, suppliers should be cross-linked and qualified through other sources, like an eSourcing supplier list that can be verified of past participation and a history of work and performance with demanding purchasing organizations. Additionally, I would always recommend the investigation of bringing in consultants that have experience with the category and supply base. Sourcing from China is a major decision with long lasting impact (good, bad or both), upfront investment will contain some of the risk that will undoubtedly exist.

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Entry Filed under: General, Global Supply Issues/Risk, Interviews, Suppliers

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