What is a bait and switch strategy in the China Sourcing context?

The bait and switch strategy does happen, whether you’re dealing with the trading company or sometimes even with the manufacturer themselves.  You need to be explicit “We visit this factory; I want the production take place here at the location we visit.”  When we post about contracts as a next blog series soon, I’ll explain to you how to actually put those terms on paper and to control the situation, so it’s more likely to happen that your product is not outsourced.

Middlemen Series -Bait and Switch Strategy

Speaking of outsourcing, at some level, something is outsourced.  So let’s just be open and honest with our suppliers.  What I mean by that is, let’s say you’re buying plastic comb.  I haven’t purchased a plastic comb for a long time, obviously, but let’s say that you’re buying a plastic comb.  Plastic is ultimately based on petroleum.  It came out of the ground as oil at one point, then it was converted into raw material, then it was converted into plastic pallets, and then those plastic pallets were purchased in bulk, fed into a plastic injection machine where the pellets are melted and pushed into a mold to make that comb, our plastic comb.

In reality, the supplier probably didn’t purchase the petroleum and converted into pallets.  They bought the pallets, and then stock in their equipment, and did the injected plastics.  So something is outsourced.  That’s a bit of an exaggeration.  Maybe when you ask the question “Do you outsource anything,” the factory says “no,” they’re thinking “Do they outsourcing the key production methods?  Are the key production done in-house or outsourced?” 

Red Flag Assessment

When someone says outsourcing, on some level everything is outsourced.  So to avoid the bait and switch strategy as buyers, you need to be specific and say:

  • Which parts of the production methods are done under your roof? 
  • Which ones are outsourced commonly? 
  • Which ones might be outsourced if you get really busy?

I’ve had situations where I visited factories, placed the order, and they got an order from Disney for millions of units.  So my 10,000 units aren’t so important.  But rather than deliver the stuff late, they took my order and gave it to another factory. However, I will also include this on the next series blog post about contact so that you will know how to get protected when situation like this occur.

So sometimes you have that bait-and-switch for marketing purposes, but also the outsourcing can happen when your production goes somewhere else, and you don’t know about it.  If you don’t know who’s producing your product, how are you going to do the quality control, how are you going to make sure that your intellectual property is protected, how are you going to communicate with the people on the production line to make sure that everything goes right.  Do I like to tell my suppliers “If you’re going to outsource it, which aspects of the production are outsourced?  And if you need to outsource the whole thing because of time constraints, let’s talk about it in advance, explain to me the reasons why.  If those reasons are legitimate, we’ll do it at the new factory.” 

So there’re ways to work with your supplier, and we’re going to cover these in the next blog post in this series …

INSIDERS REPORT & RATE SHEET
China Sourcing: 10 Common Mistakes

 

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About the Author: Michael J. Bellamy

About the Author: Michael J. Bellamy

Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses.  Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.

A featured presenter on China issues at seminars, trade shows and corporate events across the globe.

Learn more about Mike and AsiaBridge Law at
https://www.asiabridgelaw.com/business-advisory-services/

Mike is the author of “The Essential Reference Guide to China Sourcing
(available on Amazon).

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