The foreign and economic policies of the Trump administration have many businesses wondering how their transactions with international partners will fare. Countries that were once close trade partners and allies, such as China, are now subject to tariffs and other measures that could erode the relationships that companies have worked so hard to build.
In the midst of this turmoil, it’s the responsibility of business leaders to develop and maintain effective relationships with supply chain partners.
Loyalty is among the essential qualities of a successful relationship with a Chinese supplier. The benefits include improved service, priority production slots and greater flexibility when challenges arise, because suppliers know they’ll be doing business with you for the long run.
Chinese suppliers value consistency and continuity in their business relationships, as a means of ensuring reliable, stable sources of income. Because of this, they might be willing to make certain compromises to maintain the relationship. In the case of tariffs or the emergence of other financial troubles, for example, the supplier might be willing to negotiate a more favorable rate so that you don’t leave and set up shop elsewhere.
Determining whether a given supplier relationship is healthy can be difficult. Following are some red flags that might tip you off that a supplier is unreliable and that the relationship is unsustainable:
Communication issues. If there are delayed or nonexistent responses, inconsistent updates and frequent misunderstandings, it implies that your supplier doesn’t value your relationship.
Delivery issues. Late or inconsistent deliveries, and high rates of damaged or incorrect orders, can cause a bigger headache than the relationship is worth. While it’s important to be empathetic, especially if your supplier can provide adequate justification for the issues, consistent poor performance should be cause for concern.
Financial instability. Late payments to their employees or partners, sudden and unexplained changes in pricing, and rumors of bankruptcy or legal issues can all be signs that something is askew with a supplier.
High staff turnover. Whether it’s due to poor working conditions, financial troubles or problems with workplace culture, high turnover should make you reconsider working with that supplier, especially if that turnover is within public-facing positions like your point of contact.
Having formed a healthy relationship with your sourcing partners, you must work to preserve and enrich them. Regular in-person visits are one of the most critical elements in building a successful partnership with a Chinese supplier.
In the early stages of the partnership, it’s vital to forge a personal relationship with the people you’ll be working with. Go out to dinners and other social activities to break the ice and form trust. Remember that showing genuine interest in Chinese culture and respecting their traditions and values is also important. Additionally, it might be worth inviting your partners to America, allowing them to see your culture and business up close.
In-person visits are also key to quality assurance. Ongoing quality audits are part of the expectation and status quo with China suppliers —they expect their U.S. partners, especially those with large purchase orders, to visit periodically to inspect factories and meet with leadership. Doing so helps you ensure your business partners stay consistent with all expectations for quality and maintain compliance with all local and international regulations.
That said, it’s often difficult to have someone on the ground at all times. While large multinational corporations might have the luxury of affording a dedicated China office, most companies don’t.
This is where local sourcing companies come in. They often have dedicated offices in both China and the U.S., helping facilitate the relationship on both sides. Their employees are fluent in Chinese culture and traditions and, being locally based, can more easily form a connection with your sourcing partner. While in-person visits are still important, a professional sourcing company with a team on the ground can serve as your proxy in day-to-day operations.
A dedicated sourcing team can streamline communication and ensure continuous quality control, acting as a bridge between your company and sourcing partners, despite the geographical distance separating you.
Finally, and perhaps most importantly, relationships with Chinese sourcing partners must be flexible and adaptable to change. Just as the U.S. is undergoing a tumultuous time with the Trump Administration’s tariffs, the Chinese market is facing its own issues, such as deflationary pressure. A mutual understanding of these circumstances will allow both sides to be more accommodating to one another’s needs, especially if they see you as a valuable long-term partner.
Building strong relationships with suppliers is one of the most important things you can do in your supply chain. A strong relationship helps you achieve loyalty and consistency, which translates into benefits for both your business and your trade partners. Working with a skilled local team can help you establish and maintain these business relationships with your Chinese suppliers.
Laura Dow is the business director at CPG Sourcing.