Often buyers are focused on saving money, but it’s equally important to find ways to save time. What can we do to keep projects moving forward on schedule?
To answer your question, I’d like to paraphrase some points made by my friend Whit Kelly on the subject. In a blog post he gives 4 common reasons for delays:
1. Incomplete Design Databases
This is the A-#1, super-duper granddaddy of all causes of delays. As I mentioned in some of my blog writings, you really, really, REALLY need to have all the elements of the design finalized before going to production. Leaving even the smallest element of the design open to interpretation will lead to the supplier interpreting it in the way exactly opposite from what you wanted.
2. Payment delay
China is pretty close to a cash economy unless you are a buyer for a Fortune 500 company. All Purchase Orders (POs) will require a deposit, in most cases because the manufacturer is going to use that money to pay cash for the raw materials. Tooling is typically 30% At Time of Order (ATO), 40% at 1st article and 30% at final approval, before delivery. Production is most often 50% ATO and 50% At Time of Shipment (ATS), which means in practice, 100% is due before the product leaves the factory. All these terms are clearly communicated early in the project, but at least 80% of the time, there are delays from clients not paying in a timely fashion.
3. The uncommunicative buyer
It is not uncommon for projects to get caught in the doldrums and go nowhere for days, weeks, even months because the client is AWOL. It is very, very common to play “hurry up and wait”.
4. The buyer who’s in a hurry
While this might seem to be right attitude to keep things moving fast, the buyer who is in a hurry often places speed over accuracy. They want to cut corners, skip prototypes, skip writing a Product Quality Manual (PQM) with us, not bothering to proof-read the PQM, etc. Sometimes this works out, but not often. More commonly when you deviate from the normal project flow, you end up causing more delays.
Chinese vendors screw up all the time, but the delay is not all the vendors’ fault as the four common pitfalls above explain.
Luckily it is easy for the buyers to avoid these pitfalls if they want to keep sourcing projects moving forward on schedule.
For reference, you can read more about Kelly’s Laws of China Sourcing at http://chinasourcinginfo.org/2011/02/10/kelly%E2%80%99s-1st-2nd-laws-of-china-sourcing/