How to Settle Factory Claims in China More Successfully - Part Three - Advice For Your Negotiations
August 16, 2008
How to Settle Factory Claims in China More Successfully - Part Three - Advice For Your Negotiations
How to Settle Factory Claims in China More Successfully - Part Three - Advice For Your Negotiations
By Klaus-Dieter Hanke
Presenting the Facts
After the small talk with the factory management, it is time to get down to hard business. Present all necessary evidence (e.g. documents, statements, invoices and samples) to your supplier. Present everything that you have to the decision maker to convince him of his responsibility and hopefully he will accept fault.
Samples of a defective product are especially effective at proving your case because they can be handed over and everybody can directly see the problem.
A nice prepared folder or binder containing all of the documents and photos can help you in your presentation (perhaps several copies for the other managers as well). It would be great if you have a Chinese translation prepared for the non-English speaking members of the management team.
Consequences the Claim will have for Your Company
Clearly point out to your supplier the consequences the claim has already had on your company (e.g. loss of turnover, loss of customer confidence, loss of reputation as a quality importer). Additionally you should explain future consequences this claim will have if it is not solved soon. Never assume the supplier knows these things. He may understand little about how business is conducted in your home country.
Listen to Your Supplier’s Arguments
Although you may be frustrated and even angry with your supplier, you are well advised to listen to his arguments before making demands. Remember he is in control of a large organization, often much larger than your own company, and deserves some respect. He will try rejecting your claim but you still must listen to him before proposing a settlement.
Line out Your Settlement Proposal
Lining out the details of your settlement proposal is very important. If something is unclear or misunderstood, this is the time to straighten it out. Usually suppliers will ask for a written copy of your proposed settlement to review before the meeting. There is nothing wrong with this but a personal presentation gives it more weight.
Listen to Your Supplier’s Reply
Your supplier has to reply to your proposal and now he may have new ideas for solving the problem. Be patient if you want to achieve anything. You came to solve the claim and must be willing to invest sufficient time.
Give Your Supplier Time to Reconsider
It is very unlikely that your claim will be settled on the first attempt. It may be necessary to give your supplier some extra time to reconsider all the information presented and the proposed settlement. He also may want to investigate details with his company or seek outside advice.
It would be perfect timing if it were time for lunch or dinner. Take a break from the serious discussions and have a meal with your supplier. They may try to ply you with some heavy drinking but that is part of the game. Join in if you want. It may lead to an easier resolution of the problem.
Another Meeting and Hopefully a Revised Proposal
During the next meeting, which could be within the next one or two days, listen carefully to any revised proposals your supplier comes back with.
Most likely they will propose some solution if your arguments and evidence were sufficient. If they still reject your claim or insist on a previous proposal, you may have to take a tougher approach by insisting a new proposal be put on the table.
Calculate the Losses
It is very unlikely that you will recover all of your cost. If your supplier offers a compromise, you have to do the math again to determine if the result is acceptable for you. If their proposal is insufficient, make another counter proposal or request a time for another meeting to bring back a counter proposal. However, this only makes sense if you have the feeling it will help to improve the outcome.
If you feel that the supplier will not be open to an improved offer, you might as well make a decision now whether you want to continue meeting or accept their current offer. Terminating the arrangement with your existing supplier should only be done as a last resort because it is very unlikely that they will voluntarily compensate your company for anything at that point.
As you can see, you need to invest in sufficient time for your meetings and must be patient if your want to achieve a favorable claim settlement.
Klaus-Dieter Hanke
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