Pen Type-A: a cautionary tale of manufacturing in China
gist.github.com
gist.github.com
Sure I can read it by scrolling back and forth or downloading it and opening it in something that will format it nicely and perhaps I missed the "make readable" button. But serious it is 2012, there are dozens of ways to publish things on the web that format them automatically for the browser to people can "just read" them.
</rant>
Like someone else said, a company's attention to detail shows up pretty much everywhere.
Project Update #27: The Storm
For backers only, Posted by cw&t
Hi backers!
First, for those of you still waiting for your pen(s), we're still on schedule. The schedule was posted a few updates ago (update #22). The 3 remaining batches are shipped from our manufacturer in China on
July 7th (480 pens)
July 23rd (480)
August 7th (494)
In the last couple months, we fought hard to speed up production. We advanced more money and were promised ship dates by our manufacturer and none were met. In their eyes, delays were caused by us because we were so picky about the details, but the truth is we weren't asking for anything out of the ordinary. All we asked for was for them to follow the specifications in our drawings they agreed to on day one. They weren't able to meet the specifications, so they blamed production delays on little changes made during production to help make the pen more manufacturable.
To try to move things forward faster, we proposed to place a new order with our manufacturer in exchange for ramping up production. Instead, they countered our offer and demanded we sign an exclusive 4 year contract, place a new order immediately and pay an additional engineering fee, or they would stop production of the current order.
We weren't interested in a 4 year exclusive contract with a manufacturer that hadn't proved itself, so we didn't sign. On top of that, they took our olive branch (the proposal to place a new order), sharpened it into a shank and started stabbing us with it (metaphorically, of course, with lawyers).
They stopped shipping us pens. We lost some sleep. Lawyers got involved. There was yelling over email, in person, and on phone calls. After many weeks, we arrived at a compromise. We lost a lot of time, some money, and our faith in Chinese manufacturing, but we're still moving forward. They won't be ramping up, but they are completing this order and making pens (that we are super excited about!) without changing the shipping schedule.
We're not placing any future orders with them or any manufacturer in China ever again. It's an unfortunate conclusion, we can't even begin to tell you how pissed off we are with them. It's the first and hopefully last time we'll yell in a business relationship. It's not how we like to do things.
This all happened at the beginning of May. We have been aching to share this, but we had to wait until the storm settled. We were mislead, and in turn, we mislead you. We thought we would finish fulfilling all 5.5k pens in a timely manner. Many of you are understandably frustrated and upset that a project you backed is taking a year to complete. We are too, and we sincerely apologize. We've made poor business decisions and we only have ourselves to blame.
We learned our lesson. We're now setting up to manufacture our next order of pens in Vermont, USA. We won't be able to sell the pen for $50, but we're happy to be out of China. Vermont lacks the charm of smoggy skies and broken english, but when Vermont says they can do it, they mean it.
lots of love,
cw&t
PS. your drawings from us are coming soon! (2 of them are at the bottom) we have about 110 so far and many more to go.
PPS We get butterflies every time we see your drawings. Keep them coming! http://pentype-a.tumblr.com/submit
Check out some of the latest drawings (and some great pen hacks!) http://pentype-a.tumblr.com/
Now you can take your naive, tarbrush, self-adoring brand of racism, sandblast it, polish it and and stick it up your ass.
(Thanks for reposting, ars!)
(1) He signed a contract with a manufacturer. During the signing of the contract, the company intentially sealed the contract with a red stamp that looked official, but was not that companies legal red stamp. They did this so that if anything happened they would have an out if there were a dispute. A dispute eventually arose and my friend found out the hard way to always have those stamps double-checked to make sure they are legit and represent the business with whom they were doing business. Had my friend been literate in Chinese, he probably would have caught this, but the Chinese manufacturer intentionally exploited his illiteracy in Chinese to produce a contract that could not be enforced.
(2) On more than one occasion he would be called by a manufacturer to be informed that the clothes had been produced and were ready to be shipped and that all he had to do was deposit the rest of the money and they would ship the clothes. After once discovering that the manufacturer had not even begun production, but was lying to him to cover a cash flow problem he made it a point of always flying out to the manufacture's plant the very next morning to personally inspect the entire shipment before depositing money in the account. After he started doing this, he repeatedly came across many manufacturers that were caught completely unprepared by his unannounced trip and when he arrived he discovered that no work had been done. This tactic to solve cash flow issues is apparently a semi-common occurrence.
Ask any foreign national that has ever worked (not just lived as a student) and you'll come across many many stories like the two above. I have my own stories from the times I taught public speaking to Phds in China.
TBH, I personally don't attribute it to race or nationality. It's just that many businesses in China have yet to move beyond a "caveat emptor" approach to business to a trust based system. A "pareto optimality" mindset prevails there. So many businesses transactions are negotiated on the Chinese side as "A dollar they get in this is a dollar lost for me" while the foreigners (depending on the country they are from, of course) are negotiating with the intention of long term continued business and that the long-term relationship will be far more profitable for both sides than trying to maximize short term returns. If there is any miscommunication, it's not because of language, but because the Chinese business is looking at it as a short term deal and the foreign side is looking at it as a long term relationship.
Just to be fair, most markets at one point in their development have been "caveat emptor markets". Europe and the US included. At some point a market eventually gets past that mindset once trust becomes a competitive advantage. In China, trust isn't yet seen as a competitive advantage because there are still many naive foreigners coming to China to manufacture things without knowing any better. Once the supply of naive business men going to China to manufacture stuff dries up, I reckon you'll see more competition based on trust.
I don't mean to be snarky, but if this guy can't even post readable text on a website, it makes me question how valuable his advice can be.
When it comes to contracting out work, the first time is always going to suck. This whole industry has figured exactly who needs to provide what, and what every word they use means, and you'll always miss something. Ideally, you have somebody who's done it before coaching you through the process (well worth hiring a consultant do that and save you some stress).
Less ideally, ask the people you are interfacing with a lot of questions. Clarifications about what a word means. Or how they count days. Every step of the way, ask them "what do you need from me? how can I speed this up and make it easier for you? what's the next step and when does it happen? did we miss anything?" Ask if they can send you example of the documents that they need, so that you know the format and type of content they want.
Yes, it's a lot of leg work. It's worth it when the manufacturing goes right, though. And it gets easier every time.
Isn't finding a reliable consultant who has gone through the hoops as difficult as sourcing manufacturing itself?
Frankly, my story is useless - it is one entrepreneur's story of woe in a sea full of them. However, when you take stories like mine, Pen Type-A's, and the legions of others that have had problems in China, something more macro starts to emerge.
I'm beginning to detect a strong country of origin bias against China - many people are refusing to contract work out to that country. If this trend strengthens, it will affect demand for Chinese manufacturing. As demand drops, the Chinese economy will be starved of the western currency that has fueled its unbelievable growth.
I'm not crying wolf, rather I'm just seeing some ugly clouds growing over the horizon...granted, getting screwed by a Chinese factory is nothing new, but....??
That's what China is all about: mass (with a capital M) manufacturing. In pen type a's case, the up front costs and haggling are a major trouble but for an order serveral orders of magnitude larger, the up front costs are a mere rounding error.
Don't be so sure about that. China itself is currently the main growth driver for consumer goods, even for companies like Apple.
Thing is, the Chinese demand is met through RMB - the RMB has a whole ton of problems. My concern is that items like potash and oil (which the Chinese are hungry for) will become too expensive to keep the growth moving.
However, I haven't thought about your perspective, so I'm likely wrong. Thanks a lot for your feedback - it gives me something new to think about!!
http://www.kickstarter.com/projects/cwandt/pen-type-a-a-mini...
... As we got into the car to head to the other factories, the factory owner conveniently disappeared and we were whisked off with his assistant and a machinist. It was unclear where we were going. After a long drive, the car stopped and we were told to get out. There was no factory.
We were on a dark, narrow road where every storefront was some variation of a live/work machine shop. Each one different. Each one specialized. A whole town of them, crammed side by side on narrow streets lit only by the glow of naked fluorescent bulbs. Think Bladerunner meets pre-industrial metal shops. The energy was palpable. Clean? No. Could we find it on a map? No. Could we have ever imagined that a factory work is outsourced to places like this? Definitely not. And even though we had never seen anything like it before, we could recognize it straight away. Every shop was run by highly skilled, passionate, self-taught makers. A lot like the shops many of our friends back home run. They are their own bosses. They live for and are proud of their work. This was nothing like the factory where we spent the past few days. It was invigorating.
The man that machines the screw parts is awesome and his setup is incredible. He has six CNC swiss screw machines in a storefront garage, in the back room is his office, a small kitchenette, a toilet (which you flush by pouring a bucket of water into it) and a small room off the back where he and his wife sleep. ...
(I received my Pen Type-A a month or two ago, by the way. It's well made and is a pleasure to use.)
Have you had similar issues?
I know of at least one niche electronics manufacturer - they have the parts made in China, but they load the firmware back in Australia. They've gone to great lengths to make the device useless without the firmware. It's a bit of a pain shipping-wise, but gives them some security.
And the Kickstarter is here:
http://www.kickstarter.com/projects/cwandt/pen-type-a-a-mini...
Honestly, I'm not sure why their made-in-china pens cost $50 each. It's a five cent block of aluminium that's been hit with a laser. That probably costs $1 to make in China and $20 in the US (worst case). Selling it for $50 still leaves plenty of money for the designers.
Anyway, their decision is reasonable. Hiring people in your own country is easier than hiring people half the world away. If two Chinese guys wanted to make a similar pen, I'm sure they'd be successful in China.
Then you have to ship to yourself. And then re-package and ship out to your customers. And be ready to deal with people complaining about them. And some will get lost in the mail (not your fault, but if you want to be awesome, you treat it as if it is). And you have to pay yourself. And the person un-boxing and re-boxing the pens. And you worked on it before there was a Kickstarter for it, so you should probably pay yourself for that time.
And maybe, maybe, you want some money left over so that you can afford to front the cash for your next run, instead of always counting on Kickstarter projects. It's not always easy.
From reading http://www.chinalawblog.com/, it seems one solution is to include an arbitration clause. You can take them to arbitration in the US, using US law, and get the decision enforced by arbitration treaties. But you'd want legal advice for this - if you mess up, the you can end up in a no-man's land where the Chinese courts refuse to see you (because you've specified a foreign legal jurisdiction), and refuse to enforce a foreign ruling because it's not in their jurisdiction.
Also, you want some things in Chinese. If anything gets used in a Chinese court, it gets translated to Chinese. If the other party manages to influence the official translation (or the official translation is just wrong), it's not going to be fun trying to change the courts mind.
Whatever the case, working with a Chinese supplier requires a good OEM agreement, written with the advice of a lawyer who knows the ins and outs of Chinese OEM agreements. It's not easy, but it's better than your supplier seeing you as an easy mark.
There is always the "unreasonable counter offer" once they know there is almost no way back for you. There is always yelling (but not insulting!), that's a normal part of the negotiation process.
It sounds to me like your "manufacturer" is already the distrubutor of whatever-pen-you-invented in Asia. Its not uncommon that they produce for their client and then produce another batch for themselves and sell it in China. Kinda like Zuckerberg did when he made Facebook while "working for" some other dudes. Standard practise in China.
Anyway, producing something inovative in China usually means having somebody there to check up in person and each step of the way. And spell out the contract very precisely down to the last screw. Never expect "reasonableness", it is always seen as an opportunity to make a few extra bucks. And a mainland Chinese company boss will discuss for a whole day to gain 10 Kuai extra.
Ymmv, that's only my personal experience after some years in China.
That sounds a lot like getting something innovative made anywhere in the world. If you are producing your first batch of any innovative product, make sure you hire a very very chilled out and friendly expert who can speak the same language as the manufacturer, and who can virtually camp next to the factory for the first three batches. If you don't do this, then you are either making something easy with large margins and don't care about wastage, or you just don't care.
Pen Type-A is a cautionary tale of overestimating your abilities, and of why Kickstarter is unlikely to have any sort of transformative impact.
Having read through the "updates" section of their Kickstarter page, it is clear to me that nobody on the team knows anything about manufacturing, least of all Chinese manufacturing. I am completely unsurprised by the fact that two amateurs end up making lots of amateurish mistakes.
This situation is no different from what happens when a non-technical manager tries to outsource a software development project. He doesn't know enough to spot good working practices or recognise when he's being fobbed off. He doesn't understand the myriad technical issues that could completely derail a project. He's a child in the big bad world, unaware of how little he knows, or how costly his naivety could be.
But this works fine only as long as some guy makes the same pens and starts selling for prices way lesser than you do.
This is the reason why China exists. Because there is 'Some guy' who always sells things for prices lesser than somebody else. And not manufacturing in China isn't an option for companies like Apple, Dell etc. For their volume, the cost advantage is simply too huge.
People dream up a product
Other people give them money
First people gives money to China and hope product materializes
Also, this is only a sob history. Nobody will learn anything from it. How did they find factories in China? How did they find one in the us?