Sourcing in China: Best Practices for Medical Device Companies
By Kandace Nguyen Fu, Senior Vice President of Pacific Bridge Medical
To provide tips on how to avoid common risks and ensure the success of your China sourcing ventures, Pacific Bridge Medical (PBM)’s blog series, Sourcing in China: Best Practices for Medical Device Companies, will outline the sourcing process and provide tips for effective “best practices”, along with illustrative examples from sourcing projects we have assisted clients with in the past. Start reading from the beginning of the series at Phase 1 – Supplier Search, or navigate to other topics through the links below:
- Phase 1 – Supplier Search
- Phase 2 – Contract Negotiation
- Phase 3 – Purchase Order
- Phase 4 – Customs Requirements
- Phase 5 – Quality Inspections
- Phase 6 – Long-term Supplier Relations
The fourth blog in this series focuses on the topic of ensuring that the Chinese suppliers follow the relevant regulatory requirements, including artwork and packaging specifications.
Obtaining Regulatory Approval
Once the first purchase order has been made, buyers should communicate with the Chinese suppliers regarding the relevant regulatory requirements for customs clearance so the products can be imported into their country. The buyer’s regulatory team and quality control department will need to be very diligent, as Chinese suppliers often make mistakes or mishandle the key details during this phase. Please make sure to check and confirm the following points:
The buyer should send the artwork specifications regarding the logo, colors, labeling, and packaging to the supplier, after which the supplier should confirm that they understand the requirements and provide proofs of the artwork for the buyer to review. The buyer needs to carefully check over the artwork proofs and request any necessary corrections. The supplier may only proceed with the printing once the buyer fully approves of the proofs.
However, even if the buyer meticulously reviews the proofs, there may still be discrepancies between the approved artwork and the final printed copy. Oftentimes, there will be transcription errors in the printed address, product details, and contents, or the artwork may be printed in black and white rather than the required colors. This may be due to the supplier making careless mistakes, misunderstanding the requirements, or attempting to cut costs. Having an on-the-ground representative who speaks Chinese and is familiar with Chinese business practices is very helpful in resolving these issues, as they can communicate directly with the supplier and ensure that the supplier follows all the necessary requirements in-person.
Regulatory Forms for Import/Customs Clearance
Before the Chinese supplier can proceed with full-scale production, they will be required to complete a regulatory form, which should be submitted to the appropriate regulatory agencies of the country the products will be imported to. The buyer’s regulatory team needs to carefully review the documents to make sure that the suppliers properly filled out the form with all the necessary information.
Please be aware that many suppliers do not have a dedicated regulatory department or team. Oftentimes, the person filling out the regulatory forms may be the company’s secretary or a low-level employee who is far from a qualified regulatory professional. In addition, Chinese suppliers do not tend to be very detail-oriented when handling these regulatory forms, as they will often write notes such as “see information on certificate” rather than actually providing the requested information. This type of comment will not be satisfactory to the regulatory authorities and will delay the process of obtaining regulatory approval.
You may need to ask the supplier to revise the regulatory form multiple times, but it is necessary to make sure that the documents submitted to the regulatory authorities are properly completed and free of errors.
Case Study: Resolving Labeling and Artwork Errors
Our client’s domestic regulatory agency instituted new regulations that required our client to revise the labeling and artwork for their continence pad products. PBM corresponded with the Chinese continence pad supplier on our client’s behalf to provide the new product labeling artwork and request that all the product labels be altered to reflect the client’s new artwork. We also advised the supplier to discard any existing product labels with the client’s old artwork, since these outdated labels could no longer be used. However, since the supplier had already printed a large number of product labels with the old artwork, they still tried to use up these labels in the interest of saving on printing and labeling costs.
The quality compliance inspector on PBM’s China team caught the labeling error during the quality inspection we completed at the supplier’s facility. When PBM raised the issue with the Chinese supplier, the supplier claimed that our client had told the supplier directly to use all the existing product labels first, before printing the new labels with the updated artwork. We knew this claim was false.
PBM then initiated a follow up discussion between all three parties: our client, the supplier, and PBM. The aim was to clear up all discrepancies regarding the client’s artwork. PBM brought records of previous written correspondence with the supplier as proof of PBM’s request for the supplier to discard the existing labels.
During the meeting, the supplier finally admitted that they did remember PBM advising them to discard all the existing product labels with the old artwork, and claimed that they had made an “honest mistake” on their end. After extensive negotiation, the supplier agreed to refund our client 25% of the client’s purchase order as an apology for the mistake.
Without proof of previous correspondence with the supplier, it would have been difficult to definitively argue against the supplier’s claims, and the purchase order could have been delayed. Fortunately, PBM’s China team had ample notes and records showing that the client never agreed to continue using the old artwork and labeling for their new products. This case emphasizes the importance of performing thorough quality checks and maintaining proper records when working with Chinese suppliers.
In this case, having a capable and diligent on-the-ground team was critical to resolving the issue. If PBM’s quality compliance inspector had not caught the error while the products were still at the Chinese supplier’s facility, it is likely that there would have been much more serious delays later on during the importing process.
Tune in to next week’s blog on phase 5 of the sourcing process: conducting quality inspections at the Chinese supplier’s facilities!