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China sourcing

The annual price conversation, and what has to exist before you open it

A yearly price review is not a negotiation you prepare in the week before. It is decided by what you recorded during the twelve months that came before it, and by what you can offer that costs the factory nothing.

France → China

Every buyer with a settled supplier arrives at the same moment: the price has not moved for a while, the volume has grown, and it feels as though something should be given back. The conversation usually opens with a percentage and closes with a polite refusal, because the request has no material behind it. A factory answers a demand with a position; it answers a document with a calculation.

What the year has to have produced

None of this is built in a week, which is the point. Each item is a line you add when it happens, in a file that takes minutes a month. Its value is that it is yours, dated, and not disputable a year later.

  • Volume, month by month, in units and in value. Not a total: the shape of the year, which is what tells a factory whether you smooth its line or make it jump.
  • Defects, by cause rather than by count. Ten returns with one root cause is a conversation about a process. Ten returns with ten causes is a conversation about the relationship.
  • Dates: promised, confirmed, shipped. Three columns per order. The gap between the second and the third is the only honest measure of lead time, and it is never the one in the quotation.
  • Every change you asked for, and who paid for it. Engineering changes, artwork revisions, urgent splits. A factory that absorbed several of them remembers, even if it never invoiced.
  • Your own record as a customer. Payments on time, forecasts that held, orders confirmed when you said they would be. This is the part that gives the request its standing.

Asking for a reduction, and asking for an explanation

« We need a lower price » invites one answer: no, or a token. « Our volume has roughly doubled and the price has not moved — help me understand which parts of your cost changed with the volume and which did not » invites a different one. The second question is harder to refuse, because refusing it means saying that nothing in the cost structure responds to quantity, which is not true and both of you know it.

The difference is not politeness, it is where the work lands. A demand asks the factory to give something up. A question asks it to open a calculation — and once the calculation is on the table, the movement that follows is argued rather than conceded, which means it survives the next order. A price given reluctantly comes back as a thinner component, a slower answer or a longer queue.

What actually moves a factory

A factory's real constraints are cash, load and uncertainty. Almost everything a buyer can offer for free addresses one of the three, and each one is worth more to the factory than it costs you.

What you offerWhat it solves for the factoryWhat it costs you
A committed annual volume, even a modest onePlanning: it can buy material and book capacity in one go instead of order by orderThe discipline of honouring it — so commit to the floor, not the hope
A rolling forecast you actually updateUncertainty: it stops keeping spare capacity idle for youAn hour a month, and the honesty to revise it downwards too
Fewer references, longer runsChangeovers: setup time is paid by someone, and it is youA real look at which variants sell
Faster payment, or a larger depositCash, which is the constraint most factories feel firstYour own working capital — count it before offering it
Simplification you propose yourselfCost: a tolerance that was never needed, a finish nobody sees, a test that duplicates anotherEngineering time, and the humility to ask what is expensive in your own drawing

When in the year the answer can be different

Timing does not create room, but it decides whether the room that exists is available. Two windows work. The first is when the factory is building its order book for the coming year and an annual commitment is worth something to it; the second is when the line is quiet and filling it has its own value. The weeks before the New Year break are the opposite of both: everything is late, everyone is saturated, and nobody is doing arithmetic.

The other timing question is the frequency. A buyer who reopens the price every quarter teaches the factory to quote defensively, which raises the starting point of every quotation afterwards. Once a year, at a moment both sides expect, with material on the table, is a rhythm a supplier can live with — and it is the rhythm that makes the next one possible.

Decide in advance what you will do with a refusal. If the answer is nothing, you are not negotiating, you are asking — which is fine, but say it that way rather than making a threat you will not carry out. A threat that is not executed costs more than the reduction was worth.

Questions we get on this.

How often should a price be renegotiated?

Once a year, at a moment both sides expect, is the rhythm that keeps a supplier working with you. More often teaches the factory to build a cushion into every quotation, and you pay for that cushion on every order in between. The exception is a material clause, which has its own periodicity and works in both directions.

What if the factory simply refuses?

Then ask what would have to change for the answer to be different — volume, packaging, a tolerance, the payment term. A refusal that comes with a condition is a price list in disguise. A refusal with no condition attached, from a supplier whose quality and dates are good, is worth accepting for the year rather than damaging a relationship that is working.

Should I show competing quotes?

Only if they are real and comparable, on the same specification and the same Incoterm, and only if you would genuinely move. A quote a factory can tell is not for the same product destroys your standing for the rest of the conversation, and the factory can usually tell.