Sourcing from China

There are quite a lot of effort and things to consider when sourcing from China. Here are five tips to get you started.

1. Spend time looking for the right supplier

‍A Google, Bing or Yahoo search is the default option for many people seeking to source products from China. You can also go to online sourcing platforms such as Alibaba, Global Sources and Made in China, which connect buyers to suppliers in China.

While all these resources are useful to draw up a shortlist, it is important to remember that many businesses thrown up by search engines and sourcing platforms may be resellers and not manufacturers. While sourcing from such middlemen may be ok if you are buying products to retail such as toys, clothes or cheap electronics, when you require products that must meet specific technical requirements such as die casts, metal stamping and plastic injection molding it is best to identify a manufacturer and source from them directly. Most importantly, this also reduces costs.

Online sourcing platforms such as Alibaba and Global Sources, also rate their suppliers, which could help in the shortlisting process. Alibaba, for instance, gives its suppliers “gold” ratings, which purchasers see as a sign of trustworthiness. However, it is important to remember that any supplier who pays Alibaba an annual fee for premium membership can get gold supplier status, which increases the vendor’s visibility on the site. That is therefore not exactly a very trustworthy reliability indicator.

2. Verify suppliers

‍Once you shortlist suppliers, you need to verify their credentials. While some obvious information is available online, you need to evaluate:

1. Whether they are indeed the factory and not a middleman.
2. Whether they have the technical expertise and production capability to deliver what they say they can deliver.

There are many ways you can do this. You could ask the factory for its audited accounts, check its Value Added Tax invoice, ask for product samples. You could also identify the factory’s Chinese name, its location and the local government office under whose jurisdiction it falls. This office will have the factory’s registration records, which you can use to verify the details they have provided to you.  

3. Remember that quality is directly proportional to cost

Why do purchasers across the world look at suppliers in China for their requirements? One of the primary reasons is low manufacturing costs, which even with the add-ons of shipping charges and duties ends up being cheaper for the purchaser than sourcing from elsewhere in the West. While negotiating with potential suppliers, it is useful to remember that all manufacturers generally have a price floor – the minimum cost to it takes to manufacture the product.

This brings us two points. One, if you have done your research about the product, the costs of raw material and market, you will have an idea of what this price is. Ideally, do not choose suppliers who offer you a price way below this. Two, purchasers with huge orders (the ideal purchasers from the viewpoint of the supplier) may attempt to beat down their chosen supplier’s price even further. Especially for consumer product packaging, you want to use high quality materials. No one want to buy a premium products (like cosmetics) with crappy packaging, all due to an unreasonable price point that will result in corners being cut.

In both cases, remember if suppliers go below their minimum price thresholds, it WILL have an effect elsewhere. It could manifest either in a reduction in the quality of raw material or hurt the workers’ wages or conditions of work. It could also lead to the supplier bypassing steps in the quality control process. In the long run, all this affects not only your product but your reputation and could even have legal implications.

4. Be clear in communication

When sourcing in Asia, one must keep in mind that there is a language and culture gap. Though some bigger suppliers are likely to have English-speaking customer support, many of the problems between suppliers and purchasers can be traced back to misunderstandings in communication. Often “understanding what was said” is not the same as “understanding what was meant!”. None of this is deliberate, of course, but if purchasers keep this in mind, they can protect themselves from costly mistakes and delays.

The communication gap is also why all your requirements – from product specifications to quality and type of packaging to whether instruction manuals are required and their content – must be put in writing, clearly and in a detailed manner. Ideally, do not leave space for the supplier to make any assumptions, and encourage them to ask you questions if they are not clear about something.

5. Quality control inspections

‍While having a good manufacturing agreement is a good way to start your relationship with the supplier, regular quality control inspections are necessary so that you can ensure the quality of your product is up to your standards. This prevents costly mistakes in the future. Research has shown that problems caught later in the production process will always cost more than those caught earlier.

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While these five tips are a good starting point for those inexperienced in the business of sourcing from China, global sourcing agents such as Sourcing Allies take care of a lot of the research and due diligence outlined above. Sourcing Allies, for instance, has a team in China that guides purchasers through the process of getting quotes, evaluating factories, managing the complexities of communicating your manufacturing requirements, quality control inspections, shipping and transportation, administration and most of all ensure the goods arrive at your desired location.

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