Many believe that China will soon overtake the United States as the world’s greatest economy in the twenty-first century. China remains the most affordable nation for retailers and manufacturers to obtain goods or parts, notwithstanding recent increases in relative manufacturing costs there.
Having a sound sourcing process and strategy is essential for ensuring the safest possible solution when buying from China. An individual, customised sourcing checklist can quickly elevate an inexperienced importer to an expert one.
Every importer has a different strategy for navigating the confusion of global trade. Below, we have emphasised the fundamental sourcing approach that all importers ought to follow as a general rule. This would make it easier to assure security and safety when importing and producing in China.
1. Identify a product
Pick a good product that you can make a little bit better and stick with it. If it is your first experience, consider it a learning moment. A further step must be taken after selecting the product you want to be manufactured to determine all required elements and requirements.
2. Create a specification sheet for the product
Before choosing suppliers, be careful to create a very thorough list of the product specifications. The majority of product development firms have a template product specification sheet that they complete with all the information about the product.
This makes sure there are no misunderstandings when a factory receives a request for a quote.
3. Product validation
Why spend weeks looking for suppliers when you don’t yet know what the possible manufacturing costs would be? Early on, you can save time and money by developing a manufacturing cost analysis and validating your product.
4. Identify 50 to 100 potential suppliers
You should compile a lengthy list of potential vendors using the Sourcing Guide. Include anyone who even remotely has the ability to produce your goods. Your chances of discovering the ideal provider increase with the sample size.
5. Narrow down your suppliers to just 5
Start becoming more stringent about the conditions that a supplier must meet in order for you to do business with them as it becomes harder and harder to rule out potential providers.
Don’t just accept what is left, if you are not content with your choice, add another 20 to 50 vendors to your list and restart this sourcing process step once again.
6. Place sample orders
It is time to compare the output quality of the five qualified vendors. Order samples from each of the five, have them delivered to you and start contrasting the main variations.
At this stage of your sourcing strategy, you can start taking price into account as well.
Start bargaining with your suppliers today. Establish your priorities first, then work with your provider to achieve them by talking about them. Remember that your product quality will nearly always suffer if low price is your top priority. Rather negotiate on payment terms and conditions.
8. Identify your key supplier
You should evaluate each of your suppliers to see which one exhibits the most qualifying skills as part of your sourcing process at this point.
Once you have done that, check your earlier product specification sheet to make sure they can fulfil your product criteria.
9. Create production requirements and purchase agreements
This is the moment to gather your documentation, whether you want a Performa Invoice or a Production Manual, and go over it with your supplier to make sure everyone is on the same page and fully understands it.
10. Make initial payment
Verify everything, then proceed with the payment. Avoid using PayPal since Chinese suppliers hate it because of the fees. Additionally, it lets them know that you are not a serious buyer.
11. Maintain weekly production updates
Make sure to seek detailed production progress reports every week in addition to checking in frequently. Make it a habit to ask the supplier to notify you as soon as possible if there are any problems so you can plan ahead and address them.
12. Organize freight forwarder collection
Send your freight forwarder the specifics of your shipment, along with the contact information for your supplier, so they can set up collection after the manufacture is finished.
13. FBA prep and organization
Make sure your sourcing process includes a clear plan for labelling and preparing your products in accordance with Amazon’s specifications.
To avoid your supplier from learning about your sales channel, if you choose to use a third party rather than your supplier, make sure this is set up before the products have ended production.
14. Quality control
Have your products inspected at all times. Use the inspection type that best fits your order out of the many available options, but does not ignore this one. If needed you can also consider a third-party inspection.
Make sure your items reach your forwarder and that all the necessary paperwork is ready for their delivery to the destination. This covers all information about customs, duties, and taxes. All of this will be taken care of by an experienced SCM.
16. Trading Company
If you only need a few things and don’t want to deal with the difficulties of sourcing in China, a trading firm can be a smart choice. Your charges will often be greater as a result of the trading company’s profit margin on the sourced items.
Additionally, it will be challenging to locate information on the supply chain, and you still need to keep an eye out for problems with product quality.
For international businesses, sourcing products in China comes with a number of dangers, including subpar products, fraud, and challenges enforcing contracts. Of course, not all of these risks are specific to China, but given that it is still developing, the possibility of them is frequently considerably higher than in industrialised nations.
However, if you do your homework beforehand and proceed with caution, the possibility of large expense reduction might make this risk worthwhile.
The checklists mentioned above are a must-have when creating a sourcing process to independently locate suppliers in China. Even though the actions listed above are what we consider to be the absolute minimum, it never hurts to add a few more.