China is a popular manufacturing hub for outsourcing products. Having said that, all businesses tend to look at China for importing their products due to its low labour costs.
Changing market trends in the Chinese market
If you keep track of the Chinese market regularly, you might have noticed how the Chinese import market has changed. With more and more suppliers emerging in the market, the competition is severe. You might find that the negotiation of MOQ with supplier become harder, especially if you are looking for custom products from China.
The key to ensuring that you get the best suppliers for your products is to change your procurement strategy. You will need to carefully analyse your current procurement process and focus on areas where you can improve.
Secondly, you need to conduct a market analysis and investigate the latest trends adopted by Chinese suppliers. Based on your analysis, you can develop your procurement objectives and use these to negotiate with your Chinese suppliers.
Now as an organization, you might be looking at procuring good-quality goods, with a quick turnaround time at low costs from your Chinese suppliers. This is possible, provided you are dealing with only one product category.
In case of diversified product portfolios, this can be quite challenging since you cannot rely on one supplier to meet your requirements. Here is where you might need to focus on your new procurement strategy.
This can be done in 2 ways:
Focus on the quality aspect
Focus on reducing the cost
Product quality plays a significant role especially if you are dealing with high-end products such as electronics and automobiles. In such situations, you need to do thorough research on your suppliers and choose one that best suits the job.
You might even need to have a backup plan in place if your current supplier would not be able to manufacture products in China on time.
When you are dealing with custom products from China, you need to ensure that you are updated with the current market scenarios. If you are a newbie, you can easily be duped by fraudulent companies.
If you are dealing with bulk requirements, then your focus would be to reduce the costs. In such situations, you need not have to look for specialized suppliers, but rather look for credible ones that can help you with your requirements.
Once you have negotiated the prices, you can begin with the production and ensure that your products are shipped off to the delivery locations.
Now another scenario that you might come across would be wherein you have a requirement of only one-time production of a specific product. In such cases, most of the Chinese suppliers will be a MOQ requirement and will not compromise on the costs.
There are certain procurement practices that many businesses adopt to get good prices from Chinese suppliers. Do note that all these practices have their fair share of pros and cons. No strategy is perfect, but you should know whether it is worth the risk or not.
A few of the common procurement practices followed by businesses are:
1. Negotiating on the prices based on multiple quotes offered by other suppliers
China Trade Show is a common platform for companies to meet potential suppliers and get to know their services. If you are looking for manufacturing custom products from China, then you can meet up with such suppliers and share your requirements with them.
Here, you can get quotes from multiple suppliers and choose the ones best suited to your budget. The benefit of this strategy is:
You get to manufacture your products at low costs
You meet the suppliers face-to-face and get an insight into the services they offer
The downside to this strategy is:
The suppliers might compromise the product quality due to low costs
In some cases, the suppliers might run out of business
2. Working with small clutter of suppliers
Another procurement strategy is working with only specific suppliers based on your requirements. In such situations, you have a long-term contract with the suppliers, and you also get to involve them in the decision-making process of your product. The benefits are:
Both you and the suppliers are aligned with your business goals
You get to hear their opinions and advice when it comes to product customization
The downside includes:
The suppliers might sometime not be experienced to be involved in the decision-making
Some suppliers might not welcome new ideas and may not cooperate with your demands
3. Consolidation of the supplier base
With a consolidated supplier base, you are dealing with a few key suppliers, thereby making it easier for you to negotiate and build rapport with them. The benefits include:
You are assured of top-quality products at reduced costs
You can even bring down your shipping costs
The downside to this is:
Your business can have a negative impact if margins are less
4. Business directly purchases the products without suppliers
If you plan on making custom products as a one-time purchase, say for promotional purposes, then this could be an apt procurement strategy. The benefits of this include:
You can save time and can focus on other aspects of your business
The downside to this is:
You may end up with a huge inventory due to MOQ issues
Whatever procurement strategy you adopt ensure that you weigh the pros and cons. If the top management or suppliers are rigid, then you might have a hard time convincing them otherwise.
Hiring procurement agents to look for Chinese suppliers
Now, that you have your procurement strategies in place, the next step is to choose your suppliers. This might require a bit of hard work and effort on your part. You cannot randomly select suppliers and expect them to manufacture the products. Sourcing platforms like Alibaba or Globalsources.com can offer you a list of suppliers, but how would you verify their credibility?
When it comes to manufacturing custom products from China, it is always better to reel in the experts. Here is where procurement agents can be of help to you. Procurement agents are well-versed in the local markets and can help you find the perfect suppliers.
If you have any specific requirements, they will know which suppliers to contact and help you get good rates. Now, if this is your first time looking for procurement agents, you might need to be mindful of certain red flags:
Agents keep insisting on certain suppliers based on their relationship with them
Agents are hesitant to give references for their clients
They agree to everything that you put forth on the table
Credible procurement agencies will carefully understand your business requirements, evaluate the background of the suppliers, and then share their findings with you. They will also perform factory audit in China and ensure that the suppliers are all compliant before giving you the green signal to work with them.
When it comes to procurement agents, you might want to understand the services that they offer. Some might only be willing to share the supplier information, whereas others might extend their services to customs, branding, and China inspections.
Last, but not least, you also need to be updated on the fee structure of these agents. Common fee structures include commission-based or fixed prices.
Patience is the key when it comes to working with Chinese suppliers. You need to tread carefully and ensure that you have complete knowledge of the Chinese outsourcing market before you commit to their services.