Successful organizations are aware that to increase profit and growth they have to take risks like adding new products or expanding in new territories or acquire another business or tap into online channels. Pricing is also a factor that needs serious consideration.
Fortunately, reducing material costs is a great way. Sourcing and procurement can have a direct and significant impact on the bottom-line. The savings obtained from sourcing and procurement strategy enables organizations to reinvest in tools, equipment, technology, personnel, and services, and drive enhanced performance for growth.
In this post, let’s understand global sourcing strategies, benefits, challenges, and how to order product from China.
Global sourcing - Sourcing is a synonym for outsourcing. Sourcing focuses on leveraging low production and labor costs from other countries. For example, the majority of companies buy products from China because it is one of the low-cost sourcing destinations. Global sourcing is not strictly limited to cheap production but it aims to tap into new talents or resources that are domestically unavailable.
Sourcing partners - A sourcing partner locates a suitable product supplier and helps in briefings and negotiations with the chosen supplier. They make it easy for international companies to order products from China without any compromise on quality and prices.
Green logistics - Green logistics is not limited to transportation or delivery methods. It includes warehousing, packaging, material handling, transport terminal, distribution, and disposal. The green logistic process minimizes environmental damage while maintaining efficiency. Eco-friendly customers can buy products from China because the country’s initiative towards green logistic technology is better than other foreign countries.
Global quality standards - China joined the World Trade Organization, so it is stricter about their products' quality standards. Therefore ordering products from China is possible without the concern about quality.
If you plan to order products from China then approach a right sourcing agency. Make sure they offer complete transparency, quality, and pricing. Sourcing agencies offer -
Product sourcing - The initial step is to understand your business objectives and quality needs. The sourcing agent obtains quotes from the best manufacturers and determines an appropriate one based on lead-time, cost, and quality. They send samples for review after accepting the quotation. After samples are approved, a trial run is arranged, and after you gain confidence mass production is started. The shipping process is on time and you can track it down.
Manufacturing control- Pre-production inspection, on-line inspection, and pre-shipment inspection are crucial in the manufacturing control procedure. It saves time and probable issues that can pop up later. The inspection team will have good experience and the manufacturing process works on proven practices and industry know-how.
Quality inspection - Quality inspection services include factory audit as well as pre and during product inspection, container loading check, and pre-shipment inspection. The professionals monitor your manufacturers to ensure compliance with safety and quality standards.
Order monitoring - Their project management team of sourcing agencies will be committed to adhering to good practices, which ensures that information regarding possible snags or hitches are delivered to the manufacturing team promptly. This reduces hitches in the production and boosts the overall process.
Sourcing agencies provide highly scalable, consistent, and healthy business continuity for their global clients that are looking to ordering products from China.
China is proven to be a successful global sourcing destination for many organizations. Businesses can buy products from China because of the following reasons or benefits.
Your aim is growth and expansion, so it becomes essential to partner with foreign manufacturers from developing countries. A successful organization can outsource its labour-intensive processes to developing nations offering cheap human labor. This allows lower production costs and ultimately the savings can be shared with potential customers.
Businesses with insufficient infrastructure find it hard to the manufacturer as expected. If they approach low-cost developed countries then they can use their infrastructure to produce goods in large volumes at a speedy rate. It increases production capacity but lessens overall production cost. For example, an automobile business can outsource their parts manufacturing unit to a low-cost country with advanced technology or order electronics from a nation charging less tariff.
One country is better in technology, while the other country has talent. Global sourcing allows tapping capabilities, resources, and skills, which are unavailable at home. It decreases supply risk and you obtain cheap products or services even when the extra taxes & transportation costs are included.
How can global sourcing be challenging?With the benefits of low production or labor costs, global sourcing accompanies certain challenges. Mitigating these challenges has to be included in an efficient global sourcing strategy.
If you or your supplier is not in-fluent in English a common language then there can be delays and misunderstandings. It is even suggested to have verbal communication supported by written approvals and crucial documents translated. It is even suggested that you hire an expert linguistic or sourcing agent in the supplier nation.
The supplier is on foreign turf and precious time is lost in waiting for their response to queries. Therefore, it is necessary to have a representative or in-country staff being present there, who can communicate quickly with the supplier, whenever needed.
It is not sensible to depend on international suppliers to approve that quality standards are fulfilled. It is essential to have quality inspections before ordered products leave the country it was produced. Hire quality inspectors for a product review on the factory site. You can even hire a sourcing agency that offers quality inspection onsite.
Developing countries like India, China, Vietnam, etc. must adhere to quality criteria, social responsibility, as well as environmental & safety standards. Suppliers need to know the expectations and standards for compliance. Therefore regular audits of the foreign supplier are essential. Sourcing agents perform audits and quality assurance inspections to ensure compliance.
On-time deliveries are crucial. Delays can turn out to be costly as you may have the orders shipped by air rather than sea or pay a penalty to customers. Therefore it is essential to understand lead times thoroughly. Have clear and open communication associated with the production process to stay on top of deadlines. Sourcing agents establish and monitor production schedules to ensure consistent on-time deliveries.
Logistics must be of utmost priority for your global supply chain tactic as things can go off beam. Ensure that the supplier is proactive and has a contingency plan to handle unexpected delays and sudden obstacles [unnecessary shutdowns, labor unrest, transport disruption, etc.]. Partnering with a reliable product sourcing agency is a wise decision because their skilled logistic team ensures that the order gets delivered on time without any quality issues as expected.
Investigation & research - Identify operational activities, market needs and assess your competitors. It helps to understand business goals and the target market to position your brand in the global market. A solid procurement plan helps to detect sourcing scope.
Evaluate market & supplier - Create parameters for hiring reliable suppliers. The sourcing agent will help in determining the suppliers choosing parameters and prepare a list. Requests for information are sent to the listed suppliers.
Choose a suitable supplier - Based on the response from suppliers, the sourcing expert will prepare a final supplier list as many will not respond to the request for information. The chosen suppliers will offer an estimate or quote. After thorough research and comparison, the suitable supplier is informed about the deadline of product delivery.
Implement sourcing process - The sourcing agency will create a strategy and work schedule. It is a stage where resources, as well as shared supply & logistic arrangements, are made. The sourcing agency even monitors regular performance and sends reports to your company.
Monitor performance - Suppliers' performance is evaluated based on resources and procedures employed. The report helps to understand communication extent with suppliers. In case of collaboration issues, efforts can be taken to reduce it. Performance monitoring helps to maintain an effective global sourcing process.
Easy accessibility - Ensure that traveling to an outsourcing country is easy, whenever needed. After entering into a partnership with a sourcing company in another nation, you will often need to pay visits.
Low costs - Confirm the costs regarding the sourcing process are as low as possible and do not affect your business revenue. Consider the production costs, taxes, and tariffs to be incurred. Ensure that the cash saved from the global sourcing initiative does not get lost in transportation expenses.
Appropriate laws - Supplying country’s law has to be favorable or you will need to consider another sourcing destination.
Clear communication - You need to understand the country’s language and culture as you plan to establish long-term business relations.
The international purchase process is successful, if you consider the costs, working capital, payment terms, product quality, statutory policies, supply chain risks, political stability, bureaucracy, trade tariffs, and economical status of the supplier’s country.
There are other aspects like supplier’s flexibility to respond to demand changes, your capability to track clients' demand scale, lead time involved, ability to stop flawed products reaching your customers, and relationship of both countries [yours and suppliers].
The key reason to partner with a sourcing agency is you will possibly find suppliers offering high-quality products on time. It is hard to follow up with foreign suppliers and you cannot monitor the product quality you ordered. Unlike face-to-face, communication is also unclear and inefficient between you and the supplier.
A sourcing agent representing you means they belong to your supplier’s country and are aware of how to navigate better than you.
They can spot scams instantly. As you are in a different nation, you are unaware of the supplier’s integrity. Sourcing experts are aware of such scam suppliers and keep you alerted.
Pay suppliers only after you are 100% sure about product quality. The sourcing team performs an onsite in-person quality check, so you are 100% certain about product quality.
They can discover new suppliers, which offer quality level products at fair rates.
No issue about language and culture barrier as the sourcing agent is native.
They do all the legwork.
They even help these suppliers develop new styles of products.
They assist in quality control, market research, pre-shipment inspection, supplier network development, and customs clearance. Therefore investing in sourcing agencies reduces the overall operating cost and increases revenue.
A professional sourcing company acts as a reliable middleman, prepared to invest their efforts and time. They ensure that you gain access to trustworthy suppliers and attain the right merchandise at possibly low cost. Sourcing agents help you minimize costs, maximize profits, and save time.
Why is China an ideal sourcing destination?China has become a massive global sourcing destination for sourcing manufacturer’s suppliers, and wholesalers of different products. You can buy products from China ranging from electronics and medical devices to clothing and footwear to furniture and appliances. It is one of the largest Asian countries and the primary trading partner of the US. Its strength is in producing an array of products at low costs and buyers are spoilt for choosing suppliers.
Nevertheless, the country’s economic policy has developed to encourage exports, which is a win-win scenario for every stakeholder involved in trading. China’s human resources are vast and paired with the Government’s drive to welcome international importers is remarkable.
China is a port for budding new worldwide businesses. Below are some steps on how to order product from China, if you desire to assess your entrepreneurial wisdom.
Do you wish to buy a product suitable to sell in your market then do extensive research in your niche to identify if the chosen product will penetrate the market? Check the demand and supply aspect or must you consider product variations. Check local suppliers to gain solid knowledge sufficient enough to deal with the Chinese dealers. Know your product prices locally to gain an idea of profit margins before moving to the next step.
If you have offices of Chinese suppliers within your country then pay a visit, check their catalogues, communicate with their home office in China and review their products. Take your time to research before choosing a reliable supplier.
Chinese entrepreneurs are shrewd and follow strong business ethics. Perform a comprehensive product price analysis of different suppliers to gain an idea of the local Chinese market rates before you choose a supplier and finalize a deal. Mutual trust is essential for business growth and long-term relationship with the supplier. International trade is based on trust, which can last for generations.
The quotations and prices from the Chinese supplier will seem appealing. Consider tariffs on some products imported to your country, which can add up. Government imposes high tariffs to discourage imports of certain goods. The government even earns from these payments and the funds are used in country development projects. Research the tariffs in advance to perform a cost-benefit analysis and gain an idea of possible profit margin.
You even have to consider the bans on some products like Alcohol. It is put rightly banned in several Muslim countries, while the same product will be sold at double the price in Malaysia. International trade reveals situations that appear to be mysteries but are actually opportunities in disguise.
Shipping back to your homeland will need a trustworthy and reliable freight quote. There are many fees to pay and some bottlenecks that can increase your expenses. It is wise to hire experienced freight forwarding services with good reviews. The product nature will determine the option like air or sea freight. Your shipments can be tracked with ease and if there are delays you can inquire.
Local custom clearance is the last step you will need to do. Hire a customs broker because the customs officers in several countries are ill-famed for bribery and delay tactics because of declared goods value discrepancies. You will need to pay import duty as required by law. After shipment is cleared, move it out and transport the merchandise to a local warehouse.
Sourcing companies offer the gateway to their foreign clients to buy products in China with consistent quality, on-time deliveries, and relatively low production costs. It is hard to find reliable new suppliers, so you will need to do some research to find the right sourcing agency.
By outsourcing your procurement needs to the best sourcing partner, you can enjoy consistent quality and supply at a low cost. Simultaneously, you can avoid unreliable supply, quality problems, cultural differences, language barriers, and currency handling. With QC inspectors, your orders are mass-produced as per standards. Quality control is crucial for building your company because the products you sell must exceed or meet customer expectations.
Sourcing agents are a shortcut in locating an ideal supplier on foreign land. They eliminate the heavy legwork and lessen the risks involved in partnering with a new supplier.