Our world has never been this connected. We depend hugely on imports and exports for our economies to keep functioning. E-commerce and digital marketing have revolutionized the way businesses all around the world function now. In this increasingly competitive world, business owners are seeking ways to not just be creative with their product and service lines, but to also procure the highest quality raw materials and outdoor products from China at the lowest cost possible.
As a consequence, the concept of global sourcing has become highly relevant in today’s market scenario. While there are many experts globally who can be consulted for export management strategies, there is little knowledge and emphasis on procurement and sourcing at a global level.
Although buyers and sellers work on different dynamics and both need to invest time, focus, and commitment in the process, global sourcing is an efficient way to reduce cost and establish an operation chain that functions effortlessly. China is considered as one of the best destinations for sourcing outdoor products made in China as per global quality standards.
We all know that finding smarter ways of getting the work done and hard work lays the foundation stone for any successful business organization. However, this alone cannot bring in profits in the competitive world that we live in today. While the core functioning of any business around the globe is to provide something of value for their clients and end-customers, be it a product, knowledge, or service.
The key factors that allow a business entity to reach its goals and make them profitable are 2:
When business volume is the only way to generate profitability, business owners need to think out of the box to optimize costs at various operational levels such as:
Minimizing the costs of procurement and sourcing of raw materials.
Minimizing operational costs using automation.
Continuously striving for quality keeps you operational in the niche market for a very long-time.
Both these steps can only be achieved if have solid strategies in place for sourcing and quality control.
Globalization has allowed many major players in the industrial sector to have a manufacturing facility in part of the world, an administrative office in the other, and the selling market in yet another. Global markets ensure that goods and services can move seamlessly throughout the world and have led to major trends in the process of sourcing outdoor products direct from China and other industrial goods from various sourcing destinations.
Some of these changing trends are:
Cost optimization by global sourcing: Due to the connectedness of global markets, reduced interference from governments, and better logistics; global sourcing is the new preferred and highly cost-effective trend.
The emergence of sourcing partners: Local sourcing partnering agencies are emerging to help companies in procuring the best possible products from local markets of the country, performing quality control, and making the entire process work seamlessly.
Use of green logistics: Most companies have become environmentally responsive and the use of green logistics to reduce carbon footprint is the trend now.
Maintenance of highest quality standards: While quantity does bring profits, it is quality that is a major focus of global industries now. Faster procurement while maintaining the quality standards in the agenda that is followed everywhere.
Developing nations see sourcing as the means to expand their economies and improve employment conditions domestically. Global sourcing has created specialized manufacturing hubs in China.
Procuring outdoor products from China or any other sourcing country should be based on the cost-effectiveness, geographical advantages providing easy and faster logistics, maintenance of global quality standards, and political stability in the source country.
China is a low-cost manufacturing hub. The capabilities, operational, and cost advantages of sourcing outdoor garden products direct from China cannot be replicated elsewhere. It is the fastest-growing economy. Many third parties function as sourcing agencies to carry out the important tasks of supply chain operations including quality checks and arrangement of logistics.
The 3 key areas that give an upper hand to China as a global market are:
Tax incentives are provided by the government to those involved in the manufacturing process.
60% of growth in GDP in China has come from manufacturing alone in the last 10 years.
There are many multinationals established in the country that use domestic companies for the production of various goods for selling in the international market.
The availability of labor is not just massive but also very cheap compared to many American and UK states.
This reduces overall operational costs and makes sourcing from China a beneficial strategy.
These provide easy availability of maritime logistics to keep the supply chain operational without any hurdles.
China has segmented the industries based on the goods line they are manufacturing.
Each segment is based in a different province which makes it easier for international companies to locate and directly deal with the suppliers.
With stricter quality norms, the Chinese manufacturing units now focus heavily on achieving the standard quality parameters.
The entire process of sourcing outdoor products from China involves 6 main processes or steps that are carried out with utmost transparency to mitigate the risks that are involved in large-scale operations. Following are the steps involved in the global sourcing process:
This is the first step that should be carried out by the purchase and supply team.
They should collaborate with people from all departments to analyze the need of sourcing various goods or services.
This should include the volume of goods required, whether they require raw materials, a component, or a finished good, and its packaging requirements.
The team also needs to analyze the logistics requirements and custom clearance permits, licenses, and regulations of both the countries involved.
In the second step after we have listed our internal needs, we need to make a thorough assessment of the supplier market.
We need to list down the best source market for our specific product need in terms of cost-effectiveness, lower risk profile, lower government regulations, and easy availability.
You need to assess the market according to your purpose, whether you want a finished good in which case you will need to analyze the manufacturing process or procure the raw materials.
You will be analyzing the custom requirements, taxes payable, and international trade rules of the source country.
You will also be assessing different modes of transportation through which you can procure the products.
The third steps involve making a list of suppliers or choose a sourcing agent.
You will compare each supplier in terms of their production capabilities, costs they offer, and quality standards they can maintain.
If you are not choosing a sourcing agent, you will also have to carry to factory visits and look at the supplier’s customer reviews.
Verification of the license and registration details of the sourcing partner needs to be done with due diligence to lower the risks as much as possible.
List out your goals and evaluate if the sourcing is a one-time process or a repeatable one.
Based on cost and risk evaluation, you need to formulate a sourcing strategy.
Your strategy must include if you are going to directly work with the supplier or you will be partnering with a sourcing agent.
If there are no middlemen, you can directly ask the suppliers for quotations.
After evaluating all the factors, you will calculate the bid according to the unit price of the product and payment terms.
The unit price should be inclusive of transportation costs and costs incurred in fulfilling the custom and other legal requirements.
Once you have selected the supplier, you will list down negotiation terms that must include purchase volume, discounts available, costs of transportation, and payment terms.
After both the parties agree to these terms, communicate the quality parameters clearly to the supplier.
In the next step, you can ask the supplier to produce and send a sample for verification.
Once the sample is verified, the final contract is made and signed by both parties.
Sourcing agents make the entire experience hassle-free. They are reliable and licensed to work as the middlemen between the foreign company and the destination from where goods or raw materials are sourced. In the absence of sourcing agents, sourcing outdoor products from China or any other source country would be very difficult.
They have adequate personnel to perform major functions in the operational chain such as:
They identify local suppliers who can meet the global quality standards in their services and goods.
Their presence in the local markets is such that they can easily facilitate negotiations in bulk pricing.
They arrange for sourcing of the samples and once approved, final drafting of the contract is initiated by them.
Once the manufacturing process begins, they carry out factory visits, coordinate with logistics for packing and transportation, and perform quality checks at all levels.
They do the entire paperwork that is needed for customs clearance.
In short, they take over the entire operation chain.
Indeed, sourcing agents are important in performing above mentioned activities but one should be careful to do a thorough check about their experience in the niche market, their licenses and registrations, and reviews. You must also make sure that they have staff that can easily communicate with you in the English language and has an excellent presence and contacts in the local markets.
For those who do not have an established international base for their business and are just new in the field, procurement and sourcing of plastic and outdoor products made in China can prove to be a very daunting task. The language and cultural barriers, legal and custom barriers, geographical barriers, and risks associated with the absence of a thorough understanding of the local market, could make it almost impossible for them to handle the operational chain.
Here is where a sourcing company can be of great help. They will have networks with established companies for manufacturing, sourcing, and supply chain. They connect qualified producers with international companies and ensure that the entire process is carried out through a transparent channel.
There is an overwhelmingly long list of producers in China, but unless you know the market in and out, it is very difficult to choose the right ones. China based sourcing company can carry out all this work for you with much ease. They will have quality inspectors who carry out quality checks during the entire production process.
Sourcing companies help their international clients procure products from China at the lowest price possible, while maintaining quality standards and timely delivery. They hire bilingual support staff and facilitate efficient communication at all stages of the operation chain. There will not be any language barriers.
Procuring and sourcing products from global sources always helps business owners in removing production hurdles that they have to face locally. Sometimes the manufacturing unit is available but one of the components or a part of the raw material is difficult to obtain locally. In such scenarios, sourcing outdoor products made in China is the most competitive strategy to keep the operational lines functioning. There are many other benefits of global sourcing such as:
Tax incentives, cheaper labor costs, and cheaper raw materials drastically reduce the production cost in the country from where you are sourcing.
When the raw materials are not easily available in the domestic market, globally sourcing the final product results in reduced lead time.
Segmented establishment of clusters of manufacturing units of the same kind of products helps the buyer in getting the best quality product at competitive prices.
Product diversification that comes with sourcing products from the global market results in expansion of the business operations giving you an edge over your competitors.
Although there are many advantages of sourcing outdoor products made in China or even the raw materials in some cases, it is not easy for new establishments to make connections in the local market and source products as there are many challenges and hurdles that one has to face in the process. Some of the challenged that global sourcing strategies have to face are:
Maintaining an effective communication line is difficult due to local language barriers (Mandarin in China) in the source country.
Lack of control on the product cycle can result in lower quality in the final product or increased spending and reliability on third-party quality checks.
Each sourcing country has different political and labor laws which can sometimes result in delays in the overall production line.
Custom clearance laws of some countries are very rigid resulting in further delays.
Arrangement of logistics is another factor that is a challenge you have to face when you are not in the domestic market.
You need help from local third parties who have the technical knowledge about the entire process and can effectively communicate in the local language at the base level. This is an additional cost that you will have to incur.
Even though there are many hurdles to global sourcing, it is getting easier with technological advancements and is still very beneficial for the expansion of the business. We can easily use global sourcing to our advantage by overcoming some of these hurdles with the following practices:
Use the internet to your advantage and perform thorough research to analyze the opportunities present in the source country, shortlist the suppliers, and do a background check on them.
Planning well ahead in time regarding any in-field factory visits to ensure that the production line is in sync with your quality parameters could save you a lot of money.
You can take help from a professional sourcing company that is proficient in handling all the challenges listed above in their local markets.
Establish a clear communication line during the entire operational cycle and pay particular attention to the scrutiny process before signing a contract.
Many companies are now relying on global sourcing as it is coming up as the cheapest procurement option. The best way to handle global sourcing successfully in markets such as China is by gaining some expertise in the field and by identifying the complexities involved in the production line. Come up with ways to overcome the challenges that you will face while sourcing outdoor products made in China.
Formulate the right strategy that can allow you to carry out the same operational line again and again without causing any major delays. Effective communication and focus on quality are the keys to finding success with global sourcing.