Common Mistakes to Avoid for Achieving Successful China Sourcing


插图1.jpegNobody will disagree with the fact that today China is one of the leading manufacturing hubs of the world. Right from electronic items to various plastic products, you can find almost everything in China. Therefore, it is not at all a surprise that companies from the world are trying to source different products from China.

As a business owner of any manufacturing company or as a purchasing manager, your primary goal is to find a source of high-quality products and raw materials at the best possible price. This can lower your production cost and make your business more competitive.

As a prudent businessman, while sourcing any products from an overseas country, it is essential to evaluate the various challenges and risks involved. Of course, there are many benefits of buying your items from China, but unless you have a proper strategy in place, you may not succeed in your effort.

To have an effective strategic sourcing process, particularly while procuring from a country like China, you must develop certain skills in order to understand various challenges and risks and how to deal with them. Any mistakes committed can be very costly for you too.

Therefore, in this article, we shall try to discuss the various steps that you must take while going for successful sourcing from China and also what are the possible mistakes that you must try to avoid in this process.

For avoiding various common mistakes while going for China sourcing first of all you must know what those mistakes are.

Poor strategy planning

For successful sourcing from China, there must be a strategy in place and that must be planned very well. Often dealing in money and supplies with any foreign country can become too complicated without any well-defined sourcing strategy.

To ensure that you have proper clarity on functionality, price, and product quality, you will need a good plan. It is also critical to ensure that your orders are delivered on time. After adequate verification, trade exhibitions, the internet, and social media can all be used to find suitable vendors.

Failing to audit your supplier

Before you select any Chinese company, you must run a China factory audit. You may either do this yourself by visiting China or through a trustworthy third-party auditor. Doing it personally has the advantage that you can develop a personal rapport with the management of the company, which matters a lot, particularly while doing business with any Chinese company for developing long-term business relationships.

Your checklist must include:

·      The expected quality standards

·      The production capacity according to your current and future needs

·      Technology capabilities.

Not ordering any product samples

No suppliers can produce products by simply looking at your specifications. There can be many communication gaps, perhaps the supplier has failed to see certain finer points that were so much important to meet your quality parameters.

Therefore, it is important to first order a few samples of your required product after explaining your specifications. After getting the sample, you must thoroughly check the samples and check for any deviation. It may take a few iterations to get an approved sample.

Failing to have a stringent manufacturing agreement

For protecting yourself against any future issues and to maintain a clear business relationship, you must sign a very carefully drafted written agreement. Your agreement must include everything in as much elaborate as possible. The following points must be covered:

·      The parties involved

·      Your payment terms

·      Logistics, price, quality, and sample terms

·      Clearly define your desired quality, delivery, and satisfaction  

·      Liability for any contract breaches

·      Choice of law

·      Dispute resolution

·      Arbitration clause

·      Attorney fees

Involve an attorney with you to review your written contract and also explain the various implications of this contract.

Failing to do due diligence on your suppliers

To avoid being scammed, you must ensure that you do due diligence on your potential Chinese suppliers. You may read online reviews from their previous customers and check whether there were any issues with the business.

Check the business license of your supplier, which will give you the following details:

·      The company’s name and address

·      Legal representative

·      Registered capital

·      Official company information

Also, you must verify the local registration of suppliers with the Chinese Authorities for Industry.

Poor cost forecasting

When you obtain a quote from any Chinese supplier, you may start feeling like you have achieved your goal, imagining the profits that you will make. However, there could be a number of hidden charges that you are overlooking when calculating the price of your goods.

When forecasting your cost, you must include the overall landed cost, not just the unit cost that is quoted. This will offer you a better idea of how much finally you will have to pay your Chinese provider in the end.

Lack of any protection for various quality issues and also payments

Because your strategy for China sourcing is international, you will need to put measures in place to protect yourself as well as your money in the event of a disagreement. In such instances, a formal contract will be useful.

You should also select a secure payment option that allows you to easily retrieve your funds in the event of a dispute. The best payment choices for your sourcing strategy in China are to use a certain escrow service or any bank LC (line of credit).

插图3.jpgPoor communication of your needs

Due to cultural variations and a language barrier, your demands may be misunderstood. This could lead to misunderstandings, which could cost you money during any China sourcing process.

Ensure that all specs are written down and reviewed with your supplier. Also, you should encourage children to ask questions when they are unsure and seek clarification when necessary.

Once you get it perfect, the possibilities are truly unlimited. You can build your company on your own terms, without having to deal with the problems that come with dealing with a foreign supplier. Your little effort and insight will help prevent these errors and the resulting setbacks.

The following are 7 helpful tips to set up your strategy for China sourcing:

1. Use a trustworthy sourcing agent

A reliable and trustworthy sourcing agent may take care of your entire sourcing process in China. A sourcing agent can get quotes from certain reliable manufacturers and take care of shipping your products, ensure quality, delivery and be your representative in China.

So, you must select an experienced agent who must have an office in China with a staff who are very proficient in speaking and writing in English besides of course the local Chinese language.

Your agent must be well-versed with Chinese business culture and also be aware of the product that you are planning to do China sourcing. You may take your own time to find such an agent who can easily take care of all your worries and make your sourcing process from China smooth.

You can have the following expectations from a certain reputable sourcing agent in China:

·      Good knowledge and information about manufacturing hubs in China

·      Well-versed in English and local languages and also excellent communication skills

·      Excellent coordination skills

·      Awareness of various compliance rules/regulations

2. Verify the agent’s credentials

Don’t choose the very first name that you get after doing a Google search. Rather take some time in doing research about the agent to verify his track record and credentials. Check the following about the agent:

·      Where is your agent located?

Prefer a certain foreign agent located in China as it is impossible to get full details about any local agent.

·      How long has the agent’s Chinese office been working?

Verify how long the agent is involved in this business.

·      Can the agent provide references?

Ask for references and speak to those references in detail about the agent.

·      How quality concerns are handled by the agent?

You must tell them that you will not accept any substandard product.

·      Whether the agent speaks good English?

Ensure that the agent and his staff are proficient in speaking and writing good English.

3. Have clarity about what you actually want

You must submit a comprehensive specification of the products or materials that you want from your manufacturers for your sourcing process to succeed. Make it crystal clear what you are looking for in a product or any raw material. Don't take anything for granted because doing any business in China differs significantly from doing business in your country.

Failure to offer explicit instructions may cause confusion, and you may receive something other than what you ordered. You will waste a lot of your time and money trying to find the correct things.

If possible, include comprehensive drawings. You may wish to send your supplier a sample piece if you are actively manufacturing your products. If you have to make adjustment, make sure that you provide precise written instructions.

4. Insist on a few samples before placing your order

Despite providing thorough instructions, there is still the possibility that the things you receive will not meet your expectations. As a result, before placing a purchase, always request a sample.

The first sample might or might not meet your requirements. Your suggestions will assist the manufacturer in making improvements to the product.

You must also provide an estimated number of items you will require. If you appear to be a vital business source, the manufacturer is more inclined to pay attention. They may not be as receptive if they believe you would only put a little order.

Take time to thoroughly test a sample product you receive from the manufacturer. Your products must fulfil all of your clients' needs.

5. Take control of the quality aspects

Taking control of quality is the safest approach to source any products from China. If you are unable to pay a visit to the factory yourself, hiring an independent 3rd-party quality inspector is a smart option. Your agent also can assist you in locating a reputable quality inspector.

It will be critical that your quality inspector provide you with an independent view of the products' quality. Always be wary of the people you hire.

It may certainly be a good decision to hire a certain quality inspector but, you cannot do so for every order. Establishing a well-structured plan for quality control is required. 

You and your agent should have a suitable quality management plan in place. Also, you may need to visit China's factories on a regular basis to confirm that the entire quality control plan that you set is working properly.

6. Understand your quality controls

Understanding the following will be helpful for you as a customer:

·      Vetting process: Ensure that your sourcing agent checks the license, experience, track record, and certifications of suppliers and also he made enough efforts.

·      Factory visits: Your sourcing agent must pay a few visits to the factories before recommending you any manufacturer. He must check their production methods and quality systems.

·      Quality certificates: Your representative must verify that the manufacturers with whom they work have legitimate quality certificates. These certificates are not held by all Chinese firms.

·      Certificate of Authorization: This Certificate of Authorization that your agent must provide for you, is evidence that he is authorized for supplying various goods overseas.

插图2.jpg7. Be realistic about the pricing

Indeed, the low-price rates available in China are not available anywhere else in the world. You must, however, keep in mind that you will receive what you will pay for.

Chinese manufacturers are able to deliver affordable goods due to low labour costs and technological improvements. However, it is recommended to stay away from the cheapest items. Manufacturers may scrimp on quality in order to supply you with low-cost goods.

In addition, China's manufacturing industry is flourishing. Every day, new manufacturers and factories emerge. Newcomers may agree to produce your goods at rock-bottom prices, but they will inevitably compromise on quality.

The goods produced by established firms will be of considerably greater quality; but, this quality will come at a higher cost. You must consider pricing when developing a strategy for sourcing from China. However, this may not be the only thing to consider.

You must deliver high-quality products if you want your firm to flourish and your number of loyal clients to increase. You should only work with vendors who offer competitive products without sacrificing quality. Yes, they are a little more expensive, but they are definitely worth it.

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