In today’s business environment, no business can ignore the importance of China’s market, as this country has become one of the leading sources of supply. No other country can compete with China in terms of the pricing that Chinese suppliers can offer.
However, sourcing from China is not that easy, particularly for new business companies. Also, with the recent pandemic situation that was created a few years back and geopolitical situations, lots of disruptions have taken place in sourcing and supplier management from China. Many suppliers in China are not able to supply their goods as they could a few years back. As a result, many businesses these days are facing a new challenge to source from China.
This article is trying to develop a strategy so the China direct sourcing process can get streamlined and businesses can continue to get their products at reduced costs.
1. Define your requirements
It is also important to take into consideration a few important factors of your items being sourced, such as lead time, different suppliers, production capacity of each supplier, and product quality. Once you have collected all these data, you will have a complete picture of your requirements. It will help you identify the right product suppliers, and you can negotiate with them properly.
In addition to that, it is also important that you list out all your product requests according to your priority. Some items may be critical, and some others may not be so urgent. Based on that, you can set your priorities and negotiate with the vendors accordingly.
2. Supplier prequalification
There may be many suppliers available in China for the product that you are searching for. However, remember the quality of the products of each supplier may be different. Therefore, based on your requirements, you must categorize them based on their quality and service.
When you are doing supplier prequalification then you must look at their following parameters like your needs, supplier’s capability to supply, quality standard, financial position of the supplier, how long has the supplier been in business, and any other criteria based on your business.
Your supplier qualification process must be robust enough so that you can easily access them based on the quality, price, delivery schedule, reliability, and sustainability.
You can also qualify your supplier based on certain scores that you can give based on the above-mentioned criteria. This will help you to compare your suppliers objectively, and whenever the need arises, you can choose the right supplier.
You can also adopt your own methods to prequalify your supplier based on the type of your industry. You must select them by looking at the various business directories, and after that, you must do a background check on each supplier.
You may also come across many suppliers while attending any trade shows, too. Here, you can also get an opportunity to discuss with the suppliers in person and evaluate their capability. For their financial status, you can ask them to provide their bank details or financial statements.
3. Open discussion
Poor communication often leads to misunderstandings in business. Suppliers can’t read your mind, so it is essential to clearly convey your needs and expectations. By providing detailed outlines, you will make it easier to achieve the results you want. Communicate with suppliers in an open and reciprocal manner, treating them as business partners.
Have a thorough conversation with your provider to make sure your demands and expectations are understood. This open communication not only helps you understand more about the supplier but also determines whether they are a reliable partner for your business.
Such discussions pave the way for building a long-term relationship. Ensure that the arrangement you develop is mutually beneficial, fostering advantages for both you and your supplier.
You may also take the following actions:
a. Hire local experts - Employ local intermediaries or consultants who understand the market and can bridge communication gaps.
b. Leverage technology - These days, there are several apps and tools available that can translate Chinese into English. These tools can be used for communication. Video discussions are also possible through Zoom.
c. Document everything - Ensure that every discussion regarding specifications or any agreements you do must be recorded and well-documented.
d. Respect your supplier - It is crucial to show respect for the other party to achieve success, ensuring mutual respect. Suppliers are more inclined to work with buyers who value and appreciate their efforts. Demonstrating respect towards your supplier fosters trust, which in turn can lead to improved performance from their side. Both parties should contribute to building this respect and trust, as they are key to enhancing the potential for a successful partnership.
e. Be fair - When it comes to managing supplier relationships, fairness is essential. The contract's conditions must be followed, and both parties must treat the other fairly. Address the concerns raised by a supplier who has expressed unhappiness with their treatment in order to improve the situation.
In a similar vein, it is critical that the customer and supplier address any problems in accordance with the terms of the agreement. Effective communication can resolve many concerns.
The buyer can get unsatisfied and look for other solutions if the supplier ignores the issue. Successful cooperation requires that you and your supplier treat one another fairly.
4. Use technology to streamline your supply chain
Advanced technical solution is an effective starting point for streamlining your supply chain, enhancing both efficiency and accuracy at every touchpoint.
Take AI for instance. AI leverages algorithms and extensive data to make predictions with greater precision than humans. This can benefit your supply chain in several ways:
- Demand prediction: AI can more precisely predict demand, allowing you to implement a Just-In-Time strategy and cut down on surplus inventory.
- Transportation planning: AI can reduce costs by optimizing shipping timetables and routes.
- Stock monitoring: Technology can automate stock tracking, minimizing manual counting and reducing errors.
- Customer experience: On the customer side, technology can facilitate automated shipping notifications and real-time delivery tracking.
Integrating these technologies can significantly improve various aspects of your supply chain management
5. Improve your inventory management
An important consideration when evaluating your eCommerce supply chain is inventory management. Examine possible areas for improvement, such as recurring complaints from customers regarding items that are out of stock or the handling of perishables that haven't sold quickly enough.
Examining the purchasing patterns of your customers can provide insightful information to improve your inventory control. For instance, identify trends in buying patterns, especially if high-demand items are often out of stock. Determine if these issues are seasonal.
Also, review your inventory waste to pinpoint key challenges. Are you overestimating sales for items that spoil before they are sold?
The key to effective inventory management is gathering comprehensive data on customer behaviour and trends. This information will help streamline your inventory processes and optimize warehouse space.
6. Review your transport arrangements and logistics
Evaluate the routes and vehicles used for transporting both raw materials and finished goods. You might discover that optimizing scheduling and loading could lead to savings in both time and money.
Data analytics can be invaluable in this process, especially when leveraging modern transportation technology to track shipments. For example, consolidating deliveries into fewer, larger shipments of raw materials could be more cost-effective for your business.
Consider the types of vehicles you are using, given the rising fuel costs. Could switching to alternative transportation methods offer a faster and more economical solution? Evaluate whether there are better carriers available or if negotiating with your current logistics partners could yield a more favourable or efficient arrangement for your business.
7. Collaborate internally
If you want to succeed in sourcing and China supplier management then it is necessary that within your company, there is a good understanding among various departments of the company. You may be responsible for the procurement activities in your company; however, the products may be needed by the main stores, production, maintenance, engineering or any other department of your company.
It is very important that you have regular interactions with them so that you are always aware of when they need the supply. This will help you to be proactive and never come in a stockout situation. Also, the finance and logistic team must support you so that, based on their input, you can search for the appropriate supplier who can offer you a timely service.
8. Revamp your risk management approach
Although risks are an unavoidable component of the supply chain, you can improve your procedures and reduce them with proper risk management. Begin by identifying the most important risks at every stage of your supply chain, including the worst-case situations such as your main supplier missing a crucial delivery.
Once risks are identified, develop strategies to manage them. For instance, diversify your supplier base to avoid over-reliance on a few sources. When direct sourcing from China, assess potential risks such as supply chain disruptions and quality control issues. Conduct thorough China supplier evaluation, considering their financial stability, market reputation, and delivery track record to manage risk effectively.
9. Optimize your supply chain processes
Try to identify those areas where you can make a certain improvement to increase the efficiency of your sourcing and supplier management. This can offer you several benefits. As an example, if you are facing a lot of rejections in your supply, then you can set up a suitable IQC so that the defective products do not reach the production floor.
Obtaining an outside perspective on your current processes can be highly beneficial. An external consultant can assess your operations against best practice models and identify ways to standardize your processes to align with those standards.
For example, in packing, a consultant might identify inefficiencies in your current methods. Enhancing your packing processes could lead to significant time and cost savings.
10. Ensure your end-to-end supply chain is well functioning for you
Every detail in your business contributes to your overall competitiveness. By thoroughly analysing your end-to-end supply chain, you can identify numerous areas for improvement, even the smallest ones. Collectively, these minor adjustments can lead to significant improvements in your business.
11. Quality Control and Assurance
Quality control is paramount in sourcing. Implement the following practices to ensure product quality:
- Quality standards: Clearly define the requirements and standards for quality. You can also try to share all these details with your supplier so that they also can understand what exactly you need.
- Third-party inspections: You can also hire quality specialists available in China who may check the quality of your products before they are shipped from China.
- Continuous improvement: Every step of your sourcing process will be analysed a small improvement will be made. This practice will continue.
12. Leveraging technology for efficiency
Technology plays a crucial role in optimizing supplier management. Consider the following tools and platforms:
- ERP systems: In modern management systems, companies use ERP systems to manage their businesses. This offers a lot of help in the procurement planning.
- Supply chain management software: Another tool is becoming popular these days in supply management where all activities can be tracked on real-time basis.
- Blockchain technology: This tool can increase transparency in your supply chain and reduce any risk of scams.
13. Navigating legal and regulatory challenges
To ensure that sourcing and supplier management activities in China move smoothly, you must update yourself on the various rules and regulations of that country. The following are the key areas where your attention must be focused
- Trade regulations: You must know the tariffs, trade policies, procedures for import or export from China, etc.
- Contract law: When you are making any contract with suppliers in China, it is important to ensure that it is legally valid based on their country. You may also seek advice from certain legal experts who are aware of Chinese laws.
- Intellectual property: While dealing with Chinese companies, it is very important to protect your intellectual property and trademarks. Make sure that you have patented them in China to prevent any misuse.
Conclusion
Streamlining sourcing and supplier management in China involves strategic planning, effective communication, and leveraging technology. Understanding the market, fostering strong relationships, and implementing quality control measures enhance efficiency and risk mitigation.
Ensuring compliance and sustainability requires being up to date on ethical practices and local rules. Businesses can successfully navigate through the complexities, keep a competitive edge, and achieve long-term success streamlining the sourcing process.
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