Things to Consider before You Start Global Sourcing
The world of business has become a global marketplace nowadays. To be effective in today’s competitive landscape, businesses often have factory partners across the globe. It’s an exciting time, but it can also be a challenging time for businesses just getting started in global sourcing of products.
1. Find a Global Sourcing Partner
Entrepreneurs have a streak of independence. That’s why they are in business for themselves. But a good business person will also know when to seek expertise from a partner. Global sourcing is one of those times when it’s wise to seek out a good partner because there are many unknowns. A sourcing company will steer you toward opportunities and away from pitfalls. It’s better to benefit from someone else’s experience than to make mistakes by trial and error.
2. Don’t Make Decisions on Price Alone
Lower prices are a primary reason to seek out global factory partners, but it shouldn’t be the only reason. Selling cheap products with questionable quality is a sure way to shorten your time in business. You should do some research on factory plants. You can look for online reviews, participate in business forums, and ask for references. You might also ask for product samples before striking a deal.
3. Practice Good Communications
One of the common terms used is RFQ, which is short for “request for quotation.” An RFQ is the process of inviting suppliers to bid on an order. You’ll want to be very clear about the type of products for which you are seeking bids. For instance, you’ll want to specify if you’re looking for a custom component to be used in a finished product as opposed to the complete product itself.
4. Understand Standard Processes and Materials
Your order may include standard processes and materials such as plastics, metal forming, wire harnesses, metal casting, and wire formed products. Materials such as stainless steel should be specified by type with their corresponding grade number such as austenitic stainless steels:304, 316, and 317, or ferritic stainless steels: 430 and 434.
5. Order in Commercial Level Quantities
Another common term is MOQ, which means “minimum order quantity.” Most factories have an MOQ that you will need to meet. If you want to source from an overseas factory, the MOQ will most likely be higher than domestic factories.
6. Ask about Total Landed Costs
When you’re quoted a price, you should ask about potential additional costs often referred to as “total landed costs,” which can include charges for transportation, insurance, taxes, customs and duties, and financial institution fees. If you forget to ask about these expenses, you could be in for an unpleasant surprise.