3 Mistakes You Should Avoid for Sourcing Products from China
For being successful in China sourcing, you should have clear understandings about the sourcing process and realistic expectations. Here, the most common mistakes for sourcing products from China are listed.
1). Absence strategic management in case of China sourcing:
The companies, just after starting sourcing from China, usually make a lot of mistakes. Some of the most common mistakes, made by these companies include- lack of adequate research, the right strategy, and benchmarking process. It restricts businesses from setting the right product quality targets. Usually, the businesses source products from the Chinese market, mainly because of the cost benefits. However, according to the professionals, involved with sourcing, it shifts the focus from purchasing quality products to saving money. The commonly made mistakes of other businesses for sourcing Chinese products can be broadly classified into the following categories-
A. Not having a proper strategy
B. Not having any properly defined standard for the suppliers
C. Lack of performance assessment for suppliers
D. Not having well-defined payment process and quality assurance model
E. Not having any written contract with the suppliers
F. Not having knowledge of local market practices and laws
G. Not working with a professional who can communicate in local language
Before sourcing from China, businesses have to know all the risk factors associated with it and how will you encounter these. Along with setting realistic targets, businesses should have a system for assessing the suppliers also, so that the right decision on the renewal of contract or making contract with existing suppliers can be taken. Staying aware of local rules and regulations as well as business practices is another thing that leads to successful sourcing. Unless an importer is well acquainted with these factors, legal issues may rise and it, later can interrupt the sourcing process significantly.
2). Not considering sourcing as a core competency:
When it comes to sourcing from China, the strategy is the most critical part. At the first stage, you have to decide, whether you are going to buy or make? In many cases, buying products from foreign countries is a more feasible option. The second stage deals with deciding whether you will purchase from a low-cost country or will invest on low-cost products. When all these questions are answered, your next task will be, preparing the organization for next sourcing project.
The modern approach that many organizations adopt for sourcing products from China is, considering it as a core competency. In other words, the entire sourcing process is designed in such way so that a number of resources and talents work together. In the case of traditional sourcing projects, more focus was given on management of transactions and ensuring the maximum money. In the contemporary sourcing model, more emphasis is given on managing the KPIs.
For improving sourcing efficiency, most of the modern importers take help from the third-party agents. Sourcing activities which are outsourced in most of the cases, include- deciding whether you will focus more on cost savings or quality improvement, managing the cultural issues and achieving organizational targets in terms of cost, quality and timing.
3). Not knowing the best practices of China sourcing:
The sourcing best practices differ from country to country. While sourcing from China, an importer requires staying updated about all aspects of it. Typically, the critical elements for China sourcing include-
1. Product life cycle, i.e. how much time will take to introduce it, the time required for branding etc.
2. The right time to make purchases. It means, importers need to consider season, holidays etc. to avoid interruption or delays.
3. Cost incurred for inventory handling
4. Cultural issues that you may encounter.
5. Managing relationship with suppliers
6. Timely delivery of products
Sourcing products from China require continuous involvement. Just selecting a supplier and placing your orders will not help you here anyway. Instead, you have to put continuous effort for identifying new suppliers, making favorable contracts and improving the quality of the products to get the most out of the investment.