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Valuable Tips of Global Procurement from China

2024-03-11
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In the present scenario, China has really emerged as one of the leading manufacturing hubs of the world. Right from electronic items to metal products made in China, there are tremendous options. So, it is not at all a matter of surprise that nowadays, more western companies are looking for certain products to source from China. 

China has emerged as one of the best global sourcing destinations in Asia and around the world. It is no secret that China is known as the world's product manufacturer, and that title is earned rightfully. By having a huge and diverse supplier base, from toys to electronic gadgets, you can find a supplier for almost anything.

However, since China has many manufacturing companies, it may appear daunting to navigate and select the right supplier for your product. Before you finalize your sourcing contract, here are a few essential valuable tips you need to know for global procurement from China. We will talk about a few tips of overseas sourcing and particularly keeping China in mind.

1. Conduct market research of available suppliers

Just like when you are shopping for a product, a preliminary unofficial kind of research is done. Similarly, for sourcing products from China suppliers, you need to do thorough market research. Now this research has to be done not just for the suppliers but also for the demand of the product you are sourcing in the region you want to sell.

Doing this two-way market research helps you narrow down the product if you are confused about which product to source. It also helps you understand your target market and its spending patterns to price your sourced product according to that to maximize your profit.

Once you are starting with the market research, you need to focus on the product's manufacturer and which region they are based in. Within China, many of the product manufacturers are concentrated in one specific region.

So, you will typically begin with the internet because it is your primary default option to look for a supplier. We'd recommend you take the help of a sourcing company for this purpose that will provide you with the best list of manufacturers according to the region from where the product is being sourced.

2. Reaching out to potential China suppliers

Once you start shortlisting, you can make a list of the potential suppliers, and then you begin reaching out to potential China suppliers. You may start by telling them about the details of the product or ingredient that you want to source. Once you are done specifying your requirements, you should also be looking at the minimum order quantity that the supplier is willing to provide you with. This is also known in China as the MOQ.

A note of caution is that if you are looking to develop a prototype or want assistance developing a design for the type of product you want to source. Then you need to know that Chinese manufacturers are usually not enthusiastic about developing products because it takes up time and cost.

While searching for any supplier, you must ensure that you do enough research on the market before you select your product. Since you are looking for a long-time partner for your business, it is essential that you must evaluate your supplier well.  

If you are searching in the Chinese market, then you can search from Alibaba, however, keep in mind that quite a few that you may come across may not be the actual manufacturers, but only traders. 

The most important step for selecting the right supply partner, who is ready to offer enough references so that you also can verify. You must verify that your prospective suppliers have got adequate capital, proper quality systems, and sufficient production capacity. Also, find out the priorities of the supplier like what they are focused on? Whether they are focused on quality, price, or fast production?

3. Know the international shipping terms  

International shipping terms are important aspects that people often skip on or do not give due importance to. Not knowing your international shipping terms can land you in hot waters or potentially prevent you from receiving your order.

Knowing international shipping terms includes being aware of whether you have import rights or not; for example, for the USA, knowing your Social Security Number or your company's Internal Revenue Service Number would be sufficient to allow you to source products from China. Being aware of freight charges is also important because products are usually exported through sea freight, air freight, and air courier.

4. Ensure quality control for product procurement

Quality control is the foundation of preventing your products from getting banned and establishing authenticity with your customer base. A quality control team is essential during global procurement from online China manufacturers so that all quality-related issues are resolved before your order leaves from the Chinese factory.

Unfortunately, in China trusting the factory alone for quality control is a big risk. This is where your sourcing partner's duties come in. Their job would be to ensure that a quality inspection is carried out for every product sourced for your order.

In China, quality is often a very big issue, and unless you have very tight control over it then your whole effort may get wasted. Often even after sending all the specifications and details, you may not get the right product that you are looking for. Therefore, insist on sending a sample. Quite possibly the first sample may not be perfect right after your evaluation. So, you must communicate where it lacks. After a few iterations, you will finally get the right sample.  

Even if you have got the right sample, you must still have a proper plan for quality control. You must try to get the quality report during the production stage and do not make any compromise on that.

5. Have transparency in communication with China suppliers

This needs to be reiterated that having a transparent communication passageway is essential to having your product manufactured exactly how you envisioned it. Frequently, factories and suppliers can provide you with a similar type of product but with different features, resulting in a waste of time and money.

Communication involves letting the Chinese suppliers know the requirements for developing your product and the quantity of product you want. You also need to ensure there is clarity between both you and your supplier. We'd recommend not going for suppliers that operate on assumptions because that is risking the product quality you get.

To make your procurement process a success, you must share a full specification of the product that you intend to import from China. You must be very clear and specific so that nothing should be left to assumption. 

Without a proper specification about the product may lead to serious confusion and it will be your waste of time and effort.

It will be best to send a sample along with a proper drawing so that there is no confusion in the understanding of exactly what you are looking for. 

Building and maintaining a very strong business relationship with your supplier is very important in any overseas country and especially with China. 

Before you start importing, you need to create an effective relationship. In countries like the US, this may not be so much necessary, however, in an overseas country, these relationships can be very useful in the long run.

6. Try to visit China to conduct product quality inspection

We know this is hard and nearly impossible. But if you do not want to opt for a sourcing partner. We'd recommend that you visit China yourself to have a look at the factor for quality inspection. This ensures that your order is being manufactured in the exact way that you wanted it to be, with no faults and minimum defects.

Discuss the cost of the products and the quality. In most cases, there is going to be a competitive market of suppliers for the product you are sourcing. Hence, we'd recommend that you opt for bargaining the price for bulk orders. You can ensure product quality by requesting product samples or auditing the Chinese factory.

Pls keep in mind that only pay once quality approval is given. This is one of the biggest openings where a scam is most likely to happen. Once your order has been delivered, do not make the payment until and unless you are certain that a quality approval is given. If you are still unsure about it, you would need to check the quality of the order yourself to avoid a mishap with a potential customer.

7. Draft a thorough sourcing contract

Once you have finalized the Chinese factory which will be fulfilling your order. It is time to draft a contract to seal the deal.

Most product manufacturers will provide you with a receipt of a purchase order as the contract to save time, but that can land you in hot waters if the supplier you choose for your product decides to bail on you.

There are many different types of procurement contracts, some of which also cater to products with private labels. This is where a procurement contract will come in handy to protect your intellectual property. Here are some types of contracts that you should know of:

- NDA (Non-Disclosure Agreement) version of China is an NNN agreement that will protect your private labelled product by preventing the supplier from using your IP or from making it public.

In most Asian countries and especially in China, people are not serious about the importance of intellectual property like in Western countries.  

Therefore, it is essential to discuss with your supplier on this issue and have legal documentation on your contracts. In China, even with a legal contract, it may be challenging whether your intellectual property will remain protected.

- MA (Manufacturing Agreement) will explain the relationship you have with your supplier, preventing any wrong interpretation that may backfire on you.

Within this contract, you should be covering the basics of the cost-price and quality inspection measures that you want the supplier to have carried out. In some cases, it should also come with a product warranty. By including these details, it will prevent you from any unregistered production activities and infringements.

Your contract should remove one of your major concerns: your supplier replicating your product and becoming your competitor by selling it at a lower price than what you would be charging your customers.

It is very important to prevent your supplier or any other manufacturer from taking credit for your product. That is why you should safeguard your order by applying for a patent and getting a private label for them. That way, you are safeguarding yourself from infringement of intellectual property, but your business or brand will also become synonymous with the product you are selling.

8. Always verify before you trust

Before you trust your supplier, one of the important tips of overseas sourcing is you must check what he is supplying you. Often you may be totally surprised that what he supplied is different from what you were looking for.

You must either have your own quality monitoring program, or you may get it conducted by any reliable third party in presence of your own company’s representative.

Also, it is extremely important to confirm that the product that is shipped will meet all of your specifications and also the performance criteria that were agreed between you.

Remember even a single bad shipment can seriously damage the credibility of your procurement department and wipe out all your projected savings.

There must be some of your representatives present in the overseas location from where you are importing who can keep a proper check on the product that is getting shipped. 

You will also need a suitable tool to measure the actual quality of the product that is being shipped to you. 

While receiving their quotes, you should remember that they are quoting only what you asked. In case there is something missing in your specification then there can be a significant difference in cost. 

- Ensure that all your specifications perfectly match your needs. 

- While ordering samples, you must find an agent for supplier consolidation who can consolidate all your samples and ship to you all together to save cost.

- For the samples of Chinese custom products, they can be prototypes that may require certain improvements or a few more iterations.

Conclusion

Global procurement can be a very daunting task, and it may make you give up on the idea of sourcing products directly from China suppliers. However, it becomes easier by having a sourcing partner do the brunt of the work for you, making you let go of your worries and only focus on other parts of your business.

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