10 Tips for China Product Sourcing

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1.Learn about the supplier’s products, processes, costs and market.

In each product category, there are still thousands suppliers, and most people don’t know how to select their most suitable supplier. You’ll be your own best advocate only if you understand a supplier’s processes and its operating environment. By talking to a number of vendors, you’ll learn the industry jargon, the products available, as well as the expertise of individual suppliers. This information will be valuable during negotiations with a supplier, particularly in evaluating concessions that your supplier might consider. This does apply to China. We are always telling our clients to go visit their own factories in China and other factories and not just rely on what they are hearing from their agents or the factories themselves.

2.Change your demand pattern.

You can revise your purchasing policy by consolidating your purchase orders. For example, rather than authorising individual departments to issue purchase orders to one supplier, require that the requirements be combined in one consolidated purchase order, the size of which must be large enough to earn a price discount.
Also, you might also create a purchasing consortium with other companies and place orders with one or a few suppliers, rather than many. Your company might also switch from one material requirement to a lower-cost product. Sure. Buying more will usually get you a better price than buying less.

3.Cease doing business with supplier

As a last resort, you can cancel existing orders and exclude the supplier from future competitive bidding rounds. Before you institute this process, meet with the supplier and ask for a price concession. Also, confirm that another source of supply is available. The most important thing to do before terminating a Chinese supplier relationship is to be prepared for all the bad things that will likely happen from that termination and to have another supplier already lined up and ready to go.

4.Compare the price, choose your best supplier

By the time you receive the price quote from professional suppliers (usually they are good trading companies), you already know the appropriate product price in accordance to the quality. To avoid unnecessary issues, you as a customer need to tell them every minute detail about your requirement. Suppliers quoting 15% lower price than the professional, tend to supply products that might be different from your expectations. It is vital to order a few sample products to check quality, before making bulk purchases.

5.Work with multiple suppliers

it’s a good idea to think of building your own factory in China, which is what they now have.If you only have one supplier, then that company know that strategically you are not in a strong position and this can lead to them dictating both price, delivery times and quality.

6.Be careful of intermediary shipping

What Shoes of Prey found was that because the intermediary were paid by the cubic metres of the shipping parcels and then they in turn were charged by DHL in cubic metres, they would unpack their nicely packed shoes boxes, and cut down the top off the shoe box to make the shipping cheaper for them.
Trust Your Gut

Some vendors are almost too friendly. This is probably due to the cultural differences that exist but when I say too friendly I mean 2-3 emails a day, asking if you want to look at or buy something after you’ve explicitly declined or said no 3-4 times.

7.Be As Specific As Possible

Tailor your vendor inquiries for specific product categories. This might sound obvious but it’s important to be very specific from the start about what you are looking to buy including types of products, materials, size, color, etc. Otherwise, like me you might receive a different and most likely cheaper product or material than you intended.

8.Most Vendors Expect Wire Transfers

Payments! Most vendors will allow you to pay via PayPal. Some have PayPal but will not tell you unless you ask so make sure to ask. In fact, with most vendors, I used wording along the lines of: “Our company policy states that first time samples purchases be made using PayPal”.
Always Obtain Samples

9.Samples are an investment.

Pharmaceutical companies are notorious for spending millions of dollars on R&D every year. Most drugs will not make it through clinical trials and some will not receive FDA approval, but the few that do make it past all the hurdles will make the investment worth it.

10.Know The Difference Between Manufacturers Vs Trading Companies

In general, it’s pretty easy to tell if a supplier is a manufacturer or a trading company (wholesaler/retailer). I did however notice some very distinct trends between the manufacturers and trading companies.As a general rule of thumb, the ones that say “Import/Export Co” are more than likely not manufacturers even if their company profile states manufacturer.

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