You are dealing with people halfway around the world, with cultural and language differences, negotiating over your investment of potentially thousands of dollars in inventory with people you likely just met on the internet.Figuring out how to find a supplier to partner with, how to structure the negotiation, payment, and quality control is a critical step to successfully launching your China sourcing business.
3 Secrets to Successfully Sourcing From Chinese Suppliers:
#1 Choose The Right Supplier
1. Sourcing: Tricks of the trade • Chinese cultural and value differences: It’s a relationship business • Supplier Selection Strategy • Negotiations: You get what you pay for • Quality control: The Neverending Story • Best practices and bonuses
2.Chinese culture and values are not the same • What is “Guan Xi”? 关系 • Trust • Respect • Face • Time invested
When finding potential suppliers, Alibaba is the behemoth that you should look to first. As the largest online marketplace in China, it has the most quantity of suppliers, but not necessarily high quality.
China Sourcing is another option for finding suppliers. There is less quantity, but each supplier must pre-qualify, so the quality of supplier is possibly better.
In addition to these online marketplaces, going to trade shows is a great place to find suppliers. The Canton Fair is the largest, held twice a year in China. However, there are industry-specific trade shows in the US and Europe where you can meet Chinesesuppliers in person and build Guan Xi, or your business relationship.
As a result, suppliers will be more responsive to your requests, will offer more favorable pricing and payment terms, and be more accommodating in fixing problems as they arise. In order to protect yourself against that fate as much as possible, you have to be extremely vigilant about protecting your product and brand.
#2 Negotiate With Your Supplier
The implication here is that there are more at play in a negotiation besides just the final price. For example, you are also negotiating the quality of product, the payment terms, the delivery times, and your relationship with the supplier.
Moreover, every supplier does have a “price floor” below which they can’t go below. So if you strong arm a supplier and force them to go below their price floor, there may be negative consequences. This could be cutting corners with cheaper materials, less quality in manufacturing, shoddier packaging, or any number of other things. The main takeaway is to build a long-term relationship.
Remember, negotiating with Chinese suppliers is an ongoing process. It is a common thing, and even expected, in Chinese culture and business. If you do it at the factory in China, or even an international trade show, you are more likely to speak with the factory owner or executive management. This means that problems and challenges can be solved with greater ease, because you are dealing directly with decision makers, and not sales reps.
1. Negotiations • 一分钱一分货 • Translation: “You get what you pay for” • Price is not the only factor
2. When do I negotiate? • Initially: Shortlisted suppliers • As volumes grow: Higher volumes = Lower per unit price • External factors • When problems occur and supplier is at fault
3. Pricing: How much? • Cost-based approach • Wide net then deep sea fishing to gauge the factory price
4. How do I negotiate? • Strategy – Always play the long game, remember guanxi • How will this grow your business relationship together? • Communications: Face-to-face > Phone call/Skype > Email
#3 Monitor Your Quality Control:
Quality control in the production process is critical to success. Problems may occur for any number of reasons, but you protect yourself if you are able to get an agreement in writing. Do your best to specify materials, measurements, packaging, product quality, and any other specifications in writing. If a problem occurs, and the supplier is at fault, you can refer back to this written agreement for an appropriate refund or credit on future orders. Additionally, request a sample from the supplier before you make any supplier decisions.
In order to maintain the highest level of production quality, you want to keep your suppliers accountable through the whole process. Get everything in writing by using a Purchase Order. The important thing to note here is that you still have leverage before you have sent the final portion of your payment. If there are aspects of the order quality that do not meet what was specified in the agreement, the supplier is more willing and likely to take corrective action if they have not received full payment.
1. Quality Control: Supplier selection • BEST PRACTICE: Country test to initially gauge quality and experience • Get Samples to do a hands on test • At the same time, gauge their customer service
2. Quality Control: Placing order • GOAL: Make sure that factory understands and agrees to your requirements • Get it in writing on the Purchase Order
3. Quality Control: During production • GOAL: Catch problems as early as possible • Monitor production by asking for photos, videos, and samples • Expect factory to be passive, YOU MUST BE PROACTIVE
4. Quality Control: After production • Arrange an inspection before releasing balance of payment • Third party inspection agency • Especially when working with a new supplier or product • Tricks of the trade: Self-inspection
5. Quality Control: After shipment is delivered • Watch for defects • BEST PRACTICE: If factory is at fault: • Negotiate for compensation • Corrective Action Plan (CAP) • Put it in writing in the Purchase Order • But don’t burn any bridges, remember Guanxi • Rinse and repeat