10 Dos & Don’ts of Sourcing in China
When companies source in China, the first thing comes to one’s mind will be searching on platforms like Alibaba, Globalsource and Made-in-China.com; but in the ocean of manufacturers, how do you narrow down to find a reliable one? It is especially difficult if you are new to the game. Don't worry. In this article, we will discuss 10 Dos & Don'ts of sourcing in China.
1) DON’T just rely on the Gold ratings or verified status on sourcing platforms
Sourcing platforms such as Alibaba, Globalsource and Made-in-China.com are good places to start. You can check suppliers’ online review and ratings. One thing to caution is that on some sourcing platforms, a Gold Supplier doesn’t mean the supplier is a super star, it’s a paid membership!!
For example on Alibaba, there are different gold membership packages; supplier will be at the first priority ranking and have more of their products advertised on the Alibaba webpage as “product showcase” if they join the Premium Gold Supplier Membership. The number of years icon, just represents the period of time a supplier has paid to become a Gold Member.
Source: Alibaba website
These sourcing websites may verify the suppliers listed on their website, but it’s just about checking their business licenses and business contacts. Some may perform on site visit to ensure the onsite manufacturing operation or supplier exists. However, they won’t verify if the authenticity of the listed products.
Therefore, verified suppliers or gold members will give you some pointers, but don’t stop there. Read reviews and contact multiple suppliers to check their responsiveness.
2) DON’T see price as the ONLY consideration
When sourcing in China, usually there will be quite significant cost savings compared with sourcing locally; cost is indeed an important factor but not the only consideration.
We have heard many cases where a buyer met some suppliers in the trade show who said they could do everything and offered very low prices. But soon after, the supplier was not responding to emails, the previously quoted prices were not honored and the product quality was not satisfactory. At last, the whole co-operation went downhill, the products were not salable, and money paid couldn’t be recovered.
Imagine when you hire someone for a job position, do you look for someone with the lowest expected salary? Or would you look for someone who is competent enough for the job?
3) DO understand the company culture
If you are looking for a long term business partner, it’s important to learn about the company background and business culture. The best way to know someone is to meet face to face, otherwise some initial emails with background questions will be somewhere to start. Take your time and try getting a sense of whether they are easy to work with and knowledgeable.
Value the suppliers with long history. China has experienced many waves of factory closed down, manufacturers with long history have proven themselves to stand firm in both good times and bad times.
4) DO study the supplier’s profile and customer base
Each supplier is unique; try to understand their strength.
Ask them for a factory profile and what other customers they supply to. If the supplier also produce for other famous companies and these companies are in the same industry as yours, it’s an indication that this supplier will have the know-how to manufacture your product.
5) DO Evaluate price, capacity and lead time
When evaluating price, most supplier will quote according to FOB terms of a certain port. It is also important to take freight costs, import tax and inland transportation to your warehouse into consideration.
For import tax, different material compositions may affect which tax bracket your product into; therefore it’s also an important factor to take note during product design phase.
Check supplier’s normal lead time and see if it fits your schedule, again freight and transit time should be considered.
Don’t forget to plan for Chinese New Year, it’s a very important festival in the Chinese culture; the whole supply chain will be affected for almost 2 months.
If your order volume is big, the manufacturer’s capacity will be a key concern. Ask them for the number of workers they have and their monthly capacity.
6) DO Ask for Certification copies
Some manufacturers obtain certifications to show their company has achieved a certain level of management standards / quality. Some certifications you can ask for are:
• Management system certifications: ISO 9001: 2008
• Social compliance certifications: Social Accountability International (SA 800), Worldwide Responsible Accredited Production (WRAP), Sedex Ethical Audit, Walmart Social Compliance audit and Audit report issued by some big brands
• Security Audit: Customs-Trade Partnership Against Terrorism (CTPAT)
Some suppliers will say they have all the certifications, but it’s important to request for copies to check if it’s expired and check the name of the supplier to validate.
7) DO Request for samples
Get some samples to check the quality of work. If a supplier cannot handle sampling requests well, how can we entrust them with bulk production?
Most suppliers are willing to provide samples. Some will charge 1.5 – 2 times of FOB as sample charge, while others may even provide them for free. It is industry norm that buyer will be responsible for courier charges of sending samples.
8) DO Request supplier to sign Nondisclosure Agreements (NDA) Let’s face it! The way Chinese views Intellectual property is very different from the rest part of the world.
We see multi-national brands like New Balance or Michael Jordan lost their litigation on trademark infringement in China. How can that possibly happen???
Therefore, it’s very important for foreign companies to have their suppliers sign Nondisclosure Agreement before releasing artworks of design.
The Chinese trademark law is more on a first come first serve basis, whoever files first will get it. If you plan to sell your product in China at some point, it will be a good idea to have your trademark registered in China early to prevent possible litigation of selling / using your own trademark in China.
9) DO Start with a trail order
This is worth mentioning because it’s a common mistake that people make during time crunch. It’s important to place a trail order to test on the product quality and delivery.
Some buyers with high volume may even place orders to two or more manufacturers to diversify risks. Therefore it just makes sense to place trail orders to new suppliers to make sure all things align with your expectations.
10) DO Request for shipping samples
It’s a good practice to request for shipping samples prior to shipment to check on the bulk production quality. Often times, there may be some changes on product details from last round samples. Requesting a shipping sample will help to ensure all of your comments has been addressed in final production and to notice any error in time. You do not want to realize a problem only after receiving the bulk delivery. If there is any issue, it is better to find it out and handle it as early as possible.
Now it’s your turn to act. Go out there, do your research, build connections and meet people. Sourcing in China is not as difficult as you think. It comes with some risks, but after a couple of trail you will get a hang of it.
Hope that you will find these tips useful. If you have any question, leave us a comment on our page.