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Sourcing from Chinese factories and wholesalers: Things to consider

By Weintrade   |   23 Jun, 2017
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style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Many scholars and bloggers such as Shruti Agrawal, Nassimbeni &amp; Sartor Ashutosh Garg, and Renaud Anjoran have carefully written on the tips that one may need to consider when sourcing for suppliers and factories in China. The following have been selected from their writings and their views on their respective pages and websites to help readers to be carefully aware of the situation.</span></p><p style="text-align: center;"><br/></p><p style="text-align: center;"><img src="https://img.weintrade.com/attachment/blog_content/2017/17a70994b01a4fee870126c8181a5342.jpg" width="627" height="216"/></p><p><br/></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 等线; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Look for Reliable Suppliers</span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;– Make sure you choose honest and trustworthy sellers, or hire a sourcing specialist who will be able to make sure that vendors are reliable. You could also look for reviews/customer references online, ask sellers to provide past testimonials and check for recommendations with other businesses or people in your area who have sourced goods from China.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Insist Upon Clarity</span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;– It is crucial to communicate with potential sellers and state your specifications and requirements in a clear and detailed manner. This includes everything from OEM/custom branding, size, color and price to packaging, shipment, etc. You and the supplier must agree to the terms and details, before commencing business.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Get It in Writing</span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;– All terms should be stated expressly, in writing, to avoid fraudulent activity and ensure smoother functioning throughout the sourcing process. Written agreements are the best way of securing your business in China, so insist on written contracts and records that can serve as legal proof in case something goes wrong, protecting both you and the seller.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Escrow or Payments on Delivery</span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;– The mode of payment and delivery should be well-defined, to avoid any misunderstandings. It’s always safest to use the services of a sourcing specialist who will hold part of your payment until goods are delivered to your satisfaction. Avoid 100% upfront payments and use OEM agreements for transferring money after receipt of your shipment.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Plan a Sourcing Trip</span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;– Physical access allows you to check for the quality of products and services being promised, so consider planning a sourcing trip instead of blindly trusting whatever you hear. Visit vendor’s offices, factories and storefronts to ensure that they are in fact the manufacturers and not just intermediaries. Again, hiring a sourcing manager helps – they can conduct extra checks in case of fading quality.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">VAS and Human Toll </span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">– Value added services and human toll are two crucial elements that you need to consider as an ethical business. They add value to the actual product and must be given consideration when sourcing from China. Labor and working conditions should be up to the mark for a factory based in China, and you should avoid doing business with one that is lagging behind in these aspects.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Manage Your Supply Chain</span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;– If you’re sourcing from different suppliers, manage your supply chain by grouping them together. There are thousands of manufacturers, suppliers, agents and factories that you could be dealing with at any given time, so this makes it easier to keep track. It also ensures that your sourcing trip does not include extensive travel across a country as huge as China!</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Stay in Touch </span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">– A cooperative relationship between the company and its suppliers is mandatory for smooth functioning. In order to maintain a long-term, mutually beneficial relationship, conduct regular examinations and site visits, or set up regular communications via video conferencing, weekly reports, etc. This keeps vendors in check but also allows them to trust in your repeat business.</span></span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">&nbsp;</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Letter of the Law </span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">– You (the buyer) and your suppliers must strictly adhere to rules and regulations as defined by Chinese law and the laws of your own country. Government regulations play a vital role in easing or detracting the permissions and access for companies doing business in China.</span></span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">•</span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;"> </span></strong><strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt; font-weight: bold;">Look at the Logistics </span></strong><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">– Logistics is just as important as the product itself, i.e. communication technology, transportation, shipping modes, packaging and more. Work with the supplier to ensure that everything is handled smoothly, securely and cost-effectively, with regular updates about your order status, location and estimated delivery, as well as online tracking information for greater convenience.</span></span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">The advantages for sourcing in China can be numerous. They can be related to e.g. cheaper material and manufacturing costs, access to new technologies or resources not available in the home country, gaining a presence in the sourcing country. Whatever the reasons might be, a careful analysis of the sourcing market is recommendable.</span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"></span></p><p style="margin: 0pt; white-space: normal; text-align: center;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-size: 10.5pt; font-family: 宋体;"><br/></span></strong></span></p><p style="margin: 0pt; white-space: normal; text-align: center;"><span style="font-size: 18px; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-size: 18px;">The advantages for sourcing in China can be numerous.</span></strong></span></p><p><br/></p><p style="text-align: center;"><img width="537" height="248" src="https://img.weintrade.com/attachment/blog_content/2017/69498544316f49df804f54797594592d.jpg"/></p><p style="margin: 0pt; text-align: center;"><br/></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Nassimbeni and Sartor (2006) define four elements that should be considered in analysing the characteristics of the supply market.</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Competitive advantage of the Chinese supply</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Expertise profile of the local manufacturers</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Potential customs barriers and constraints</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Potential infringements of IPR</span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Learn about the supplier’s products, processes, costs and market. You’ll be your own best advocate only if you understand a supplier’s processes and its operating environment.</span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Become a value-added customer. Before you enter negotiations with a supplier, consider how you can help the supplier realize the value in other aspects of his business. </span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Change your demand pattern. You can revise your purchasing policy by consolidating your purchase orders. Agree to larger deposits on orders. “Accounts receivable days” affect the cash flow of all companies, so you might agree to a large cash deposit on orders to secure you a significant product discount. For instance, a 50 percent upfront payment might earn a 10 percent discount, or improved delivery terms or product customization. Agree to high-dollar purchase. If you transfer all of your business to one or a few suppliers, rather than many, you’ll receive deeper discounts and, perhaps, other perks. But before you give your business to a few suppliers, consider the increased risks of doing so. </span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Be a customer that solves issues, not one that presents issues. A supplier’s profit margin can be eroded by customer production, delivery or quality issues.</span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><br/></span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"></span></p><p style="margin: 0pt; white-space: normal; text-align: center;"><span style="font-size: 18px; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"><strong><span style="font-size: 18px;">Be a customer that solves issues, not one that presents issues.</span></strong></span></p><p style="margin: 0pt;"><br/></p><p style="text-align: center;"><img width="561" height="304" src="https://img.weintrade.com/attachment/blog_content/2017/85e81fb83412470dbb1ae0bcfddae232.jpg"/></p><p style="margin: 0pt; text-align: center;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">&nbsp;</span><br/></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Implement a bidding process. To ensure competitive pricing, use a bidding process to solicit business proposals from multiple suppliers. Doing so makes it clear your company will buy materials from the supplier that submits the most competitive bid. </span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">Consider all aspects of your purchases. Supplier prices may not be non-negotiable, but other aspects of a purchase, including the down payment, bulk discounts and shipping rates might be.</span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;">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.</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Find a Suitable Supplier.</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Clearly Define Your Expected Product.</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Negotiate Reasonable Payment Terms.</span></p><p style="margin: 0pt;"><span style="font-family: 微软雅黑, &quot;Microsoft YaHei&quot;; font-size: 10.5pt;">• Control Your Product Quality in the Factory.</span></p><p style="margin: 0pt;"><span style="font-size: 10.5pt; font-family: 微软雅黑, &quot;Microsoft YaHei&quot;;"> </span></p><p><br/></p></body></html>
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