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The process of testing your products is also a good gauge for testing the suitability of your supplier – even legitimate suppliers have been known to take advantage of inexperienced buyers. So after you have checked the credentials of your supplier, your next challenge is to minimise margins for error – those parts of production where you may lose value.

Here are the most common ways of losing value when buying from overseas suppliers, after you have agreed on price and signed a contract:

  1. Material quality – if not specified in detail, lesser quality materials can be used than the ones you might have approved of for the sample. So work to understand the material composition of your products and their components and be very explicit in defining these requirements in your order.
  2. Quality in production – your order may be produced with fewer resources, less quality control and staff assigned to the job. All of these shortcuts in resources will translate to poor quality product.
  3. Additional costs – finalise product specifications prior to the agreement, these additional requirements are costly.
  4. Production turnaround – if your order is small it can be put to the back of the queue, so it can take two months or more to produce – meaning your products hit the market well after you had planned. It may be a small issue for the manufacturer but can have devastating impacts on your business, particularly if you have a seasonal product.
  5. Incoterms/Shipping terms changed – switch from FOB to Ex-Works, so you are then responsible for freight to port and export costs.

Here is how we resolve these issues when importing from China:

Materials must be agreed in writing and samples in hand before you commit to the purchase. Western markets often demand much higher quality materials than the Chinese domestic market so be aware that the manufacturer may be less accustomed to using the materials you are specifying.

  • Lab testing of materials that cannot be verified by sight is essential. If you are not sure, the cost of a lab test will eliminate any doubts.
  • Many importers will approve multiple samples and send a stamped, photographed and approved sample to the manufacturer, as a prototype for production. The prototype is then used as a model by the factory for the entire production – so it must be copied from – and is required to be sent with the shipment back to the importer. This can help to minimise the “yes it was the same” response, because the sample was in hand by the factory and could not be substituted.

Quality and order details – we address quality as a separate topic in this video series – but let’s look at it here in terms of handling it with the manufacturer. The key here is knowing your supplier capability in depth – their equipment, staff, skills, customers and therefore the quality of product they have consistently produced in the past.

  • New importers do get caught with low volume orders – they do not invest in assessing the supplier, and only really hope from one shipment to the next. By jumping into a large commercial order without properly assessing the supplier, you are throwing the dice and really just hoping for the best.
  • The solution is to properly assess the factory in person – get there yourself or ask us to assess the factory for you. Without making that personal connection there is no accountability. The key is to clearly outline to the supplier that there is plenty of scope for future work – so they see future potential past this order.
  • It is also critical to use a partner in market that can build a relationship and put pressure on the supplier, knowing they will have someone in China knocking on their door if a product shipment is poor.
  • This is a really important point – get the supplier to think long term, talk to them about future order volumes and make sure they understand there is accountability for the order through quality inspections and factory visits with someone in market.

Additional costs – this is often the cost of inexperience and why we emphasise that you need to become a product expert very quickly.

  • We recommend clients to sample and resample if required and work through product, shipping and communication requirements while the volumes are low, and the potential for costly mistakes are minimised. Often there are issues that just cannot be pre-empted so it is important to understand that issues will arise; it’s how you respond that is the difference.
  • A point we repeat often, is keep at least one back up supplier ready to go – this can alleviate overreliance on the one supplier and it keeps the supplier on the ball.
  • When faced with a high price we first ask the supplier to give us a cost breakdown, we then pick apart their reasons for high costs for different parts of the quote. Materials for instance are often costed excessively, so this is good to get cost breakdowns from multiple suppliers to compare and keep your major supplier on the ball.

Production turnaround is a really tough one, even after factories agree in writing. For the factory it might be insignificant to delay one month, for you it may ruin your business. Its goes hand in hand with quality – there has to be accountability, so make the personal connection or work with our supplier management service where we keep in very close communication with the factory and remind them of their obligations. A successful strategy used by our sourcing team is to remind the supplier of competitor suppliers with whom we maintain great relations.

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