Nowadays China has emerged as a hotspot for businesses across the globe. Importing from China is a great way to fulfill your sourcing needs, where you can benefit from convenience, low cost, and scalability.
To have a successful sourcing strategy with a Chinese supplier, it’s important to develop certain skills to help you succeed, as there are many cultural and business differences between 2 different countries. Having an awareness of potential mistakes will help you make the most of your sourcing strategy and reap the benefits from a business relationship. So here is helpful guidance, which lets you know what mistake you could avoid in advance:
Poor Sourcing Strategy Planning
Having a sourcing strategy plan is the first step to sourcing from China. It will guide you with clear goals in mind and get the final result through sourcing. Make sure your target price with what kind of quality, when you plan to sell and this product facing to which market, by which delivery way, and delivery time. Besides, using the internet, trade shows, exhibition to identify the right suppliers and verify them is also necessary.
Not Performing Due Diligence on Suppliers
There are thousands of suppliers in China, and if without auditing then proceed with your order, it may have a risk. So visiting your supplier is the most direct and fast way to make your decision if you could go ahead. But now due to Covid-19, it may be hard to go aboard. Anyhow you could do this by having a third-party auditor, it is convenient and does not cost too much.
Then you should have a checking list of what you expect, these are 3 points that must include:
1)The quality standards
2)The production ability
3)Technology capabilities
Creating supplier standards will give you a clearer idea so that you can meet these standards more easily.
Creating Unrealistic Production and Price Targets
- Drive a VERY VERY Heavy Bargain With the Factory
If you have some prospective Chinese vendors that you want to work with, a too-hard bargain can take away their interest to produce products for you.
Both parties are running a business for profit. Say the seller finds it barely profitable, I don’t think you will be deemed as the high-quality grade customer. Unrealistic target prices will scare away good supplier options. They might even give up starting a business relationship with you.
- Negotiate with Suppliers for Lower Prices Too Early
This is more about relationship management for your existing suppliers. The suggestion is that never try to bargain with your existing supplier if you don’t have an order for them or you are not going to place an order with them.
When you bargain, your supplier tends to think there’s a coming order for them. They are working so hard during the negotiation and may compromise in prices and other terms in order to go further with you. Their efforts don’t get paid in the end. Next time when you do have the order to inquire, they won’t be as responsive as previously.
- Pick the Lowest Offer Provider Without Second Thoughts
Low price is definitely tempting but low prices must have a reason. Suppliers, freight forwarders, or brokers may provide a very low price to attract your attention and interest. The cheapest offer doesn’t mean your lowest FINAL cost. Be sure to do your homework and verify whether these providers will be able to provide quality products or services that are worth your choice.
Not Well Presenting Needs
The language barrier can be a difficult obstacle to overcome, especially when it comes to communicating your bespoke needs with a supplier. There are also cultural and business differences to consider, which can impede your normal course of action when you lack awareness.
For example, you have the plan to buy a pen, it is not enough that you sourcing just by a keyword “pen”, but add more details information, such as a gel pen or a ballpoint pen, which what color ink, which kind of design, better can provide high-quality product photos and also make a description list with all details what you want.
Not Ordering Samples
Product samples are a useful way to determine whether your supplier is capable of meeting your specifications. Acting in good faith is ill-advised since by simply communicating your needs and hoping your supplier meets them you will be leaving too much to chance.
Before finalizing any agreement with a supplier, you should inspect product samples to ensure you’re getting the precision and quality you signed up for. From observing samples, you can highlight areas of improvement if you require revisions, which you can make clear from the beginning.
However, it’s important to note that some suppliers will offer a ‘golden sample’ to win over your business, which is why working with a China sourcing agent is beneficial for continued inspections and quality control.
Failing to Draft the Official Manufacturing Agreement
Signing a carefully drawn-up written agreement, to protect yourself in the future if issues arise and make the specifics of the business relationship clear. This must include, in as much detail as possible, specifics relating to:
- The parties involved
- Payment terms
- Quality management, logistics, price, and sample terms
- A clear definition of desired product quality, satisfaction, and timely delivery
- Liability for contract breaches
- Dispute resolution
- Choice of law
- Attorney fees
- Arbitration clause
Don’t just use the same template as a previous contract. While many clauses may be the same, cross-border negotiations require special care and must be treated as such. Make sure you get an attorney to review the written contract and explain the implications of the contract. There may also be certain issues that you need to be aware of under Chinese law. Understand the legal nuances of the contract before signing anything.
Lack of Protection for Quality Issues and Payments
As this is an international business trading, so have to pay much more attention to protecting yourself, your money, your company, or private information. Make sure the payment method is safe and double-check payment details.
Also, the contract should include a clear definition of the quality of the product and delivery time. Also, buy insurance while shipping your goods.
