“China Suppliers” is a popular keyword for buyers and importers when scouring the Internet but it is not always as straightforward as a click of a button. Do you really know how to qualify the most suitable supplier for your business?
“China Suppliers” – those who never searched for them cast the first stone! Certainly, for companies that sell products finding the right supplier lays the foundations for building a successful business. Suppliers should be considered partners given their performance has a material impact on your business, particularly those that are in the early stages of growth.
A bad supplier can negatively influence your sales revenues and margins, reduce the quality of your products and services (which could cause damage to customer relations), disrupt operations and increase costs.
On the other hand, a good supplier – one that you truly partner with – which meets your business needs will provide you with quality products and services. In short, the right factory will set you up for success whereas the a bad supplier can easily jeopardize your business before it has even got off the ground.
‘China Suppliers’ – How to Identify the Best Partners
Making mistakes in the supplier selection process can impact business results at multiple levels. To avoid this, we want to share with you some useful tips and lessons learnt over the past 20 years of sourcing in China. Key to this is implementing a rigorous process that is followed and repeated as you expand your business.
1. Conduct a detailed factory evaluation
Success in offshore manufacturing starts with the supplier selection process. There is a range of factory audits that can give you the transparency you need to identify the right partners, including manufacturing audits, ethical audits (SMETA, BSCI), technical audits and also, where appropriate, internal audit requirements (particularly for specialist products or sectors). There needs to be a ‘base level’ which must be met for your clients, your business and your market for the factory to qualify as a potential partner. Anything less is immediately rejected.
2. Take an ‘Under the Hood’ approach
As a Partner and a key stakeholder potentially in your business, it is important to try and get a breadth of understanding about the supplier. This includes financials, clients, markets served, qualifications and certifications and any information on the management team. For example, there is public information available on companies in China on shareholding, management team and the number of employees. This information is invaluable as part of a holistic assessment of a factory before you start collaborating.
3. Get the right contracts in place
You want to be working with a professional supplier that sets the parameters of the relationship in a clear and accurate agreement. Such contracts enable you to quickly build trust with your partner and ensure that any intellectual property or other confidential information is suitably protected.
4. Understand the Commercials
Work through a request for quotation process that will enable you to fully evaluate the factory’s ability to deliver against your needs. This starts with the quotation process and needs to make sure that the factory has all the relevant product information to be able to provide an accurate quotation. One should also understand whether there are any minimum order quantities (MOQs), product lead times, payment terms and any sample charges. Although for the latter, it is often the case that you can get this returned on placing your first order. Make sure you factor in freight costs, import duty and any insurance to get your landed costs.
It is worth also making sure that they have the capacity to deliver your products within the timeline you have agreed. Ask for high-level information (quantity) on the factory’s other orders and do a quick sense check to see what this means in terms of available capacity. Late delivery can be detrimental to your client relationships/sales on the shop floor and can end up undoing all your hard work.
5. Do not evaluate a product or Supplier solely on price
The lowest cost may not always get you to where you need to be. In fact, it might be a risk if your sourcing strategy is only driven by saving on costs. Although product cost impacts gross margin, you should be aware that the cheapest supplier is not always the right one. Conversely, an expensive supplier does not guarantee the best products.
When selecting a supplier consider the broad range of elements that are right for your business. Ultimately, if you value a supplier as a partner, the relationship should be much more than solely focused on cost and this will lead to greater flexibility, MOQs, prioritization, assistance when timelines change, and the list goes on. It is difficult to quantify the added benefits!
*** Bonus Tip: Consider more than one supplier
It is important to have a choice of suppliers and ideally (although not always practical) it should be possible to have a range of suppliers for one product category, perhaps in different markets, so that you can quickly move between suppliers as required. Most companies use a supplier matrix that helps build resilience to shocks in your supply chain.
Need help with “China Suppliers”?
Selecting the best suppliers is critical to the success of your business. We are uniquely placed to help with a presence on the ground in the local market, product knowledge and we can add value when it comes to managing the supplier from development through to shipment.
In the main, having some kind of local presence will only help enhance these relationships whether it be your own office, a sourcing company or some other third-party presence. At ET2C, we provide our clients with the transparency needed to best manage their suppliers across Asia. For more information on how we can help you, please contact us at email@example.com.