If you own a business, then you might be aware of how a third-party supply chain function works. China, as you know is one of the leading manufacturers around the world. If you are planning to source your products from a Chinese supplier, then you might need to do your homework about them.
Why Go for China Suppliers
This would be the first question that would go in your mind. Why would you want to hire Chinese suppliers for your products, when there are other options available? Well, the first factor to consider here is you can have your products customized at low prices. When compared to other countries, Chinese suppliers are known for offering mass custom orders without compromising on quality.
Secondly, due to their low labour costs, it becomes more feasible to manufacture your products in China, than in other countries. China also has great technology with state-of-the-art machinery that can help manufacture superior quality goods.
It is always better to do your research when it comes to choosing suppliers for your products. If you search for Chinese supplier product sourcing reviews, you will be flooded with websites offering you the best Chinese sourcing companies.
You cannot just choose Chinese suppliers based on the reviews and ratings given by other companies. Each company has different preferences and so would their requirements for the supplier. If you are a new entrepreneur, then you might need to learn the ropes of the business before choosing a supplier.
If you are dealing in fast-moving goods, you need to always be ahead of your competitors. Electronics, gaming accessories, household items, you name it you have Chinese suppliers to get the products manufactured for you. You can even make use of online shopping websites such as Amazon to supply products to your target audience.
You can check out Amazon’s list of best sellers to have an idea of different categories that customers generally love to shop for. You can even make use of Google Ads or market intelligence tools to get a brief idea of the product volume you are likely to sell monthly. In this way, you can plan for orders accordingly with your Chinese supplier.
Another check that you might want to consider when checking for supplier product sourcing reviews would be the delivery of your products. If you are dealing with large orders, then you cannot rely on a single Chinese supplier to complete your order.
In such situations, you might need to hire credible Chinese sourcing agents to find credible suppliers for you. These people will be well-versed in the local language and can help you locate different suppliers that cater to your requirements.
In addition to this, they will also ensure that your products are ready well within the timeframe and will also conduct factory audits to check for defects in the products.
Now that you are clear on how the supplier network works, you need to know how the payments need to be made to your Chinese suppliers. The commonly used payment mode is a Letter of Credit or LOC. This is a financial agreement between you, the Chinese supplier, and your bank. This agreement ensures that the beneficiary will be paid in full once all the conditions mentioned in the LOC are met.
LOC can be either revocable or non-revocable. Revocable LOCs can be cancelled or revoked by the bank, whereas a non-revocable LOC cannot be cancelled unless all the parties agree to the cancellation.
Other types of LOC include:
- Revolving – These types of LOC can cover multiple transactions between the buyer and seller
- Standby – In the case of standby LOC there is an assurance from the bank that the buyer will pay the seller
If you are not sure about LOC, you can even opt for Purchase Order Financing. This type of financing ensures that there is smooth cash flow between you and your supplier as it offers funding with purchase orders. This is a good option if you are looking for an efficient way to finance your purchases.
When you check for product sourcing reviews, you might see that many people often complain about price increases from Chinese suppliers. This is a common scenario and price increases can take place due to numerous reasons:
- Materials used for the production might get expensive
- Increased taxes
- Increase in labour costs
- Appreciation in the Chinese currency
It is always better to validate the prices mentioned in your quotation. Set a common timeframe of 90 days to 180 days for your supplier to get back to you on the price validation. Sometimes, you can negotiate with the suppliers depending on your rapport with them.
Ensure that you check the prices of the raw materials to justify the price increase made by your supplier. Offer them repeated orders, so that they can give you discounts on large or bulk orders.
Reviewing your Suppliers
China is the best country to source your products as its suppliers have in-depth knowledge of the global supply chain. This does not mean that you completely trust the suppliers and immediately give them large orders, without asking for sample production.
Many of the Chinese suppliers have a set MOQ and you can take full advantage of this clause and place small orders and gradually increase the orders once you are satisfied with their manufacturing process.
Now before going through product sourcing reviews, you need to first under the type of manufacturers in China. In addition to manufacturers, you also have:
- Wholesalers – These companies deal only in standard products and have warehouses to store their goods
- Traders – These companies deal with huge orders and their manufacturing cost is on the higher side
The internet is your best option when it comes to searching for Chinese suppliers. Once you short-list the suppliers, ensure that you visit their place at least once to see the work samples yourself. In this way, you can even build a rapport with the supplier and negotiate the prices.
You can even opt to review your Chinese suppliers either through a regular route or the special route. Your regular review is a review wherein you check your end customer requirements and whether the supplier is meeting the requirements mentioned in your contract.
In the case of special review, you further divulge deeper into factors such as risks involved, confirmation on the inventory, financial issues, communication issues, reasons for orders not being delivered on time, and many more.
Supplier reviews can be either:
Under administrative review, you need to review your suppliers’ licence, the duration they have been in business, their experience, and their customer base. When it comes to operational review, you need to take into consideration the size of the manufacturing facility, the machinery used, warehouse facilities, material stock and handling, inventory stock, process flowcharts, and many more.
Procedural reviews consist of evaluating the procedures your supplier has in place for the products to be manufactured as per expectations. This could include FMEA analysis, product development, risk management, and many more.
The right Chinese suppliers can help take your business to new heights. It all boils down to networking and how you build your relationship with your suppliers.