Ask any importer and almost all of them will have a story about a mistake they’ve made sourcing products from China. Making mistakes is almost impossible to avoid. With the right advice you can avoid the most common errors that come with manufacturing and shipping from China. For some types of manufacture the safest option is to use a product sourcing agent. Below are five things to check when sourcing goods from China. Follow these tips to avoid the most common mistakes importers make when sourcing products from China.
#1 Have You Verified the Supplier?
For some industries it’s a matter of searching for potential manufacturers in China and making contact. When you email, include details of your product and ask about their experience in your field. Alibaba is a popular website for sourcing clothing and home consumables. It gives you the sellers details including years in the business, payment terms, ratings, reviews and response time. Keep in mind that Alibaba may not be the cheapest option and isn’t suitable for a range of commercial products.
If you want to source a supplier direct rather than using a third-party site, you will need to do your research. When you have shortlisted a few suppliers send each one an email asking for a quote and delivery length. Be prepared to not receive a response from every supplier and, if you do it may take a while. Find out as much as you can about the supplier including:
Check the business licence - the Business Scope should include the word manufacture or produce if it’s a legitimate factory
Ask for a 17% VAT invoice – only a factory can issue them and then check the business name matches the business licence
ISO 9001 Certification – if they are certified, they are most likely a factory
Check the Minimum Order Quantity – factories will usually have a 1,000 minimum while a trading company can organise a smaller run
#2 Quality Control and Factory Visits
It’s no secret, the quality of some products from China are questionable. Plenty of Australians can tell you a horror story of a product that was binned straight off the wharf. Even if the first order is perfect, there’s no guarantee that subsequent orders will be acceptable.
If you have the time and resources, visiting potential manufacturing factories can help. You’ll get to see where your products are made and ensure they’re a legitimate factory not a trading company. There’s no guarantee that things won’t change but it can help with getting your first order right.
If you don’t have the time to travel to China for an inspection, commission Vara Allied (a product sourcing agent) to do it for you. Someone who sources suppliers regularly, will be more aware of red flags than you will be.
#3 How Much Are Transport Costs?
China product sourcing can turn from profitable to loss very quickly because of transport costs. If it’s only a few light-weight samples, your best option might be air but if it’s the full order, air freight is cost prohibitive. The bulk of manufactured goods arrive in Australia via container ships from China. Depending on the volume of your order you will need to order a Full Container Load (FCL) or share a container if your order is Less than a Container Load (LCL). When you’re looking at a quote for manufacturing the product, make sure you factor in the transport, customs, and duty expenses to make sure it’s worth going ahead. If you are comparing quotes between suppliers, check what each one includes. Some may include transport to Australia and insurance while others don’t.
#4 Ordering Product Samples
Too many buyers make the mistake of not ordering a sample of their product. They assume that sending the factory a sample, a picture or drawing is enough, that they will manufacture the product to spec. Some buyers send detailed specifications documents that aren’t read. Keep your instructions simple and keep requesting a sample until you are completely happy. Ordering and receiving samples can be a long process but if you want your full order to be a high quality, consider sacrificing a little time up front to get it right.
#5 The Manufacturer’s Quote
When you’re comparing quotes, it’s important to know what’s included and what’s not. Make sure the quote lists the materials used to manufacture the goods otherwise an inferior one may be switched in. Ask for a firm delivery date so you know how long you expect the manufacture process to take.
The seller should include a three-letter abbreviation on your quote. The abbreviation is an Incoterm®, a standard trade definition used by shippers around the world. This ensures you and the exporter both know who organises and pays for transport, insuring the goods and any charges as the goods leave China and enter Australia. It’s ideal to research the Incoterm® of your shipment so there are no costly surprises when the time comes to collect the goods from the wharf. To understand shipping terms for international trade take a look at this article we put together.
FAQ’s & Tips For Product Sourcing from China
How Do You Source Products From China?
Research is the key to success. You want to find a reputable Chinese manufacturer but it’s tricky. You might think you’re communicating with a factory but your emails may be between a trading company or wholesaler. Both can add a margin to the cost of the product so you end up paying more than if you go direct to order from a factory. There’s also less control if you’re dealing with a third party.
What is a Product Sourcing Agent?
A Product Sourcing Agent is someone who does the legwork in finding the best manufacturer or supplier for products and services at the right price. The agent can leverage their relationship and the buying power of other clients. An agent will often make regular trips to China on behalf of clients to check out factories and meet with potential suppliers. A Product Sourcing Agent can save you a lot of time and money in the long run.
If this is your first order from China or you rarely order, Australian Border Force recommends you use the services of a licensed customs broker to clear the goods. Making a mistake on the documentation is no excuse and your inexperience could make you liable for additional costs and delays in releasing the goods.
The Importance of the Right Manufacturer
Choosing a reputable manufacturer is time consuming and difficult, especially if you’re doing it all from Australia. A business owner won’t know if they are dealing direct with a factory or a middleman (trading company). If something goes wrong with the order, a supplier may stop communicating with the owner in Australia. The supplier is less likely to fix the problem because they have a limited relationship with the owner, while an agent may have multiple clients using the same factory. The supplier is more likely to fix a problem to keep the relationship going with the agent.
How Do You Get Goods From China?
You might think you’re set once you find your ideal manufacturer but you’re only half-way there. You still need to get the goods from China to Australia and shipping isn’t easy. It takes time and experience to understand the paperwork, customs and duties and dealing with the shipping line.
If it’s your first overseas order or you only order occasionally, the Australian Border Force recommends using a customs broker. A broker/agent will take care of everything for you and reduce the chance of paying a penalty for a novice mistake.
Know Your Incoterms®
Before you enter a shipping contract, read up on Incoterms® so you know what the seller is responsible for. This will ensure there are no surprises.
If you want to eliminate some risk involved in product sourcing, ask us if we are already dealing with your ideal manufacturer by calling Vara Allied on (08) 6115 0118 or contact us online.