Ask any importer and almost all of them will have a story about a mistake they’ve made when product sourcing from China. That's because it's almost impossible to avoid making any mistakes in the process. With the right advice, you can put yourself in the best position to avoid some of the most common errors and mitigate some of the risks that come with manufacturing, shipping, logistics and more when sourcing products from China. For some types of manufacturing, the safest option is to use a product sourcing agent. Using an agent as part of your sourcing strategy serves as a great way to enhance efficiency and lower costs. Below are five things to check when product sourcing from China. Follow these tips to avoid making the most common mistakes many importers make during the process.
#1 Have You Verified the Supplier?
In some industries, kicking off the process of sourcing products is 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 ecommerce business that can help in sourcing clothing and home consumables. It gives you the seller's 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 directly rather than using a third-party site, you will need to do your research on potential suppliers. 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:
- Checking the business licence - the Business Scope should include the word manufacture or produce if it’s a legitimate factory.
- Asking for a 17% VAT invoice – only a factory can issue them. Once you've received this, check that the business name matches the 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-unit minimum order quantity, while a trading company can organise a smaller run.
#2 Quality Control and Factory Visits
It’s no secret that 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 or of a high quality.
If you have the time and resources, visiting potential manufacturers' factories can help. You’ll get to see where your products are made and ensure that you're dealing with a legitimate factory rather than 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?
Sourcing products from China can turn from a profitable venture to financial loss very quickly due of transport costs. If it’s only a few lightweight samples, your best option might be air freight. However, if it's a 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 either a Full Container Load (FCL) or share a container (Less Than Container Load). When you’re looking at a quote for the manufacturing of a product, make sure you factor in the logistics such as transport cost, customs, and duty expenses to make sure it’s worth going ahead. If you are comparing quotes between suppliers, check what each one includes. Quotes from some suppliers 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, and that the product will be manufactured to specifications. Some buyers send detailed specification documents to manufacturers that aren’t read. That's why it's important to 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 of a high quality, consider sacrificing a little time upfront to get it right.
#5 The Manufacturer’s Quote
If you're comparing quotes, it’s important to know what’s included and what’s not when sourcing from China. Make sure each 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 manufacturing 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, insurance and any additional charges as the goods leave China and enter Australia. It’s ideal to research the Incoterm® of your shipment so that there are no costly surprises when the time comes to collect the shipment from the wharf. Read more about shipping terms for international trade here.
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 and reliable Chinese manufacturer but it’s tricky. You might think you’re communicating with a factory, but it's possible that you have actually been emailing a trading company or wholesaler. Both can add a margin to the cost of the product, so you could 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?
Product sourcing plays an important role in making sure the process of obtaining goods, materials and/or services is as efficient and cost effective as it can be. A product sourcing agent is a party that does the legwork in finding the best manufacturer or supplier for products and services at the right price, whilst ensuring high-quality products, in exchange for a fee. Product sourcing agent fees are generally either payable as a flat fee or commission. Agents can leverage their relationship and the buying power of other clients, and 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 help 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 shipment.
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 may not know if they are dealing direct with a factory or a trading company, which can make product sourcing riskier. In situations where something goes wrong with the order, suppliers may stop communicating with owners in Australia. The supplier is also 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 halfway there. You still need to get the shipment from China to Australia, and the process isn't easy. It takes time and experience to understand the paperwork, customs and duties, and dealing with the shipping line.
If it’s the first time you are sourcing from China, 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 of the risk involved when it comes to sourcing products from China, ask us if we are already dealing with your ideal manufacturer by calling Vara Allied on (08) 6115 0118 or contact us online.