11 Questions you should ask yourself before sourcing in China.

Sourcing products in China, or any foreign country can be challenging for a person or business doing it for the first time.

In many cases buyers are drawn to the “Made in China” benefits, such as easily accessible manufacturing clusters, full service capabilities of suppliers, modern infrastructure, and lower costs to name a few, without being fully prepared to place orders offshore.

This article will highlight 11 of the most important questions a buyer new to Chinese sourcing should ask themselves. It is by no means exhaustive, but if you can answer these questions, you should be well set up to start your Chinese sourcing project.

Keep in mind that these are questions, and not answers. I have attempted to answer the questions in a very general way. There are many more answers to these questions, but then I would need to publish a book. Spend some time doing your own research on the below questions.

1.      Am I prepared for offshore sourcing?

This question seems quite obvious, but offshore sourcing requires a lot of preparation. Preparation is CRITICAL.

Many buyers are simply not prepared for this.

See the next ten questions for what proper preparation should entail.

2.      What regulations should I be aware of?

Like any country, China has its own regulations.

These range from financial to environmental.

I specifically mentioned environmental, as this area has come under a lot of scrutiny lately. Many factories have been closed by the government for failing to meet environmental regulations.

If you are sourcing from such a factory you have a problem. Some of these factories get closed for good, and some just until they meet the required regulations. Either way this is a major issue for a buyer. A basic internet search should give you an idea as to what is currently being clamped down on. Speaking to people on the ground is also encouraged.

Recently, local authorities started clamping down on polluting dyeing factories in Fujian Province. I know of a few buyers, whose production was affected.

It is also important to keep in mind, that a strict enforcement of a specific regulation, might not be nationwide at any specific time. Local provincial governments have different priorities at any given time.

Don’t forget your own country will have similar regulations for imported goods. For example, most countries have banned lead based paint, metal apparel trims need to be nickel free, etc.

Be sure you are aware of the laws, standards, and regulations that relate to the product you want to import.

3.      What business terms are right for me?

If you are used to sourcing locally, your business terms will differ from international business terms. Be aware the different INCOTERMS (FOB, CIF, EX WORKS, etc.), and payment options (Letter of Credit, Deposits with balance payments, etc.). Ensure you decide which works best for you in advance. For example, check out, INCOTERMS-WIKIPEDIA, and TRADE FINANCE-WIKIPEDIA.

4.      Can the supplier make/supply my product?

This might seem obvious, but it has caught many a seasoned China hand out. Myself included. Ask potential suppliers questions that will test their knowledge of the product, as well as photos or samples of previous production. Get customer references if you can.

In the apparel field, factories are often categorized by the fabric they work with. It will either be knitted fabric or woven fabric.

However, there are many sub categories. A factory specialized in jeans (woven fabric), could not make performance winter jackets (also woven fabric).

Drill down to the sub categories when sourcing.

5.      How do I deal with quality control?

How do you intend to manage your quality standards when the supplier is thousands of kilometers away?

This is a critical question.

Make sure that you know your product’s quality standards well in advance. This sounds obvious as well. However, I have dealt with many new buyers, who did not know their quality standard. The usual reason for this is that when sourcing locally, they can physically see the product with relative ease whenever they want, the local supplier is aware of the standards and will meet them automatically, and recourse for defective product is far easier. If you use a trading company, ensure that you discuss quality control with them. A good trading company must have quality controllers/inspectors, who visit suppliers regularly.

6.      Where in China is the best place for me to source from?

China has many centralized manufacturing hubs, where suppliers of specific products or commodities are concentrated.

This is very useful to narrow your search down. Do some research into these hubs.

A useful link is Berkley Sourcing Group . This is by no means exhaustive, but will give you a general idea where to look. If you use a trading company, it is important that they have an office or representation in the area.

7.      How do I communicate effectively?

Also keep in mind that English is not China’s first language. Most suppliers have good English speaking staff to deal with foreign buyers, but communication problems will occur.

If you find a supplier with excellent English abilities, this is a bonus, as it will reduce communication errors.

These communication errors can be major or minor. Either way, be prepared for them.

The best ways to avoid these are to use basic words where possible, as opposed to less known synonyms, do not use any slang or abbreviations, and use proper punctuation.

Also, do not be afraid to ask questions if something is not clear.

Make sure your staff know this. Sometimes it is better to have one of your staff members dedicated to communicating with all Chinese suppliers.

This may not be practical if you have multiple suppliers/product ranges.

In this case have a “go to” person for communication issues.

8.      Should I deal directly with a factory or trading company/agent?

This is a very subjective area. However, for someone new to sourcing in China, a good trading company will be beneficial. The emphasis is on “good”. There are many, many trading companies in China. As with anything else, some offer excellent services, while some do not.

When dealing with a trading company, you need to determine whether they are experienced in your product/products, their proximity to suppliers, how often their staff visit suppliers to check up on orders, their quality control procedures, their communication, their meeting of deadlines, and whether or not they will offer you trade references.

It is also important to keep in mind with trading companies, that big is not necessarily better. A very large trading company will likely be diversified in many product categories, but due to their size, will require large orders. Essentially, smaller orders will not be a priority. For someone starting off sourcing in China, the massive traders are not the best option. This is simple economics.

One definite benefit of a good trading company, will be their ability to ensure all local laws and regulations are met with respect to your order.

They will also ensure all the accompanying paperwork is in order, and manage your order, from beginning to end.

If you want to source directly, there are many resources out there. On the internet you can use popular sites, such as Alibaba.com, Made in China.com, and Global Sources.com.

It is really a matter of what you are comfortable with.

9.      Managing expectations.

One of the biggest issues with sourcing in China is managing your own expectations. This ties in to other questions, such as communication and business culture.

It is likely you will need to follow up continuously with suppliers, have delays, have communication issues, face cultural differences, and face a fair bit of frustration.

This is normal, as the Chinese can be a bit difficult to deal with.

However, none of these are deal breakers. Just expect them. Things will usually not go smoothly, and there will be bumps in the road. Definitely more so than sourcing locally.

As long as you expect these, and do not overreact to them, they are perfectly manageable. Build time in to your sourcing and production schedules for these.

The old adage, hoping for the best, but expecting the worst, is always applicable.

10.  Am I able to visit the supplier?

You should visit your supplier/suppliers, if possible.

In fact, I always recommend this.

It is important for a few reasons.

Firstly, you can verify your supplier/suppliers personally.

Secondly, by visiting their factory, you will see if they can make your product. If you are dealing with a trading company, they will organize factory visits.

Lastly, it creates a personal relationship that cannot be replicated by email, phone, or Skype.

11.  How do I deal with the business culture in China?

People often hear horror stories about the failure to follow the business culture and protocols in China. Luckily these types of issues have decreased substantially over the last 10 to 15 years.

As China has become more globalized, business practices have modernized. Many Chinese have studied foreign trade as part of their tertiary education, or have studied at Western institutions in China. An increasing number are studying abroad.

As the Chinese become accustomed to doing business with foreign buyers, they have gained an understanding of foreign business culture.

Twenty years ago, receiving a business card from a Chinese businessperson with one hand was seen as very insulting. Today, it is not a big issue.

Basically, try to follow business protocols where possible, but you are not expected to do everything right.

I would, however, recommend doing some reading on Chinese business culture, or a bit of internet research. It will provide a lot of insight.

You do not need to read 10 books on Chinese business culture, each containing the same information, guaranteeing to improve you chance of success, claiming to be the foremost book on the subject, and warning you that your business will collapse if you do not read said book.

A lot of these authors are naïve to think that a Chinese businessperson, has not studied the business practices of your country.

Also speak to people that currently do business in China. They are a wealth of information.

 

I hope you find these questions useful. Good luck with your sourcing in China.

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