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 How to start dealing with Chinese Suppliers?

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AuthorMessage
pjworldwide



Posts : 5
Join date : 2014-01-30
Location : London

PostSubject: How to start dealing with Chinese Suppliers?   Thu 30 Jan 2014, 7:52 pm

I thought I would highlight some of the main issues the suppliers face and cover some of the common questions that I’ve seen in the past.

Types of supplier
In China as with the rest of the world, this can vary hugely. One supplier might be a factory with thousands of staff and at the other end of the scale you might have a mother of one working from home to try and pay the bills, along with many middle men in between. The difference in China is that it might not always be that clear exactly who you are dealing with. The mother is as likely to tell you that she is a factory as the factory itself.

The truth is that they could all offer as good a service as the other. The crucial thing as far as the buyer is concerned is that this will affect what you can buy and at what prices.

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Types of product
This will also have a bearing on who you can buy from and at what unit prices. There are obviously thousands of various permutations, but to keep it simple I see that there are three main product ‘types’ if you like.

1) Off the shelf. These are made in quantity to the same design and as such reasonably easy to source.

2) Off the shelf with own branding. Also made in quantity, these products might require specific branding to be added to the basic model, so will involve extra printing, design, etc.

3) Bespoke products. These are manufactured to a specific design of the buyer and as such can be harder to obtain.

Why do I need to consider this?
Put in very simple black and white terms (I will cover in more detail below). If you ask a large scale factory to make you 250 small widgets, they simply won’t deal with you as it’s not worth their while. Yes they want to make money, but they won’t make much from that order.

Should you ask the mother of one to get these for you, chances are she will have the necessary contacts, perhaps on the back of another larger order of say 5000 widgets that she sells on in smaller batches.
Obviously once it comes down to own brand and bespoke products, there is additional design and manufacturing involved which will have a bearing on who you can buy from.

Below I have highlighted some of the common questions I come across and helps explain the answers to these from the suppliers point of view:

Paying for samples
Q. I have asked a supplier to send me some samples so I can then make a larger order, but they want me to pay for them. Why are they not trying harder to get my business?

A. If they sent samples free of charge to everyone that asked for them and then subsequently did not make an order, they would be out of business. Even if they stock the samples so have no excessive production costs, they are still essentially throwing away money.
If a buyer agrees to pay for samples, the supplier will view them as being more serious about placing a future order. Money talks as they say.

There will be some suppliers that will send out free samples, and perhaps just ask for the shipping cost to be covered by the buyer, but especially for higher value items these are becoming less common (Unless you happen to be a buyer for a company the size of Tesco’s, in which case they are more likely to hand deliver them).

MOQ is too high
Q. I want to buy 50 of these items but the supplier has a minimum order requirement of 1000 and won’t budge – Why?

A. If it is not an off the shelf item they will more than likely need to make or buy moulds, create specific designs and suchlike. The factories also have to purchase materials and even if the order is small, chances are their own supplier of the base materials might have MOQ’s themselves. All of this can be a very costly investment for a small order. The materials themselves might be difficult for them to source if they need to meet your design specifications.
Production of a specific product also takes time. They will need to schedule staffing and delivery of components even for a small order. The manufacturing process will mean they will be taking resources away from potentially larger orders with more profit in them.

Why would they want to do all this for a low quantity order with a very slim end margin?.

Unit price too expensive
Q. Price I am being quoted is too high. China is supposed to be cheap?

A. When smaller orders are involved, buyers will often discover that prices are not what they expected from China and when they factor in shipping and Duty/VAT that they realise that they could probably source from the UK cheaper.

All of the base costs mentioned in the MOQ section will need to be factored into any unit price they provide you with and they will also need to consider the possibility of not being able to take on larger orders whilst your items are being manufactured.

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A factory will ideally want large regular orders, so they might even be trying to put you off by quoting over the top if they see you as a small one off importer. They might refuse to quote you altogether unless you can prove your potential to them.

Deposit required
Q. I have ordered some goods from a manufacturer, but they want part of the payment up front. Is this a scam?

A. No not at all. If a supplier is manufacturing a product for you, they will want part payment up front. Firstly, to show you are serious (it is a non-refundable deposit after all), and secondly to pay for materials.

More than often the deposit will be 30% with the remainder due on completion of the order or prior to delivery/release of bill of lading, etc.

Manufacturing process taking too long
Q. I ordered my goods three weeks ago and I’ve paid the deposit – Why have they not been shipped yet?

A. Very few suppliers will hold large quantities of stock, or indeed if they are factory they will not have surplus materials just laying around waiting for a potential order. One of the reasons is that the factories need to move quickly with the times, so a big selling product right now could be out of favour in a months time. In addition to this, any stock held is essentially invested money that is going nowhere until the goods are sold.

Some products such as the bespoke ones mentioned will take longer to manufacture, as there is more work involved and designs need to be finalised and materials sourced.

A factory production line is not just a few dozen staff sitting round waiting for someone to press a green button on a conveyor belt once an order is received. They will often have a full schedule, some working 24 hours a day. They need to find a slot in their schedule to work on your product.

Often this can panic buyers, as they see any delays such as this a potential stalling tactic that they think will develop into a scam. It’s simply not the case.

Always ask for the lead time before you make an order, but be aware that things can sometimes change.

In summary
A supplier will only be desperate to sell to you if they feel it is worth their while doing so.

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If you haggle on price so much that the base line profit they are making is very poor, it’s likely that both the product quality and the level of customer service will suffer too. If you were trying to sell regular orders to two customers, one you were making £10 an item and the other £40, who would you want to impress more?

Finally, most buyers are wary of being scammed. Don’t forget this works both ways. More than likely the supplier themselves will have been scammed in the past or suffered at the hands of time wasters. Treat them as if you would treat your own customers, create a business relationship and reap the benefits of a successful long-term partnership.

If you would like advice on this subject please do feel free to drop me a PM or post a reply directly on here
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