China is the popular manufacturing hub when it comes to sourcing products. Many businesses turn to Chinese suppliers due to their low labour costs and state-of-the-art technologies. If you are planning to outsource your product to China, you need to have the right procurement policy in place. Selecting the wrong suppliers can not only result in the manufacturing of low-quality products, but can also lead to a poor brand image in the market.
Applying the Best Practices in Procurement
Having the right strategy in place can save your time and effort. If you are planning on procurement outsourcing to China, you need to have a dedicated team allocated for the same. Ensure that you bring all the crucial teams on board. Your purchasing department needs to spend some time finding the right manufacturer and verifying their credentials.
You cannot rely only on one supplier to manufacture your products. You might end up paying higher costs, the quality of your product might get compromised, and if the manufacturer is not able to deliver on time, it can lead to product shortage leading to dissatisfied customers.
Another approach would be to search for credible suppliers through online sourcing portals and choose a few that best suit your requirements. You can ask for quotes and compare the prices and choose the one that fits well into your budget. If you feel online sourcing portals are not sufficient, you can visit fairs and exhibitions and negotiate with the suppliers.
You can even prepare a consolidated supplier base and use this approach to minimize your cost. The benefit here is that you only get to communicate with a few suppliers, thereby saving time. The downside to this is that when suppliers work on slim margins, chances are that quality can get compromised.
Last, but not least, you can choose your key suppliers and involve them in the complete procurement outsourcing process. You can partner with them and discuss investments involving technologies, materials, and products. This will not only help build your rapport with the supplier, but also ensure lower costs.
You will need experienced suppliers who can make the right decisions and offer the right advice. They need to be fluent in English so that they can communicate better and should be flexible to changes.
No matter which procurement practice you choose, there may be certain issues with them such as:
- Suppliers not in alignment with your goals or requirements
- You might have contacted a small or big supplier who might not be able to deliver up to your expectations
- Internal disputes amongst certain departments
You can experiment with each of the practices and see the challenges that are likely to occur. Weigh the pros and cons of each practice and apply the best that would be beneficial for your company.
Choosing the Right Supplier through Sourcing Agents
If you have just familiarized yourself with the sourcing industry, there might be a lot of sceptics when it comes to choosing your procurement outsourcing supplier. If you have references, then that can help you contact certain suppliers and get the quotes. If you are producing something new, then searching for the right supplier can sometimes prove to be a challenge.
You need to spend some time and effort researching your options, shortlisting the suppliers, verifying their credentials, and explaining your requirements to them. The downside to this is sometimes the suppliers might scam you or quote higher prices.
Here is where hiring sourcing agents can make the task easier for you. Sourcing agents will search for the right suppliers, do the necessary verifications, and share the consolidated list for your perusal.
Now, you cannot jump the gun and hire the first sourcing agent that you come across. You need to ask the right questions and see if the sourcing agent is credible or not. Some basic questions that can get your ball rolling in the right direction are:
- Where is the agent located?
- Are they licensed?
- How long have they been in this business?
- What is their specialization?
- How many languages do they know?
- Can they share references of their previous clients?
- Do they offer quality inspections?
- What happens in case of quality issues from the suppliers’ end?
- How do they handle delayed shipments?
- How frequently do they share the production status and inspection reports?
All the above questions can help you get an insight into how knowledgeable your sourcing agent is. Once, you have finalized your agent, you need to be detailed about what you are looking for when it comes to hiring procurement outsourcing suppliers in China. This can help your agent network with the right people and get you the best supplier for your orders.
At the time of negotiating, you need to have a brief understanding of how the suppliers will fix their prices. Factors like the type of product, material quality, raw materials, and shipment play a crucial role here. Study the market and understand what the ideal quote for your order would be. If the supplier quotes way below this threshold, you might need to be cautious about the quality of the product they would manufacture.
You cannot completely rely on your sourcing agent for all your sourcing needs. Though they will do the majority of the work for you, you too need to take interest and check up on them frequently. If you need to do a quality inspection, you can either hire quality inspectors or personally visit the factory site along with your sourcing agent to check on your order quality.
A credible sourcing agent will not miss verifying the following criteria when it comes to suppliers?
- Suppliers’ contact information, addresses, licenses, and other credentials
- Quality certificates
- They will have the Certificate of Authorization from the suppliers
- The financial status of the company
Your work does not end with finding the right procurement outsourcing supplier. You need to check if they can manufacture the products as per your requirements. Give them a small order to manufacture and ask for product samples. You can then modify or revise the product as per your requirement.
Following the right procurement practices and working with credible suppliers can help your business to grow in leaps and bounds. You also get to understand the Chinese market and the different licenses and certifications required to do business with them.