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Path: Sourcing News & Advice
>> Import from
China Advice >> Don't make these common mistakes
when sourcing from China

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Don't make these common mistakes when sourcing from China

Posted: November 21, 2014

by Adam Gilbourne

China presents an excellent opportunity when it comes to sourcing
products. The sheer scale of manufacturing and the huge variety of products and
suppliers means there is no shortage of options when it comes to finding the
right products for your business. However, with every opportunity there is
always an element of risk and China is no exception. Much of the risk can be
managed and here we will outline some of the most common mistakes that people
make when sourcing products, so that you can avoid making them.

Not defining specs

This may sound obvious, but a clear definition
of your product is absolutely critical. Whether the product is cardboard
packaging, homewares or sports equipment, a comprehensive product specification
is the first step in ensuring you end up with a supplier and product that you
are happy with. The more detail you provide a supplier with, the more accurate
the end product will be.

Not doing enough due diligence

Many people don’t investigate potential
suppliers in enough detail. This can be a costly mistake as trade fairs, emails
and phone calls can only reveal so much about the real capabilities of a
supplier.

The first step in conducting due diligence is to
request information such as business licenses and customer references. Further
to this, visiting the factory will provide a clearer insight into their working
conditions and capabilities. Whilst on a factory visit, it’s also possible to
arrange interviews with management to understand the financial health of their
operation.

Focusing purely on price

It’s easy to get caught up in the price game.
After all, the lower the price, the higher your potential profits. Price can
certainly be an initial filter when shortlisting suppliers but relying on this
can be a very costly mistake in the long term. Low prices almost always come
with other compromises, whether it be quality, reliability, communication or
other things such as hazardous materials.

It’s important to be price conscious but letting
this rule your decision-making can be the downfall of your product or business.
Extremely low prices are often an indicator that a supplier should be avoided –
if it seems too good to be true, it probably is.

Not creating watertight contracts

Relying on verbal contracts and agreements is a
very dangerous game. When sourcing products from China it’s important that you
have everything in writing and create contracts with all parties. Standard
contracts include the main items such as parties, terms and product definitions,
but it’s important to have a legal professional assist you. This can make the
difference between a contract that you think covers you and a contract that
truly is watertight. Remember that different laws apply when doing business in a
foreign country and navigating this on your own can be very difficult.

It’s becoming more commonly known that contracts
themselves don’t always have as much standing in China as they do in the western
world, but having the strongest possible contract is still the first line of
defence.

Not having a local contact

Doing business with other countries and other
cultures can be fraught with danger and can at times be a logistical disaster
waiting to happen. Having someone on the ground can help avoid costly
mistakes.

This contact should speak Chinese and be able to
assist with quality control inspections and any emergencies with logistics or
manufacture. Many business owners believe they can handle the operation remotely
but the value of having a specific contact on the ground cannot be
underestimated.

By exercising
common sense and avoiding the mistakes above, you can take advantage of the many
opportunities in China and ensure a profitable business relationship for both
parties.

Adam
Gilbourne is the founder of Easy Imex Ltd
and helps importers to source product & manage their supply chain in China.
He writes advice for importers on the Easy Imex blog. He lives full time in
Shanghai, China. You can contact him at [email-masked].

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