If you are thinking of getting into the supply business, you probably have China in mind. Most people believe that there are great business opportunities in China because the labor costs keep the prices of commodities very low. However, as an entrepreneur you must be very careful since the global economy of China is poorly regulated leading to illegal trade activities and copyright problems. On the other hand, the inherent communication issues, importation problems and cultural differences make trade with this Asian nation very complicated. Luckily, a great number of entrepreneurs have pioneered this pathway hence they provide valuable guidance on working with Chinese suppliers successfully.
Below are some tips on sourcing products from China:
Most companies and entrepreneurs are sourcing from china for two main reasons. The first reason is the long term objective of creating a market presence in China for the purpose of serving the economy. The other reason is a short term objective of taking advantage of low labor cost in this part of the world.
- Improve Supplier Assessment
The most vital step is selecting the right trade partner. Buyers must check references and prove that suppliers have quality systems, required capacity and adequate capital. It is also vital to determine the supplier’s factory priorities. For instance, some Chinese factories focus more on fast production and price while others focus mainly on quality.
- Avoid Brokers or Middlemen
Several years ago, most business people that were sourcing from Chinese dealers were using brokers since they did not know the major players in the Chinese market and lacked the management control ability.
According to financial advisors, going direct is the best solution these days. This is because the hefty fees charged by some brokers reduced the savings obtained from oversees sourcing. The other reason why going direct is highly recommended is control, sourcing highly engineered commodities require a keen eye for thorough evaluation. Such products must be checked carefully something that most brokers don’t do.
- Convey Clearly Defined Expectations
Buyers must be clear about the products they expect from Chinese suppliers because of things like metric conversion and language barrier. It is mainly essential to have detailed and robust documentation. Have clearly defined specifications and expectations since market requirements in various countries may differ.
Moreover, you should put your requirements and orders in writing.
This acts as a reference point to ensure accuracy in delivery. You should also create performance requirements including testing protocol and product use.
- Build Strong Relationships
It is imperative to build and maintain a strong relationship with the Chinese suppliers. This is because in China strong business relationships are very crucial. The success of China sourcing is based on well established relationships and this is normally done through intermediaries such as representatives of Chinese company in different countries.
- Protect Intellectual Property
Make sure your intellectual property is protected when sourcing from China, particularly in terms of tooling and design. While legal contracts and documentation can help a great deal, having commercial leverage is essential.
Enforcing a contract in China is quite a challenge even with proper legal representation. Therefore, commercial leverage implies having the support of other businesses such that if your intellectual property is compromised by a Chinese company, they risk losing numerous business deals.
For success in China sourcing, networking is very important in a society with a weak legal system and complex bureaucracy. Good relationships and networking helps entrepreneurs and companies navigate china’s distribution and bureaucratic challenges.