Elksourcing：Essential Tips to Achieve Quality Sourcing China

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Elksourcing：Essential Tips to Achieve Quality Sourcing China

Mar 31, 2021 , by 露露

China has shed its image as a producer of cheap but poorly manufactured products.  Through the efforts of its government, the Chinese has attracted countless of foreign companies for sourcing.  Firms abroad obtain products from China because of factors like low-cost labor. Businesses that are into quality sourcing China must be conscious of certain things when finding the right sourcing specialist in the country.

Research

Entrepreneurs or firms must have a clear idea on the products they would like to order from China. Product drawings and specifications can help a sourcing agent better understand the requirements of the client.

The Internet is a good place to start in looking for a sourcing representative in China. Most foreign buyers visit websites specializing in Chinese products and suppliers to get a list of potential purchasers in China. Some buyers even go to the extent of visiting websites or social media accounts of purchasers in hopes of learning more about the prospective sourcing representative.

Bigger businesses also send employees or representatives to exhibitions held in China. Exhibitions are a one-stop shop for entrepreneurs looking for potential supplier. Exhibitions in the big cities like Beijing, Shenzhen and Shanghai gather the most number of participants. The most reputable quality sourcing China agents also participate in this type of gathering. Firms and entrepreneurs should prioritize exhibitions with at least 200 exhibitors and attended by 20,000 visitors. Exhibitions also enable buyers to have a face-to-face meeting with potential purchasers.

Selection

Businessmen or purchasing officers should talk face-to-face with potential suppliers first before signing a contract. It is also encouraged that a visit to the local factory be made to give the client a better understanding of how the potential supplier works. A visit to the local factory will also give an idea on the type of machines used as well as the number of personnel working on the product.  

Stringent selection also requires clients to ask for recognizable standards of quality like ISO. The track record of the purchaser should also be scrutinized particularly in terms of exporting overseas.

In selecting sourcing representatives, most businesses usually put a premium on the costs. However, not all sourcing agents in China that can promise the cheapest costs for their clients are to be trusted. Most of the time, cheap products also equate to poor quality. When selecting a quality sourcing China agent, quality should be the top priority all the time.

China Sourcing Agent

Elksourcing：What Sourcing Agents Can Do For You?

Mar 31, 2021 , by 露露

What does a sourcing agent do? For one, the agent will assist a company in finding sources for products and supplies at the lowest cost possible. This will help the company save time and money in production. Local companies can take advantage of sourcing agents to find the best prices. They have connections to domestic companies so they know where to find the best supplies. Overseas companies will find sourcing agents very useful as well. For instance, an overseas company who wants to buy supplies from China can use sourcing China to locate companies they can work with.

The agent will first assess the company’s needs and meet with suppliers to check if they are able to meet the requirements of the company before ordering supplies from them. Sourcing agents will do all the work for you, including doing inspections and making evaluations to address concerns that might affect the quality of the products that they supply.  

Companies will find that working with sourcing China agents will be a lot more convenient, especially if you are based overseas, because the agents are more familiar with the laws and customs in the country. You can have the sourcing agents deal with issues like import and export tariffs, and taxes. If you let someone who is unfamiliar with the norms and practices in the country you are buying supplies from handle the task, there will always be a risk of a holdup somewhere along the supply chain.

The job of a sourcing agent is not always easy. The job requires knowledge of multiple languages, superb negotiation skills, coordination skills, and good business sense. Corruption in certain regions can also complicate negotiations. That is why having someone familiar with the culture and business in the country is very important. A good sourcing agent will be able to cut through the red tape quickly and efficiently so as not to cause any more delays. 

Therefore, if you are an overseas buyer planning to buy supplies in China, it will be best for your company to use the services of sourcing China agents. Some of them work for a single employer while others may represent a number of companies. You can find them in different ways, such as searching on Google. Some are also registered with government offices and trade associations, so you may want to try looking through reliable authorities as well.

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Elksourcing：Why Chinese Suppliers Require MOQ and What Can You Do?

Mar 31, 2021 , by 露露

Minimum Order Quantity (MOQ) requirement specifies the lowest quantity of a certain product that a supplier is willing to sell. If the importer cannot reach the MOQ requirement, then the supplier is not willing to enter production. Suppliers in China tend to have fairly high MOQ requirements. Why Chinese Suppliers Require MOQ? What can you do about it?

Reason 1 – Low Profit Margins Require Large Volumes

Chinese suppliers tend to have very low profit margins, as low as 2-3% is common. Price competition is fierce and Chinese businesses in general tend to be focused on keeping a low price rather than improving product quality and service level. Low profit margins require the supplier to produce a large quantity of products in order to break even. 

Reason 2 – Material Suppliers also Require MOQ

I’m sure most Chinese suppliers would be happy to do business with smaller buyers if they could. In fact, I know that many of them dislike the fact that a high MOQ requirement forces the suppliers to rely on a smaller number of large companies that could walk away with their business without notice. The problem is that the MOQ is not decided by the supplier alone, but also by its subcontractors. Every supplier need to purchase materials and components from local subcontractors, and every subcontractor requires the supplier to purchase a certain quantity. The supplier’s MOQ requirement is thus a reflection of the MOQ requirements imposed by its subcontractors.   

Reason 3 – China Suppliers Rarely Keep Stock

A common misunderstanding is that Chinese suppliers have warehouses filled with export quality products ready to be shipped to the next buyer. It’s not true. In fact, most Chinese suppliers don’t even purchase materials and components until an order has been placed. Below I explain why:

Storage is not free and keeping a large stock would force the supplier to increase the prices. Empty shelves helps the suppliers to keep costs down and stay competitive. 
European and American product standards (i.e. CE, RoHS and FCC) don’t apply in the other parts of the world. While many Chinese suppliers are manufacturing products that are in compliance with Western product standards, they are certainly not mass-producing them before they receive an order from an American or European buyer. Product standard compliance comes at a cost (more expensive material and components) and it would leave the supplier at a disadvantage if they mass-produced products that are compliant with Western standards. 

How can you lower MOQ?

The MOQ requirement cannot simply be negotiated away or vanish. While some suppliers may accept a slightly lowered MOQ, requesting it to be removed completely is the same as asking your supplier to lose money for the sake of your business. Many importers try to play the “my orders will be larger in the future” card, but most suppliers hear this on an almost daily basis and only a fraction of their buyers can back up the claim in the end.

However, there are ways that can satisfy the supplier at the same time as you can order a smaller quantity:

Use components, materials and colors on several products. This way the supplier can limit the number of subcontractors involved.
Coordinate your orders with those of other buyers.
Import products that are not regulated in your country and/or market. This way you can purchase products that are originally produced for the Chinese market.

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Elksourcing：Price Negotiation with Chinese Suppliers

Mar 31, 2021 , by 露露

The whole point with importing from China is the cost advantage. It’s cheaper than buying from West and certain products simply cannot be found outside of China. While China is slowly losing its position as a the world low cost factory, importers still have a price focus and negotiation is part of the process. The Chinese love to bargain, it’s part of their culture and even expected in many situations. However, there are plenty of misconceptions and mistakes made my importers – especially small ones.

The supplier must also make a worthwhile profit

Rather few importers are aware of the (very) low profit margins that most Chinese suppliers struggle with. It’s simply not possible for them to offer a 10 – 20% price reduction, unless the price was way off to begin with. Asking them to lower the price with anything more than 0.5% – 2.0% is the same thing as asking them to lose money on your order.

Some importers simply cannot accept this and keep pushing for major price reductions, sometimes only for the sake of it. If you’re lucky, the supplier will simply tell you to get lost in a nice way. If you are less lucky, the supplier will give in and offer a price reduction, and adjust the quality accordingly. The likely outcome is a batch of products with horrible quality and a large number of defective units.

However, I’m not saying that should not attempt to negotiate the price. I encourage it, if only for the sake of showing that the supplier that you have clear limits. That can discourage them to make any bold moves on the price in the future. All I’m saying is that you shouldn’t expect price to be cut more than a few percentage.

Price Negotiation is all about good timing

You must give incentives to people if you want them to give you something in return. The same applies when negotiating prices in China. Keep in mind that a supplier will not reduce the price because they want to be nice; it’s a cold calculation that’s aimed at getting your order. If a supplier already knows that you’ll place your order regardless of price, they no longer have an incentive to cut back on anything. This is very common, and may occur in any of the following situations:

When a supplier knows that you don’t have any additional suppliers to fall back on
When you’ve invested a lot of time and money into product samples and development
When you are just about to place a new order
When you need products fast. This means the supplier can simply hold out until you become even more desperate.

When any of the above occurs the supplier is fully aware that you’ll place your order with or without a price reduction. For natural reasons, the supplier is very unlikely to offer even the slightest reduction when this is the case. On the contrary, some suppliers even consider such a situation an excellent opportunity for a price increase!

Be ready to leave the table and walk away

Many Chinese suppliers take a “you want this order more than we do” approach to negotiations. I’ve found that this strategy works very well when reversed. The key to success is to always make the supplier feel that you are well prepared and ready to leave the table and take your order elsewhere if they refuse to meet your demands. Although, you’ll have to leave many tables if your demands are unrealistic to begin with. This can be achieved by doing the following:

Always have plenty of supplier options available until the moment you place your order. This means that you need to negotiate with many suppliers at a time.
Never make any promise or confirm future orders. This makes the supplier feel in control.
When you’ve withdrawn from a negotiation, then that’s it. If you keep coming back you’ll like you’re out of options. This certainly doesn’t give the supplier any incentive to reduce the price.

Avoid importing products with razor thin profit margins

Since you’re reading this I assume you are not a purchasing manager working for Wal-Mart or Tesco. Thus I suggest that you forget about competing with large multinationals in terms of pricing. Instead I advise you to find a product niche where you can enjoy a fairly high profit margin. This is becoming especially important now since the “China price” is under a lot of upward pressure, mainly due to rising wages and inflation.

How To Import From China

Elksourcing：As a Startup, What to Import from China?

Mar 31, 2021 , by 露露

In this post I’ll focus on product categories that are a bit more suitable for startups and beginners looking for what to import from China. I begin by explaining what you shouldn’t do：

Avoid OEM / Customized Products

Products that are highly customized require higher MOQ requirements. This is simply because the supplier has to purchase components and materials from a larger number of subcontractors. Each subcontractor has its own MOQ (Minimum Order Quantity) requirements and this can quickly add up to an MOQ that you cannot reach.

Instead of importing an OEM product (custom designed) you can purchase a “standard product” and achieve customization through branding, such as the following;

Logo print
Custom colour
Custom product packing
Add extra accessories
Upgrade the quality of the product (use better and more expensive materials and components)

Avoid products with certification requirements

Toys, electronics, food and chemical products are regulated and require product certification. Far from all Chinese suppliers can manufacture products that are in compliance with American and European product certification requirements. Instead I would recommend a startup to import any of the following from China：

Textile products
Wristwatches
Accessories
Furniture (certain types may require testing for fire retardancy)
Bags
Leather goods
Jewelry
Wooden products
Gifts and art products
Promotional products
Phone accessories (non-electrical)
Computer accessories (non-electrical)
Cooking ware (certain types may require certification)
Fitness products (certain types may require certification)
Sports products (certain types may require certification)
Auto and MC parts and accessories (certain types may require certification)

Avoid buying from multiple suppliers

Many small businesses make the mistake of trying to bite off much more than they can swallow. Don’t expect that you can order fifty different products from seven or eight different suppliers. Below I explain why：

You’ll be limited to products that are mass-produced for the domestic market in China. The quality standards tend to be lower than what your customers would expect.
Limited to none customization options if you buy small volumes. No manufacturer is ready to send back “off shelf” products to the production line for modification or branding of some sort.
Too much administration. Importing from China is not like going down to the local supermarket and picking a little of this and that. You’ll need to provide your supplier with product specifications, buy samples and negotiate prices. This takes time, sometimes several months. Most startups simply don’t have the time and money to manage more than one product and supplier at a time.
High freight costs. One supplier equals one single shipment, and the freight companies quote much better prices when you order larger shipments.

How I would import from China on a low budget

If you’re on a low budget, I believe that the only viable strategy is to create a brand and maximize the number of products through simple forms of customization. Below I list a few examples on how this can be done:

Carpets in the same material but in different colours and cut into different shapes
IPhone 5 cases in different colours
Polo shirts of the same model and fabric, but with different sizes, colours and with different fabric details / print / embroidery
EVA Foam Rollers, same material but cut in different lengths

Simple modifications rarely require the supplier to increase the MOQ. Try to figure out what’s complicated and time consuming for a supplier to make, and what is not.

Complicated, expensive and time consuming modifications: Large increase on the MOQ requirement. This includes new moulds, purchasing new materials and components etc.
Simple modifications: Low or no MOQ increase. This includes logo print, different cutting, adding accessories, customized product packing, and custom colour.

Summary

Don’t attempt to buy too many products from too many different suppliers.
Avoid products that require certification
Avoid highly customized products
Brand an existing product as your own
Invest in quality and pitch yourself as a medium to high-end brand. Enjoy higher profit margins and don’t try to compete on price with the big players on the market.

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Elksourcing：Secrets of Late Delivery by China Suppliers

Mar 31, 2021 , by 露露

You found a China supplier on a trade show like Canton Fair, the suppliers looked good and professional, you gave them business, sent the payment and waited to receive the products. However, one delay after another, months on, your stock and inventory is running out, but the supplier still didn’t make the delivery.

To solve this late delivery issue, firstly we need to know why the suppliers didn’t ship the products within the time limit provided in the contract.

1) Supplier is too busy, and you are not on the top of their priority list

Many buyers try to find big and established suppliers, despite their own business size and order size. They didn’t notice that big but busy suppliers often fail to catch up the deadline of delivery.
One of my clients has been buying car mats from a decent-sized supplier from East China. They buy one 20’ every month, the order size is not big, and surely not small.
The cooperation has been good. But since early 2012, the buyers can’t receive products in time; the situation went from bad to worse in recent months. The buyer become very frustrated and puzzled, why all of sudden, the supplier can’t deliver orders in time?
We did some research on the supplier, found that they received a big contract (10 million USD) from Kmart, all their production lines are occupied to produce the order from Kmart, the orders from small and medium sized buyers have to be postponed. The boss of the factory does hope to set up new workshop to increase the production capacity, but it can’t be done overnight, they need to buy land, buy equipment, recruit and train workers. It will take years.

2) With or without a contract, it makes big difference

Most buyers underestimate the power of contract. Aside from being used in lawsuit as evidence of mutual agreement in all aspects of transaction, more importantly, contract can be used as precaution. The contract set the boundary and limit so the other party won’t go beyond too far.
With a remind of a clause for penalty of delay in contract, the supplier will think twice when they delay the delivery.

3) The supplier is trading company, cannot control the production progress of factory

On trade show, many trading companies make up themselves to look like factories, without visit, you can’t tell if they are trading companies or factories. Trading companies and factories have their own advantages and disadvantages. Good trading company can manage the supply chain and production for buyer effectively and smoothly, but bad trading company could mess it up.
In one of our cases, the trading company lost control of the factory, which causes 5-month late delivery.

4) Delay caused by China customs

Before the products are loaded to the ship, suppliers need to make custom clearance at China Customs.
I am sure that many buyers are not aware that there are risks that China Customs might not release or even detain the products, which will cause late shipping.
a. Improper categorization of HS code
For most products, the suppliers can get tax refund from the government based on the HS code of the products. The tax refund rates vary from 0 to 17%. And because of that, many suppliers may use wrong HS code when conducting customs clearance, just to get higher tax rebate rate. For example, if I export door mats, these door mats are made of rubber back (70%) and carpet top (30%), if I use the HS code of rubber, the tax refund rate is 9%, if I use the HS code of carpet, then the tax refund rate is 17%. As the products are mainly made of rubber, so I should adopt the HS code of rubber when do custom clearance, however, many of the suppliers will use the HS code of carpet when making custom clearance.
If the customs find it out, they will detain the products until the supplier corrects the HS code and pays penalty. This procedure will take months to finish; the delay will cause huge loss to buyer.

b. Intelligence property rights protection
We have exported some gift products to a baseball team. On the gifts, the logo of sponsor Toyota was printed.
When we made the custom clearance through China Customs, we were requested to submit an authorization letter from the brand owner Toyota, giving us the authorization to use the logo of Toyota. We were not prepared for it, so the products were detained due to suspected intelligence property rights infringement.
We then contacted our client (who is a gift promotion company, who got the order from a Toyota dealer), our client then tried to contact the dealer, and the dealer tried to contact Toyota, so many people in the middle.
After 10 days, we got the authorization letter, we then submitted to the Customs, and then the products were released, but we have missed the vessel time.
If you are not sure that your products will infringe intelligence property rights of third party, you can inquire on the Intelligence property rights registration system of China Customs at http://www.haiguanbeian.cn/applyrecord/.

c. Mistakes on custom clearance documents.
Normally custom clearance documents are prepared by exporter, will be sent to shipping agent, and then forwarded to the brokers at customs for custom declaration.
A mistake on the document will delay the custom clearance (hence shipping, as the products won’t be released without going through customs). If there are mistakes,the suppliers will need to correct the documents, resend to shipping agent for customs clearance.

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Elksourcing：Why You Should Not Buy Branded Products from China?

Mar 31, 2021 , by 露露

I have recently read an post on a forum, a guy complained that he thought he could buy cheap electronics in China before he come to china as EVERYTHING IS MADE IN CHINA, but after he comes, he found electronics here are more expensive than in Europe, he is quite puzzled about that.

I bet what he is looking at must be branded electronics which is not originated from China, like iPhone, Samsung tablet, Sony Play Station, etc, it is a common sense that Foreign Brand products (including electronics) are sold in China no cheaper than in western country, if not more expensive. As the dealers/importers have to add tariff and shipping expense onto the cost of products, so in most case, the foreign brand products in china are more expensive.

Someone will argue that most brand maker have set up a manufacturing base in China or have a manufacturer partner in China to do the OEM for them, so could that possibly make the branded products cheaper in china? The answer is NO. The brand company will sign a contract to prohibit the local manufacturer to distribute, sell or resell the branded products locally, and / or disclose any confidential information to third party before they enter into cooperation relationship. So the local manufacturers are not qualified and dare not to sell the branded products publicly or secretly as that such act could risk to lose the big customer and business. Also the brand companies are not silly enough as to set up a pricing strategy that their products are sold at extremely low price in China that even after they are exported to western country they still enjoy great price advantage.

However, there are so many “venders” on Alibaba and so many ecommerce sites in China (well not only in china) sell brand products at extremely low price, how could they get original brand products at such a low price? The answer is very simple: they are counterfeited or refurnished. Search UKBF forum or other forums, you will find that those who try to buy branded products from china end up either being scammed or receiving counterfeited products.

Facing the increasingly pressure and critique from western countries, China customs are taking serious and strict methods to inspect and detain counterfeit brand products. So if you pay the money and still don’t get your products, other than being scammed, chances are your products have been detained by China Customs.

How To Import From China

Elksourcing：How to Get a Better Price from Your Chinese Supplier?

Mar 31, 2021 , by 露露

Many importers will always try to get a better price from their Chinese suppliers, but how? You need to know some tactics to try to meet this target. Here are some tips:

#1 – Buy larger quantities

This one might seem fairly obvious – buy more and you’ll get a lower unit price. However, many importers tend to buy from more suppliers than necessary – and thus lower the quantity purchased from each one of them. Orders can easily be concentrated on a smaller amount of suppliers if you base your product selection on what the suppliers has to offer, rather than selecting a number of suppliers on a predetermined product list.

#2 – Streamlined usage of Materials & Components

A product is a composition of materials and components. Your supplier needs to purchase these materials and components from their subcontractors. A large number of various components and materials results in a higher amount of purchases that needs to be made, and thus higher costs. The best way to avoid this issue is simply to reuse the same materials and components in several products. A positive side effect of this approach is that you might also be able to lower the suppliers Minimum Order Quantity (MOQ) requirement.

#3 – Avoid unnecessary product customization

Customized products often require customized tooling, such as injection moulds. While an injection mould can be used for a very large number of units (often counted in the hundreds of thousands) it’s in general paid for by the importer. Thus the more customized products you order, the higher the tooling cost will be. If you’re specifically importing unique products that have no equivalent on the market, then you can stop reading. However, plenty of importers fail to understand that even the slightest change in a design may lead to dramatically increased tooling costs. I list my suggestions below;

The importer is usually expected to pay for any additional tooling. Avoid product customization unless it’s essential.
Limit the product customization to components and/or materials that doesn’t require expensive tooling.

#4- Reasonably lower your quality requirements

I’ve seen plenty of situations where the importer requires a quality standard that simply cannot be matched by the supplier. This could be dimensional tolerances that are too narrow or other product specifications that are all but impossible for the supplier to comply with. From the supplier’s perspective, quality requirements that are very hard to reach increase the waste and the risk of a total loss. The end result is that the supplier is forced to raise the price in order to compensate for the increase waste and risk. If a supplier clearly communicates that your requirements are hard or impossible to reach, you should do any of the following;

Look for another supplier
Accept a price increase
Adjust your requirements according to the supplier capability.

#5 – Ship by sea

Many importers tend to waste money on not so cost efficient transportation. Sea freight is in general much cheaper than Air Freight, something that can have a big impact on the unit price. Especially if we take customs and VAT into consideration, both of which are added on top of both the product price and the freight cost. However, Sea freight is slower and takes around 30 – 40 days to reach most ports in Europe and North America. Thus it requires the importer to have some foresight and place the order well before the existing stock runs out. It’s rather common that importers end up wasting their profit margins on highly expensive Air Freight because they “simply cannot wait 35 days” for the cargo to arrive. This is what I advise you to do;

Place your order at least 3 months before you expect to run out of stock.
Ask your supplier to quote you a C&F price that includes shipping cost.