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Elksourcing：Why Online Sellers Choose Sourcing from China?

Apr 21, 2021 , by 露露

To source goods from China and resell online is proven successful for many entrepreneurs. Why more and more online sellers choose sourcing from China? There are many reasons, on top of them, the following reason are recognized by many business owners.

1) Cheap cost

Most of China products are available at a cheaper cost. If you source your product from a distributor or wholesaler in the USA, you are like to pay 2 or 3-time higher prices than sourcing from China. The cost savings are achieved via cheaper labor cost, faster production speed with moulds, and less marginal cost at high order QTY. Cheap cost can sharp your business’ competitiveness.

2) Supplier options

China is known as a manufacturing hub for its business ecosystem, labor pool and low production costs. Numerous industrial clusters are a distinctive feature of the Chinese economy. 

China has a long list of producers, thereby leaving you many choices. You have the flexibility to choose a producer whom you think is the best suitable for you. 

3) Easy exporting

When it comes to exporting goods, China follows a very streamlined process. Because of good infrastructure, vast labor supply, and strong government management, the logistics is very efficient. China has invested heavily in power and infrastructure; it has the most advanced ports and road system. 

4) Product quality

In the last decades, China gathered rich experiences on manufacturing and quality control, and more and more china factories have quality control system, the quality inspectors use quality control measures to assure that the product reaches the customer at desired quality. Most factories perform 100% inspection for their products, so more and more factories can meet the top-quality product specifications. 

Many China factories follow strict standards and regulations when it comes to quality, they focus on the quality of equipment, structures, materials and components. Also, the quality control services provided by 3rd party inspection company can help you in ensuring compliance with quality standards and mandatory regulation. 

5) Short lead time

Another good reason to source goods from China is that it needs less time in production. The productivity of their workforce is commendable, they have excellent logistics and infrastructure and they are also technologically advanced. More and more factories invest heavily in bigger machines, automatic production line, and new technologies.

As the laws are systematized in favor of exporting, they reduce the complexity of exporting from China.

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Elksourcing：Common Risks of Sourcing Products in China

Apr 21, 2021 , by 露露

One of the most common dilemmas of business start-ups is choosing the best products to sell. Aside from that, another challenge is finding the right supplier to get the products from. With a lot of suppliers all over the world, it can be hard to select a reliable and trustworthy one with whom you can have a great business relationship in the long run.

China is top of mind as far as product importation is concerned. Through the years, the mega-country has positioned itself as the world’s largest manufacturing hub. China is indeed a great country to source items to sell. However, there are several things you should consider before choosing the best items your business can sell. 

In this article, I’d like to share with you the common risks of sourcing products in China while embracing the opportunities that come with it. 

1. Lack of well-defined strategy

When sourcing products in China, you must have a well-defined sourcing strategy including locating the best supplier for your particular needs. Many companies fail to do the proper due diligence when sourcing for goods in China. As a result, they may not get the best deal in terms of price, quality, functionality, or timely delivery.

To avoid this mistake, you must have a methodical sourcing strategy. Successful sourcing strategies typically include:

Identifying suppliers.

Verifying suppliers.

Managing quality control.

Deciding which sourcing method, direct purchase or using a sourcing agent best fits your needs.

2. No standards for suppliers

Before searching for suppliers, it is important to have defined standards. Well-defined standards can determine whether sourcing efforts are successful. For example, a company might initially purchase a small order of electronic parts from a Chinese supplier and be happy with the product quality only to learn that delivery on larger follow-up orders would be delayed due to the supplier’s limited production capacity. If the company needs the parts delivered on time to capitalize on the holiday season sales rush, it runs the risk of losing profits, all because it did not eliminate potential suppliers with limited production capacity.

Due diligence is perhaps the most important step when sourcing in China, yet many companies fail to perform adequate due diligence and end up being scammed. Some fail to perform due diligence at all!

3. Lack of quality control

It is crucial to verify and assure the quality of your products. You need to hire a quality control company to check quality on behalf of you. The QC inspectors can personally visit your supplier’s factory, pull random samples, and check the safety, function and appearance. Also, when necessary, the QC inspectors can perform in-house testing, such as hi-pot test, endurance test, abuse test, and package test.

If quality control is missing, you face high risks of receiving defective products in bulk QTY. It’s always too late if problems are found by yourself at your warehouse, or even worse, found by the customers. So, it is very important to make sure all potential problems are reported before the products leave China, so corrective actions can be taken.

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Elksourcing：Practical Ways to Find Good Chinese Suppliers

Apr 21, 2021 , by 露露

China is such a huge manufacturing base, for a product, there are hundreds or even thousands of suppliers. In reality, looking for good Chinese suppliers can be a tedious task.

During our sourcing practices, we have learned the following ways to find good Chinese suppliers and complete successful sourcing tasks. 

1. Search Engines and B2B Platforms

Internet is a huge virtual place where you can search for anything you need, including good Chinese suppliers. Whether it’s Google, Bing, Yahoo, or other search engines there is, these can surely help with your search for potential product suppliers.

There are also B2B sourcing platforms that can help you find Chinese suppliers, such as Alibaba, Global Sources, Made-in-China. You can filter the results so you can determine whether the supplier is a suitable one. 

2. Trade Shows

Another avenue to search for legitimate Chinese suppliers is through trade shows. Among popular supplier trade shows in China are the Canton Fair, which is held twice year in Guangzhou, and HKTDC Trade Fair held in Hong Kong twice a year. 

If you don’t have time or desire to travel to the other side of the world, there are trade shows in USA and Europe which you can attend. One example of trade fairs featuring Chinese suppliers is the International Consumer Electronics Show which is held in Las Vegas. 

3. Social Media

Many businesses have their own social media pages, so finding a supplier via social media seem to be a logical option. Among social media platforms you can find Chinese suppliers are LinkedIn and Facebook.

The above list is some of the best places to find Chinese product suppliers. While these sources are already proven and tested in terms of finding a supplier, it is still necessary to do extensive research and background checks so you will transact only with a reliable and trustworthy supplier.

4. Hire a sourcing agent.

A sourcing agent can help you a lot in dealing with Chinese suppliers, much more if the agent speaks their native language. More often than not, Chinese suppliers may increase the product costs if they learn they are dealing with a foreign business owner. That is why your sourcing agent should know the roundabouts of Chinese product sourcing and importation process so you can make the best decisions for your business.

Conclusion 

Finding a good Chinese supplier is a challenging task. It requires extensive research and background checks to ensure you only deal with a trustworthy source. Transacting with a legitimate supplier will help your business thrive in the long run.

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Elksourcing：Notes for Sourcing Bespoke Products from China

Apr 20, 2021 , by 露露

Not like sourcing stock products, sourcing bespoke products is more complicated and you may meet face more challenges. Having custom parts manufactured involves locating and building a relationship with a factory, unless you use a sourcing company, which is highly recommended. 

The followings are some notes I have learned from my 20-year experience of sourcing from China.

1) Develop Your Product

The first step to getting your product sourced is to, not surprisingly, develop your product. This involves going from conceptual ideas and artwork to having engineer drawings designed and then prototyped. Sometimes this can take one or few tries before your product has taken shape in the way you envision. It is not likely that an engineer can get your design perfectly designed in the first iteration of files and prototypes, so don’t be shocked if the first prototype is a little rough.

If this is a new groundbreaking product, you should be taking prototypes to family members, friends, and strangers to do market research. Try and get their feedback and input on how to improve it. Find out what they like about it, then try and improve and emphasize those aspects of it. Correct any flaws that are spotted, and you are well on your way to success.

2) Protect Your Product

You should try and take every precaution to protect the intellectual property of your product. Try and get a patent if possible. Even if you can’t get a utility patent, you should be able to distinguish the aesthetics of your product so you can get a design patent. A patent lawyer can help decide which patent route to take.

You can also get a Non-Disclosure Agreement with companies you choose to involve in your product. NDA prevent parties from giving away or selling your information, and they can be written to last as long as you want. If you are signing another company’s NDA, be sure to thoroughly review and understand it.

3) Sourcing the Products

After all the preliminary work you have done to get this far, you should now be ready to start sourcing your products from China. Sourcing companies will help you save many months of time, significant money, and travel as they will have pre-established relationships with factories in China.

Business relationships in China are much different than in western cultures. In China, contracts are dependent on the strength of the relationship. Some businesses will turn down lucrative deals if they have been offended or the relationship hasn’t been built strong enough. Or what can happen is they will prioritize orders with companies that they do have those long-lasting relationships with.

You should communicate to your supplier upfront what standards and certifications you need your product to meet. They won’t know if your product needs to be certified or what those certifications may entail, so you will have to contact an expert in the field of your product. For example, if you are manufacturing a repellant, you’ll need to contact an FDA consultant to advise you. You can learn more about product compliance here. This will affect which manufacturers the sourcing agents can contact.

The first step to getting your products sourced is to get a quote. Quotes from sourcing companies should include shipping terms, payment terms, sample costs, cost per unit, and production time.

You should start with a sample for your order. Samples will allow you to invest a small amount while getting evidence that the factory can produce your product as you want it made.

Approval of the sample will mean that the production order is ready to start. A rough estimate for production orders is about 1~2 months. The size and complexity of the product can impact how long the part takes to be produced.

4) QC Inspection

A third-party inspection company is available to come in and inspect your shipment when it is complete. The QC inspectors will review the shipment and draw up a complete report with pictures in regard to the standards you have them inspect. This is a good practice for larger first-time orders.

Repeat orders on parts should be much quicker. The factories will be familiar with how to manufacture your product and you won’t have to go through the sample process again. However, you still need to pay much attention to quality control, in peak seasons, factory may be too busy to focus on all details. After Chinese New Year holiday, 30~50% workers may not come back, so factory has to recruit many new labors, but the new workers are not familiar and skillful, so, the quality level usually is lower than average.

5) Plan Ahead

You will need to have a customs broker lined up. Once the order is finished, shipping documents such as the ISF (Importer Security Filing) and bill of lading will need to be processed. Customs brokers are specially certified to process these documents and clear shipments at the port of entry.

If you need parts quickly, try and plan to build as much time as possible for the production and shipping process. Unexpected events such as dock worker strikes, diseases, natural disasters and other unforeseen circumstances can occur, so be sure to account for the unexpected.

Per my experience, it is better to leave 2 weeks as cushion time, as many delays could happen, especially in peak seasons and close to major holidays, such as time before Christmas and time before Chinese New Year.

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Elksourcing：Building Good Relationship with Your Chinese Supplier

Apr 20, 2021 , by 露露

China is factory of the world, so, when we speak global sourcing, China is on the top of list. Once you find a Chinese supplier and decide to work with it, it’s essential to build and maintain a strong and healthy relationship. We believe below aspects are critical for building good relationship between you and your Chinese supplier.

1. Capability

The supplier has to be able to do what you need them to do. Can they make your product out of the material you need? But the next step is also crucial. Can they grow with you? 

Do they have multiple manufacturing capabilities? 

Can they scale up? Do they want to?

2. Communication 

Responsiveness is an important attribute in any relationship. You want to be able to get in touch with your supplier when you need them, and you want them to communicate with you as well. If your supplier is overseas, this is even more important. Make sure to have a native speaker who can translate for you on your calls. 

How frequently will they report to you?

Will they call or email?

Who will be your point of contact?

Will you receive written reports? How regularly?  

3. Transparency

Open, honest communication is what customers are looking for. Customers want to see where their products are being made. They want a supplier that welcomes them to the factory floor.

When can I visit the facility?

How much notice do you need?

Can I get a list of references and other customers?

Who are some of your suppliers?

4. Quality

Obviously, products are useless if they don’t perform to standard. Customers are looking for suppliers who can meet the basic industry performance standards, and in many cases, outperform those standards. They are looking for a supplier who makes a part right the first time, and every time after that.

What is your quality plan?

What testing capabilities do you have at your facility?

Your company’s success will be built on a good sourcing strategy and creating a sound sourcing process. By measuring the performance of your suppliers, and aligning their capabilities with your needs, both your businesses will be set up to excel and flourish. And that’s the best kind of partnership. China sourcing agent – Elksourcing have capabilities to fulfill your need.

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Elksourcing：Common Mistakes Made by New Importers

Apr 20, 2021 , by 露露

China has become one of the largest manufacturing hubs in the world. However, if you are a new importer, there are certain details that you need to pay close attention to as these may make or break your import from China. The followings are common mistakes made by new importers.

1. Not understanding Chinese business culture

You can’t do business without proper communication. This applies to any businessman from any country trying to strike a business deal. China is such a vast country that it’s home to very different cultures. If you’re looking to establish a long-term relationship with Chinese businessman, going beyond the basic introductory phrases will be handy.

Also keep in mind the Chinese way of doing business. What may appear polite to you may come off as rude to the Chinese, and vice versa, and you definitely wouldn’t want to lose a deal just because of an easily avoidable misinterpretation.

2. Not investigating applicable regulations

Knowing the trade regulations of the product you’re importing is part of any import and export process. But when importing from China, it’s best to take extra precaution. It’s not uncommon for Chinese suppliers to produce goods that fail to comply with international standards. In fact, it’s reported that in certain industries, as few as 5% of Chinese suppliers actually meet the guidelines implemented by the European Union.

Depending on where you’re importing to, we recommend that you properly investigate not only the import laws of the importing country but also the regulation that applies to the products. That way, you know exactly what to look for when choosing a supplier in China to ensure that the products you’re importing comply with the right standards. This helps to prevent problems at customs clearance and delays. A good resource for information on product guidelines is the chambers of commerce and customs offices of your country.

3. Choosing wrong Incoterm

Incoterms are a clear set of conditions by which both importer and exporter are obliged to abide in any international transaction. This prevents misinterpretation and confusion over costs, risks, management, and responsibilities. When importing from China, it’s highly advisable to pay close attention to the pros and cons of the Incoterm you choose.

Three common Incoterms used for imports from China are FOB, CIF, and EXW. However, each of these has advantages and disadvantages that could play a massive role in the overall cost of your import. The CIF Incoterm may seem like the better option due to its low costs and relatively fewer responsibilities. But this could backfire later on as with limited control, chances are you will have to accept everything your supplier decides, which could end up in significantly higher costs. In general, we recommend choosing FOB as this gives you greater control over the entire import process and costs.

4. Choosing unreliable suppliers

As an importer, you’re responsible for the products that you import. This means that you’re answerable to customs should anything go wrong with your import and are liable should your products cause injuries to any consumer. That said, it’s extremely important to choose reliable suppliers from China.

Before signing an agreement with a supplier, make sure you’ve done proper research into its production process. This means knowing where it obtains its materials from and even speaking to other importers who are either importing the same products or have dealt with said supplier. You may also want to take a trip down to the production ground personally for additional assurance. Consider bringing a specialist who understands the production process of the product you’re importing with you and can thus advise you on potential problems that may come up.

5. Not planning in advance

Time is an important factor to consider for any import you’re doing from China. Any one of the above-mentioned errors alone can cause massive delays and disruption to your logistics chain, let alone were two or more to occur. With these in mind, always begin planning your import from China with extra time to spare.

We recommend that you start organizing your import at least three months in advance. Depending on the port in China from which you’re importing and the destination point, transit times may vary rather significantly. Also keep in mind time needed for inland transportation.

Ideally, you should have your shipment booked at least two weeks before the vessel sails. This gives you extra time for your agent at origin to get all the required documents done in time, prepare the shipment, and allow for a time buffer should something go wrong. To obtain the best transit times and minimize hiccups, always speak to your freight forwarder for the best ocean freight options.

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Elksourcing：Things to Consider during Global Sourcing

Apr 20, 2021 , by 露露

Global sourcing products requires careful consideration, it’s a tough decision for any organization. You must determine whether it’s best to gain cost advantages at the expense of some control of your organization’s core activities, or if globally sourcing would be too costly to be practical. Below are key things you need to consider during global sourcing.

1. Monetary Risk 

Although the use of foreign suppliers can save costs due to factors such as lower costs of labor and proximity to raw materials, there are also risks that can impact costs including: 

Unanticipated and rising shipping costs. 

Cost of delays or loss of goods in transit. 

Rising costs of transactions, such as documentation fees, contract management fees and third-party supplier audit fees. 

Costs related to time zone differences, extra time for storage or transport delays, e.g. approval is given in one country, but the time difference or traditional days off mean the action cannot be enacted until the next business day. Many organizations use primary and secondary sourcing as a mitigation strategy. A primary source is used as long as it meets company requirements for supply, delivery, and quality while a secondary supplier is available to cover shortfalls. Often the secondary supplier in on-shore or near-shore in order to address supply issues quickly, and although typically more expensive, this can prevent greater monetary risk to the organization due to lost customers purchasing competitors’ products.

2. Competitive Advantage

Protection of intellectual property and quality are important aspects of competitive advantage. Organizations who believe their intellectual property is absolutely core to their competitive advantage should be very selective about the components they source from global suppliers. The more an organization has to divulge of its proprietary information, even in terms of specifications, the greater the risk to its competitive advantage. Organizations must also keep the purpose of global sourcing in mind, by ensuring their costing is realistic and includes all the costs of sourcing, such as planning, transition, and implementation costs. If a competitive advantage is to be gained by lowering costs, it is important to ensure there are no hidden costs that will eliminate any realized cost advantage. Organization must ensure they understand what their competitive advantage is and all the factors of global souring so they can best utilize, protect, and enhance their competitive advantage.

3. Culture

Global sourcing success requires the understanding of the cross-cultural differences between the sourcing organization and the potential supplier. If the key players in global sourcing initiatives are not aware of the impact of their behaviors on the interactions with potential suppliers, the resulting misunderstandings, miscommunication and hurt feelings will prevent any attempts at business agreements.

4. Ethics

Ethical business practices in other countries cannot be assumed as a standard practice. Although sourcing organizations are seeking the lowest prices, there can be negative backlash from customers if they find that, for example, farmers or mine workers are exploited or purchases are funding wars and insurgents. In developing countries, producers of certain raw commodities, such as coffee, bananas, cocoa, sugar, tea, and cotton, are being assisted by the Fair-Trade social movement, which seeks to ensure producers receive equitable compensation and serves to promote sustainable community development.

5. Environment and Compliance 

Other countries have different standards, laws, regulations, and business practices that can impact sourcing from other countries, either by adding costs or requirements that would be considered illegal in one’s own country. It is always important to remember to conduct business from the perspective of the end customer. Questionable practices that can be related to an organization’s product can have a negative effect on an organization’s brand and reputation. 

6. Quality 

The implications of a quality failure from an international source are much more severe than a quality failure from a domestic source. With lead times involving different time zones and much longer distances, it can take several months to rectify a quality problem. Quality issues also affect downstream supply chains.

7. Logistics 

Once quality supplies have been secured, the next consideration is managing their transportation. Even assuming transport costs have been factored into the feasibility research, there are still risks in transportation that are beyond the control of the exporter and importer because supplies are generally in transport for long distances and for long periods of time. 

8. IP Protection

Sourcing international suppliers for raw materials or components doesn’t pose a high risk for loss of intellectual property compared to outsourcing manufacturing. However, there is an intellectual property protection risk, if the components contain proprietary design or material elements or require proprietary equipment.

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Elksourcing：Type of Defects in QC Inspection

Apr 20, 2021 , by 露露

Most importers set quality tolerance level by use of an AQL table used in an acceptable quality level sampling method, such as Level II, AQL 0/1.5/4.0. Quality control experts categorize quality defects into three categories: Critical, Major, Minor.

Defect classification is a crucial step because it determines if the goods pass or fail the test. To help you make better decisions, we provide you with a complete guide on the types of defects. 

1) Critical Defects

They are the most serious type of defects and do render a product unusable or even capable of causing harm to someone near it. Critical defects can put the business at huge risk or product recalls lawsuits and liability issues. Most importers usually have a zero-tolerance policy on orders that have critical defects. Any product will automatically fail inspection when a critical defect is found.

2) Major Defects

The major defects are those who are capable of affecting the appearance, performance, and function of an item. An item having a major defect will always depart from the product specification of the buyer. Customers can easily notice these defects, and probably they will return the item, raise a complaint, or even seek a refund.

A good number of importers have limits of major defects set lower than those of minor defects in the sample size that has been inspected. In most cases, they will accept a product with a few major defects, although they are most likely to reject the order or request the supplier to rework or hold onto it in case it fails inspection due to a high number of major defects.

3) Minor Defects

In most cases, the minor defects will be the insignificant and small issues that don’t affect the form or function of any item. Most customers will not notice a minor defect on a product, and some customers will not return the product just because of their minor defect.

The importers set a higher tolerance level when it comes to the application of that standard to a smaller defect in the AQL sampling that has been inspected. However, a product can still fail inspection when the number of minor defects is beyond the set limit by tolerance.