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The Four Major Steps of Product Sourcing

Tuesday, 10th December 2013

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Procurement from China is not a job for a lazy person. It’s time consuming and requires experience to do effectively. Here are 4 steps to get better results when procuring product from China:

Step 1: Create a clear set of product specifications. This ensures you’ll get more accurate quotations from the factory. You will come across as a professional, experienced buyer who is focused on the product specifications and not just price. Good factories like working with such buyers.

When creating specifications consider:

What materials are used? What are the dimensions? Is there a production process you require? How will the goods be packaged? Are there any critical functions the product has to achieve? Do you have a product sample to provide the factory? What about CAD drawings?

Make sure your requirements are extremely clear.

Step 2: Get quotations from multiple suppliers currently producing or capable of producing your product.

You should research trade websites (global sources, alibaba etc), travel to trade shows, or search Chinese only or other supplier directories.

If you’re using a procurement agent they will have a network of factories they can recommend. Many times these factories or workshops have no online presence and would be impossible to find. Try to investigate as many sources as possible.

Step 3: Sorting out the results of your initial investigation. You may end up with 5, 10 or 20 quotations.

You should ask each supplier if they are currently producing your exact product at their factory. Do they ever outsource any part of the production?

What equipment and machinery do they use? How long have they been in business making your specific product? Who else do they sell to? What materials do they use? Where does their product sit in the market (high end, mid end, low end)? What are tricks commonly used to rip off buyers (and increase their margin)?

Arrange samples if possible. Is it a hand-made sample? Or has it come directly from the production line - using the same process as mass production?

Step 4: Visit your shortlisted suppliers. You may have 10 quotations – but must narrow this down to 1, 2 or 3 shortlisted suppliers.

Things to consider: pricing, lead times, experience, materials used and answers to all questions from step 3.

You should now visit these suppliers. You will see the reality on the ground. Does it confirm the story you have been told? Once you are at the factory, many suppliers will give you a helpful overview of their industry. They will explain the common tricks used to rip customers off. You can gain crucial information from these meetings.

CONCLUSION

At this point, you will have enough information to make an accurate choice on the best supplier for your business. But that’s not the end of the work. There’s plenty more to do; creating sales contracts – which clearly state specifications and expectations, arranging quality control inspections and shipping the goods to your door. We’ll discuss these steps in future articles.

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