13 Tips You Should Keep In Mind When You Are Thinking of Outsourcing From China

Earlier to get rich there was a popular phrase “Go West, young man” but now the statement has seen a little change. So to give wings to your business the latest phrase of 21st Century is “Go East, entrepreneur”. Many people including the experts are predicting China as the biggest market and hence the largest economy which will in no time from now overtake US. Due to high demand in the country, though it has seen a steep rise in the relative production cost but it is still far lower than the other countries to source or manufacture goods.

Inexperienced or unskilled sourcing agent is nothing just welcoming loss to the books of your accounts. But hiring a highly reputable agent agency with the impressive results is not the cup of tea for small companies or start-ups. Sourcing through the companies also puts you in a condition where your liability of the sourcing fee is much higher than your profit earned.

Except to the problems of the agents and their sky kissing fees, sourcing from China may also be like jumping in the well as it has lot of risks attached to it. Moreover, we all know that, good service will not always be cheap and cheap service will not always be good. So, if you are owning a small company or start up and want to outsource from China then it would be better to get up, pack your bags and land in the China itself. It will a bit hectic and tiresome but it will keep you far from the unorganized or looting sourcing agencies.

So, we have brought you some advice or tips to keep in mind when you are thinking of outsourcing from China:

1. Good Knowledge about the Product to Be Outsourced

Good Knowledge about the Product to Be Outsourced

Prior to the inquiries which you put out regarding the suppliers in China, it will be wiser and beneficial to know about the parts of the products which you require. This may include its quality, performance, and function.

You should be well acquainted with the certification or quality standards of one or more goods you are seeking to outsource as Chinese suppliers (not all of them) are bad certification and quality standards, moreover, they are hardly going to do any research for you.

Also, you should confirm the certificate or standard which is applicable to the product and get to know whether the supplier is capable to provide you with that standard of the product. The only way you can get to know about the supplier is you can check his or her previous certificates issued by his or her clients.

2. Learn more about the supplier

Learn more about the supplier

Learning more about the supplier will be the next priority. You will have to get in the field yourself and get to know about the supplier’s products, cost, processes, and market. For this, you will have to be good at the negotiation in the local language which you can develop by talking to some of the vendors and can also expertise in the way of the business. It is better to visit the factories itself in China than to believe on what the agents are saying.

3. Establishing a Strategic Partner

Establishing a Strategic Partner

The heading in another way means to become a value-added customer of the supplier. Prior to entering into the contract with the supplier try to make that transaction to turn into a strategic relationship by making him realize the value in other aspects of the business. Unfortunately, this won’t work in China as the factory owners there already have experienced unfulfilled promises of future large orders and they might take it lightly or ignore it. So, this type of partnership can be established by an agent.

4. Managing the Outsourcing

Managing the Outsourcing

If you want to work on your abilities without the help of the sourcing agent then obviously all the management process will fall on your shoulders. You would have to keep a lot of information about them to compare them. Following are the basis on which they can be compared:

  • Certification compliance
  • Product specification compliance
  • Pricing
  • Product sample costs
  • Production time
  • Quality Management System Procedures

Keep all the other records related to them as no one knows when you need them. To give you an idea, most of the agents have around 50 suppliers in the list to compare and of which they have the data.

5. Get thoroughly satisfied with your Supplier

Get thoroughly satisfied with your Supplier

If you want and if you think that you might require one then do inspect your suppliers’ product quality with prior notice. Instead of setting up a hidden inspection let the supplier know and make him clear you are doing so to ensure the qualification of the product according to the requirement in your country.

Don’t get panicked or surprise if some of the suppliers you contacted, stop replying. It is better as you get to know that their products were not to the mark which you required to purchase.

6. Change in Purchasing Policy

Change in Purchasing Policy

Do make changes in the demand pattern. What you can do is to make an aggregate order of all the goods you require rather than authorizing individual departments. This would affect the price and would help you earn a good discount.

7. Paying Manner

Paying Manner

As we have read above, Chinese factories are no that reliable and they are not good at yielding the products if the required deposits are made. So, make the deposit you will make the safer you will be. Depositing according to their terms like 50 percent, 70 percent, and 90 percent may lead you to lose.

So, if you are managing the outsourcing without any agent then you would have to keep this point in your mind

8. Getting into a Contract

Getting into a Contract

Getting into a contract with the supplier will be both safer as well as lawful. It would ensure the quality and safety requirements and the inspection rights. This would help you play safely in the market. If the contract mentions you responsible for the inspection then you should get inspected. It would be better if you would make contact in Chinese.

9. Bidding Process for better results

Bidding Process for better results

Implementing a bidding process before entering into a contract will make you play smarter. You can call for bidding from the list of all those suppliers who are ready to meet all your requirements. This would ensure competitive pricing and will also make the companies clear that you would buy products from the supplier with the lowest bid.

Don’t ever implement the bidding process among all the suppliers. Call only those who are agreeing on your requirements and then chose one with the most competitive bid.

10. Routine Trips to China

Routine Trips to China

If you are planning to manage the outsourcing yourself rather than hiring an agent then do make it clear that you may have to visit China at least twice a year to get your relationships to rebuild and to recheck the production process going on.

However, if you hire an agent then the tension of visiting will come to an end and you can get to know the whole condition even once a month.

Hiring an agent or going yourself won’t make a bigger difference financially but it would make difference on the basis of trust. You have trust in your eyes but believing an agent or on another person is likely difficult.

11. Building Political Connections

Building Political Connections

For exporting from China and importing in your country you might have to do a lot of paperwork. Despite that every time you want to import the products you would like it to be done smoothly which may also require good political relations on both sides.

Considering the above situations it might not be possible for everyone to do that on his or her level so that person may have to hire an agent-agency which has already established itself into the political sector properly and have completed the all the paperwork.

12. First Priority – Time or Money

First Priority – Time or Money

You also have to decide over your first priority means you have to think that whether you want to save money or save time. If you want to save time and it is more important to you than you should go with hiring an agent and if money has more value for you than you should roll up your sleeves and get your hands dirty.

However, for the small business or startups, it is obvious that money will be their first priority so hiring an agent is not their cup of tea. But for a large business or well-established business, there is a choice or priority between time and money.

13. Requirement of Skills

Requirement of Skills

Being a fresher and entering directly into the market requires one to have that skills so that he can negotiate that is why most of the well established business hire an agent. But if you have a small business or start up then you might have to learn the skills by any means possible to grab the best deal by visiting there.

As agents are into this business and it is their routine so the required skill get developed into that and moreover they have the required relations developed in the market as they have to contact almost every supplier every time for a different order.

Considering the above mentioned points we can conclude that getting yourself into the may require a lot of time, skills, patience but once you did it will be your lifetime investment as the efficiency and results of the work person does in his own interests are always better. If you are an owner of a small business or start up then you will be recommended to do it yourself as you time would be your second priority placing money at the first. Putting time will not hurt you more than putting your money which may get into loss.

On the other side if you are an owner of a large business you will be recommended to hire an agent as your time is more precious than money. You are acting as an ambassador of the company and the company requires more of your time than your business. This is being recommended with a warning because believing on everyone in the 21st Century on anyone may lead you towards loss. If it can be possible you can train any of your trustees for the outsourcing and can ask him or her to visit so that you can have a sound sleep at night.

Jumping into the market yourself or making jump of any of trustee will allow you to get the best out of the benefits of outsourcing in China. As we all know China is known for its outsourcing because of cheap availability of products, its relatively cheap labour, the expansion opportunities available there, the diversified and mass market. All these pros of outsourcing in China can be exploited better only if your take decision of doing it yourself rather than hiring an agent.

And if you hire an agent who might not be trustworthy may lead you to towards all the cons of outsourcing in China which are like you may have to face the issues with quality, there might be arising copyright issues and another maybe language issues. Agents won’t bother about all these things and they will hardly do any research for you. They will provide you the type of service they are providing others and then hand you their fee bill with huge amount written on it.

Hope you might have got clear about the outsourcing in China, whether you will do it yourself or you hire an agent. Do make a wiser decision with keeping all the conditions, situations and the above points in your mind.

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About the author

Sharline is the founder of LeelineSourcing.com. With 10 years of experience sourcing in China, She loves to share knowledge and ideas in sourcing bussiness.She writes only the truths which others are normally not willing to tell. This makes her posts distinguishable from other import & export articles.
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