Many people in the global sourcing have recently said that China is no longer the place to go for your sourcing needs. They have made various claims in support of this rationale. For example, some have said that the prices charged by Chinese suppliers are now too high, and lower prices can be found in other countries like Vietnam.
But price is never the only factor of a successful business. Quality control, delivery time, new product development ability, communication efficiency, alternative suppliers, experience in international trade, and so on. You need to take care everything in a real cross-border business. China offers the best combination of all these factors. There may be other countries have lower prices (reduce by 5%-10%), but none of them has the kind of combination that China has. This biggest country has been working as “World Factory” for 40 years. You can purchase almost everything with any price and quality level.
So the question here is how to achieve higher savings than your competitors, instead of complaining why the sources are not as good as you thought before. Here I’ll share you the practices some big guys use while sourcing.
1. Cooperation with professionals
You should find suppliers that specialize in your field and your field only. These suppliers have a great deal of experience working with similar companies, so they know exactly what they have to do to serve you as best as they possibly can.
- Specialists in your field can give you valuable advice during production
The importance of working with a supplier that specializes in your field cannot be overstated. These suppliers know all about the production process, so they can give you the advice you need if there are any hangups. This advice alone can be invaluable, but this is not the only reason that you should find the most experienced supplier you can.
- Building a relationship with specialist suppliers for lower prices
Everybody has experience with global sourcing knows that it can be hard to find a reliable supplier. This phenomenon holds true in China as well. However, when you find a viable supplier and establish a long-term working relationship with them the benefits are huge. Suppliers in China are more motivated to develop close working relationships with their foreign customers. They know that these relationships are what set the good suppliers apart from the rest. A close working relationship can lead to lower prices, as suppliers that specialize in a certain field have control over the entire supply chain.
2. Discounts through large procurement volumes
One of the main advantages of building up a long-lasting relationship with the suppliers is the ability to obtain a large discount through ordering significant volumes of product. The amount of these discounts varies from supplier to supplier. However, they commonly range from 5% to 20%. If the customer has a long-standing relationship with that supplier, they can negotiate the percentage of the discount upwards based on how much they’re ordering and how long the relationship has gone on. Manufacturers need some old customers to keep their production running.
Suppliers and countries other than China such as Indonesia or Vietnam do not have the same ability and experience working with big orders. Their production capacity is’t big enough to cut down their own cost. They even don’t know that Western customers expect discounts for bulk orders. The ability and experience that Chinese companies have with offering these discounts means they know how to structure them in the most advantageous way for both themselves and the customer. In China, you can find OEM manufacturers hiring thousands workers everywhere. They are very familiar with Economies of Scale.
3. You can negotiate patiently with Chinese suppliers
Another aspect of the business that the suppliers have a great deal of experience with is the negotiation. They often negotiate with Western customers and understand the Western business culture. Many of them have employees whose sole job is to negotiate with foreign clients. You are more likely to find employees that speak English well, which is in contrast suppliers from other countries in my experience.
- Getting quotations from other suppliers
There are many resources easily available on the internet that will allow you to access and compare quotes from different suppliers. It’s every easy to find dozens of suppliers in China. Such as Alibaba, MIC and Globalsources. You can use these quotes to negotiate better prices. This is an essential tool in the negotiating process.
- The relationship between price and quality
While it is important to negotiate the best possible price, keep in mind that you get what you pay for. The absolute lowest prices will come with a decrease in quality. Long-term working relationships with your suppliers will allow you to communicate about this issue more effectively. Suppliers that have a long-standing and positive working relationship with you will let you know when they reach the lowest prices they can go down to without there being a noticeable decrease in quality.
4. Redesigning your product
Everybody goes through a period when I need to redesign their products. While this is a headache, it is a necessary evil. Keep in mind that Chinese manufacturers will work with you to redesign your product. They will make it as easy for you as possible. However, there are several guidelines you need to keep in mind on your end. You must keep the product design as simple as possible, be realistic about the materials that will be used, and find the simplest suitable packaging possible.
- Keeping your product design as simple as possible
It is vital when using suppliers to keep your product design as simple as possible. When you’re dealing with them, you’re trying to save as much money as possible and get your products as quickly as possible. The key to doing this is keeping your product designs simple. Thankfully, Chinese factories are experts in making products as simple as possible. While your input is vital in this process, listen to what your suppliers have to say. They have a great deal of experience doing this work. Your input is final in this process, but you should respect the advice of your suppliers.
- Quality of materials
Keep in mind that you are trying to get the maximum value for your money. One good way to get value for your money is to use materials that are reasonably priced but still of an acceptable quality. So talking with the suppliers. They will certainly give you some good ideas if they are real professionals in your field.
A surprising amount of money can be saved on the packaging. This can be done by making the packaging as simple as possible. This will also enhance customer satisfaction but make a product easier to open.
5. Negotiating payment terms for cashflow
Just as it is vital to negotiate the price of order, it is equally important to negotiate the payment terms. The right payment terms can substantially improve your business’ cash flow.
Chinese exporters that have longstanding relationships with Western clients are frequently willing to agree to payment terms that help their client’s cash flow situation.
6. Taking advantage of currency depreciation
It’s no secret that the Yuan has been depreciating against the dollar. You can take advantage of this by renegotiating your deal with your supplier.
You should not feel bad about taking advantage of this depreciation. It is simply part of business, and your experienced suppliers will certainly understand what you want.
7. Choose the right means of transportation
It is vital that you reduce shipping costs as much as possible. Shipping costs are cited as one of the negative aspects of sourcing from China, but this doesn’t have to be the case if you choose the right shipping option. You can choose from sea freight, air freight, and express.
Many people choose Air freight, as it is faster. But expensive fee will be a big part of your cost. Sea freight is slow, but it’s very cheap. You can get more profit although you sell them at the same price in your market. So I suggest that sea freight shoule be your first choice always.
8. Quality control cost reduction
Quality control is one of the main fears people have when working with Chinese companies. Some people have heard horror stories about bad experiences others have had with Chinese people. So many people like to visit the factory during production.
Actually, yoou can hire a professional quality control company who locates in China. Especially your order is not big enough. This is more cost-effective than making a business trip to check the work yourself. More quality control companies can be found through a Google search. The price should be about 200-300 USD per day. It’s not so much comparing to your trip cost.
In conclusion, there is still a chance to save a lot of money by sourcing products from China. If you follow the practices outlined in this article, you can save even more. And believe me, you will find China still remains the best place in the world to source products from.