The advantages to working with Asian suppliers are many: competitive pricing, good lead times, quality work, an understanding of the complex nature of international trade, affordable duty rates, and favourable customer relationships. You’ve built and culled a list of potential suppliers in Asia but where do you go from here?
1. Vet Your Suppliers Carefully
As much as we don’t like to think about it, there are fraudulent companies everywhere. Although corruption is no more rampant in Asia than anywhere else, it is in your best interest to check out your suppliers carefully. You might not be able to catch the next Pan-Pacific flight to follow up in person, but there are some steps you can take to ensure that you are doing business with a reliable company.
For compliance purposes and as part of that vetting process, be sure to conduct a thorough Sanctioned Party List Screening to ensure that they are not on any EU or US Denied Party Lists.
After you have conducted this screening, check their online presence. How thorough and accurate is their website? Do you notice any red flags that alarm you? What methods can you use to contact them? Be wary of an incomplete or sloppy website with limited contact information, many misspellings or other red flags. Make sure that all hyperlinks tie back directly to the company and aren’t phishing links or other forms of fraud.
What payment terms are available? What lead times do they quote? Do they have customer references they can direct you to? There are resources online to help guide you towards reputable companies and away from blacklisted sources. There are also companies available that can conduct an audit on your behalf.
2. Build Your Customer Relationships
Once you are comfortable that you are dealing with a compliant and trustworthy business, it is important that you develop an appropriate business relationship. Understanding their company culture, how they like to conduct business and being aware of their business customs, holidays, and country culture will help you build a mutually successful business relationship.
It might help you to place a small test order to get a feel for the process, an understanding of what the final order will look like and help you smooth out any issues before you place a big time-sensitive order that might have major implications for both businesses.
Make sure you give them plenty of opportunities to understand your requirements and an opportunity for them to understand how you like to do business too. Keep it professional, friendly, and courteous but be thorough in your communications. Keep good records of all communications so that you can build a paper trail for reference purposes.
3. Negotiate Rates and Contracts
The next step is to draw up a mutually agreeable contract where pricing, delivery times, Incoterms, and financing options are discussed and signed off on by both parties. It is not in your best interest to agree to 100 percent up-front payment, especially when working with a new supplier. Most companies are comfortable working with a percentage up-front, followed by payment in full upon successful completion of the delivery.
Communicate your expectations clearly, build extra time into your requirements to allow for unforeseeable circumstances such as Customs delays, weather delays, and other issues.
4. Finalise Your Order
Once you receive your sample order, inspect it thoroughly for quality defects and communicate any needed changes back to your supplier. You might wish to have an independent inspection performed by a quality control company who specialises in reviewing the product against the provided specifications.
You need assurance that your product will meet not only the requirements of your customers but comply with the standards imposed in your industry for safety, reliability, and product testing. Do not place your final order until you are satisfied with all your testing.
5. A Word about Quality Control
One of the biggest keys to your ongoing success is to build a rigorous quality control strategy that addresses your product requirements from an ongoing standpoint. Set in place policies, processes, and desk-level procedures to make ongoing testing a priority. Also set forth a plan for addressing defects.
Know how often items will be inspected, what your quality control standards will be and acceptable sample sizes. Be sure to include your suppliers not just on the expectations but the results so that they might make any necessary adjustments.
6. Addressing Customs Issues
Having a basic understanding of the Customs process will aid you greatly. Select a Customs Broker that understands the unique challenges faced by your industry and who has an excellent track record in handling the myriad of complicated trade regulations. Finding and applying the correct HTS code can make a huge difference in the duty rates you pay as well as keeping you from costly fines and fees due to non-compliance.
Part of the requirements that you should consider when evaluating your suppliers is how well-versed they are in accurately completing commercial invoices and other shipping documentation. Are they compliant with the latest documentation requirements? Do they carry any import certifications?
Lastly, having an understanding of the method of shipping, the Port of Entry, and any special requirements that present themselves due to the nature of the commodities you are importing may make a huge difference. Does your product require review and approval by an OGA (other government agency? Even a product as simple as orthopaedic socks may require additional review and approval, and this may create additional delays. Are there trade agreements to keep in mind? What are your documentation requirements?
Air Cargo is generally far quicker but far more expensive. Ocean cargo may be less expensive but may have more regulatory hurdles and very tight time-driven deadlines. The Port of Entry can make a huge difference too. In the US for example, Asian freight will come in through Los Angeles, San Francisco, Anchorage, or Seattle. Although each port complies with the same rules, there may be a bit of nuance in how those rules are followed and which specific regulations are a point of focus. The sheer volume of freight per Port of Entry can also impact Customs clearance times.
Conducting business with your neighbours is challenging, but being separated by an ocean can dramatically increase both your risk and your reward. Building a solid plan, mitigating risks, thoroughly vetting your suppliers, communicating your expectations clearly, addressing your quality control processes and concerns, and having confidence in international trade compliance will go a long way in helping your build a long and successful relationship with your Asian suppliers.