Strategic China Product Sourcing

By definition, strategic sourcing means leveraging supply channels at the lowest total cost. It is widely acknowledged that China’s manufacturers offer a huge cost advantage to importers everywhere; especially in the west.  For solo entrepreneurs and Amazon sellers, planning and implementing a China sourcing strategy calls for significant mental and physical efforts. Data collection, spend analysis, market research, supplier outreach and negotiating can all become even more complex given the greater geographical distances, particularly when you factor in both cultural and language barriers.

This post covers a few of the key aspects of sourcing from China that entrepreneurs should know and plan for.

What does strategic sourcing involve?

Gaining a 360-degree understanding of the product category

Profiling the product you want to sell, and the present and future spend associated with sourcing it is a logical first step. The size, shape, design, grade, specification and other aspects of the product will influence your sourcing decisions, as will the cost to manufacture and ship the product to your country. Document this data before you begin your search for a China supplier.

Analyzing the supply market

Surveying the vast China supply market can be a challenge for importers that have no experience doing business in the country. Online supplier directories like Alibaba, Global Sources and Made in China can simplify the search for suppliers. During the time of selecting your factory, it is always helpful to have a broad view of China’s numerous manufacturing regions, the various trade dynamics, the cost of manufacturing labor per hour, and also to account for any unknown factors that could disrupt production.

Questions to ask:

Which manufacturing region should I focus on?Zhejiang has plastics, textiles, metallurgy, household electricals and kitchenware industries.Jiangsu is a hub of chemicals, biomedicine, auto parts, textiles and steel production.Guangzhou manufactures electronic appliances, toys, textiles and apparel.What bargaining powers do suppliers hold versus buyers?For custom parts, should you stick to an established manufacturer or consider newer entrants claiming advanced technical capabilities?What are the main disruptions to production?Potentially hazardous weather phenomenon (ex: Typhon Canhong)Government’s actions (ex: shutting or fining factories that violate environmental protection reforms)Chinese New Year, when workers are away on an extended holiday to their hometowns, this country wide factory shutdown typically lasts anywhere between 2 - 4 weeks

This understanding will allow you to refine your search for suppliers. As discussed below, you will know exactly what to search for online, or who to meet in-person at the Canton Fair. 

Reaching out to suppliers

Contact suppliers either online or visit them in person at the massive Canton Fair in Guangzhou, where thousands of manufacturers and suppliers congregate twice a year. Either way be mindful of the realities of interacting with Chinese suppliers. Here are some tips:

Write simple, direct and matter-of-fact emails that leave no room for ambiguity. Use bullet points so that the important information is actually read.Avoid long introductions or unnecessary details. They tend to create confusion and draw away from the key information.Write as you would speak. A friendly tone is always better than a stiff one.Be explicit about what you want rather than giving the supplier choices. Your deal will only be reached over several negotiations!

It is most likely that you don’t know Mandarin Chinese and your supplier won’t be fluent in English. Hiring a translator during your first in-person meeting with the supplier will ensure smoother communication. The manager at the factory will understand your requirements best if they are conveyed in his language.

Factory representatives at trade fairs usually only know basic English and won’t be able to answer questions beyond what they’ve been trained to say. Here too, a translator can help you screen suppliers most efficiently.

Knowing the quality and safety regulations in your country

Regulatory requirements differ by country and product category. Meeting applicable standards and labeling requirements is critical to avoid legal hassles after your product has gone out to customers. This is also important when your products pass through the U.S. Customs as your shipment could be randomly selected to undergo an inspection. If there are any issues, your shipment will be halted.

Here is a brief overview of the labeling, quality and safety requirements for products sold in the United States:

Country of origin label (‘Made in China’)Textile and apparel products: fiber content, manufacturer’s identity and care instructionsChildren’s products: Meet applicable safety standards for the product, Children’s Products Certificate (CPC), a permanent tracking label on each product as well as packagingElectronics products: Adhere to FCC standardsKitchen hardware: 21 CFR covers plastics, coatings, glass, ceramics and metal used in different kitchen utensilsChemicals: No federal regulations but state laws like California Proposition (CA Prop) 65 may apply

From your end prepare digital files for label printing and send them to your supplier. It is as simple as creating a label file in an .ai or .eps format. Select an accredited product testing company in China that will provide you with a lab report. You will need this when requested to submit proof of compliance.