10 China Sourcing Terms All Businesses Should Know

For those new to China sourcing, some of the lingo can seem confusing. In this blog, we’ll summarize the top 10 terms most commonly used in supply chain management that all importers should know.

Glossary of Sourcing Terms:

-Blanket Order: This is a purchase order in which the buyer places multiple orders with multiple delivery dates over a period of time to take advantage of set pricing.

-CIF: Stands for Cost, Insurance, and Freight. This expense is usually paid by the seller to cover the costs, insurance, and freight while the order is in transit. Once the goods are loaded at the designated port, the buyer becomes responsible for this cost.

-FCL/LCL: Full Container Load – Refers to shipments where the full container of goods belongs to one buyer. This is generally less expensive than LCL. For FCL, you usually pay a flat fee as opposed to paying for the space that you use within a container. Less than Container Load (LCL) refers to small shipments that do not require a full container capacity of goods to be shipped and are usually more expensive than a full container.

-FOB: Free On Board – Refers to the point at which the buyer becomes responsible for the goods being transported in a given vessel.

-ISS: Inspection Specification Sheet describes, in detail, how the product should be tested, and the expected quality.

-Landed Cost: The total cost after goods have arrived at their final destination (usually the importer’s warehouse). This includes order price, freight, taxes, duties, and fees.

-PSI: Production, Sales, and Inventory report compares the planned production rate to the sales. This allows successful planning for production, sale, and inventory rates.

-PSS: The Product Specification Sheet details all product specifications – what it looks like, what it feels like, how it functions, measurements, materials, etc.

RFQ: The Request For Quotation is a document that details all order details including the product specifications, target price, expected delivery date, etc. This document should be uniform and is usually presented to multiple suppliers to receive detailed quotations. It ensures the same information is furnished to all potential suppliers when sourcing from China.

-Waybill: This is a document issued by the shipping carrier to acknowledge receipt of the goods being transported, and it serves as a receipt. This document also indicates the shipment’s destination address and includes contact information for the recipient/buyer.

Being aware of the above terms can help ensure importers that buy direct from China know what to expect. Are there other China supply chain management terms you would like us to define or explain? Share them with us in the comments below!

 

Editor’s Note: This blog was originally published in March 2021.

    Subscribe

    Get sourcing news and tips

    China Performance Group BBB Business Review