Tips To Find A Suitable Supplier In China
May 25, 2012
With the onset of the Internet and its ability to connect people from all over the world, it is becoming easier and easier for you to find a manufacturer for your product. China in particular has become a major beneficiary of this growth. With tools such as Alibaba or Global Sources, it’s a simple matter of an internet search to find a supplier giving you the opportunity to take advantage of a large number of competitive factories in a country with low labor costs, rising productivity, advanced infrastructure, and increasingly sophisticated production capabilities.
Unfortunately though, once you have found a supplier online that claims to be able to produce your product, it’s not always smooth sailing from there. In my experience in this industry, I have met with plenty of buyers that have ended up getting frustrated because they have been communicating with suppliers in China for months, without any measureable progress having been made. Often this has to do with the factory in question not actually being able to meet the buyer’s expectations or standards.
To successfully find a suitable China supplier, you need a strategy, which I believe should include awareness, knowledge and a good amount of homework. Below are some practical tips to find a suitable China supplier that has the potential to develop into a long-term relationship.
Tip One：Choose the Right Kind Of Supplier
Make sure to be aware of the different ownership structures that exist for manufacturing companies in China and the pros and cons of each. For example, State Owned Enterprises (SOEs) are generally larger, well established and have good reputations. With SOEs you don’t need worry as much about problems with your final shipment but be warned that you will typically run into bureaucratic obstacles as the complicated management structures and paperwork requirements can make even simple processes take an inordinate amount of time.
Private companies in comparison tend to be much easier to deal with. Given that they operate in a much more competitive, Darwinian environment, they usually have a much stronger desire to work with you. That said, these have their drawbacks too as they have much fewer assurances as to the actual quality of their work and they tend to be willing to say and do whatever it takes to get your business.
In general, if you will be placing small orders annually, it is usually best to avoid the very large manufacturers as they will quote you higher prices and have much less incentive to really care for your order. Though smaller factories may be somewhat easier to develop a relationship with, they will need much closer monitoring throughout the production process, particularly for the first production run.
Beware: It is not uncommon to be shown a nice factory that you choose to hire only to find that they have subcontracted production to a smaller workshop. Make sure to conduct your due diligence with thorough factory audits to make sure your production is being carried out as advertised. Your contract with your supplier should also prohibit subcontracting.
Tip Two: Do not Select a Factory without an Audit
I have met many foreign importers that will find a nice sample at a trade show in China, receive a favorable quotation from the company that they think manufactured the sample and then think their supplier search has ended. Be aware though that it can be very risky to choose your supplier in this way. Online directories (e.g. Alibaba) and trade shows are only a starting point. Suppliers usually pay to be listed in the directory or to exhibit at a show, and they are not rigorously screened. (Read our past post on Sourcing and Alibaba to learn about the skewed incentive structure at Alibaba).
If your contact claims to own a factory, you can run a background check on his/her company to confirm this claim. There are several channels for conducting these checks. First you can call the company and ask them to provide copies of the relevant certifications. Next, you can ask them for a client list which you can use to ask previous customers of theirs about their experience with the factory. Finally, you can contact the relevant, local regulatory bureaus such as the provincial Administration for Industry and Commerce (See here for Beijing’s bureau).
Regardless of the risks however, the best place to start your search for a supplier is the directory websites. This will give you a good idea of your options and help you to formulate a reliable range of possible prices. The most well known of these include:
Once you have a good feel for who the company is and are assured that your contact actually is a representative of the factory, you should next set out to perform a factory audit. You may choose to pay a third party located in the area your factory is in to do this job for you.
When you are conducting these investigations, make sure that the factory is aware of the importing regulations associated with your target market. Find out from your home country what requirements there are to import from China and verify that your suppliers meet these conditions.
Tip Three：Place A Sample Order With Your Top Two Factories
This is a good way to test the market if you are unable to make a final decision on a factory or are unsure if the Chinese market is suitable for your product. It’s a good idea to start with a list of about 10 suppliers which you then narrow down to 5. From this 5, I typically pick the top 2 or 3 suppliers from which to ask for samples.
When you ask for a sample, remember that you shouldn’t just be monitoring the final product. Pay attention to the whole process, evaluating the totality of their operations.
- How easy is it to work with this factory?
- Do they communicate in a timely manner?
- How was the overall quality of the sample including how well they followed your instructions?
- Was everything delivered on time?
Take all of this into account when you’re making your evaluation for a factory.
Finally, remember that it is always good to have backup plans, so keep the factories, samples, and evaluations on file for future reference.
Having a good system in place and not trying to take any shortcuts will save you time and money in the future. In general, by doing thorough investigations of suppliers, no matter how confident they may seem of their capabilities nor how comfortable the relationship feels, you can avoid later miscommunications and delays.