All you need to know about suppliers
Suppliers, as we have already said, are very important for the start and growth of your business and it is essential to create a long-term and trusting relationship.
So it is important to know everything about suppliers and to know as much information as possible about them and that we present to you below.
The types of suppliers you need to know
In the commerce sector there is not only one type of supplier but there are different types, with different characteristics and that you need to know in order to make the best choice.
The different suppliers we will introduce to you are factories, trading companies and sourcing companies.
When is it best to work with factories?
First of all, you need to know that Chinese manufacturing factories are different from each other based on their size, their quality, their production capacity and their types of products.
We recommend working with factories only if:
- You understand well how the product is made and how it was produced and therefore its production process
- You don't need to customize the product
- The quality of service is not very important to you.
We advise you to work with factories only if these three conditions suit you because Chinese manufacturing factories have problems communicating in English as they specialize in manufacturing and not marketing, advertising and outreach. So, you have to be clear in explaining how you want the product and in order to be able to be, you have to be sure of how you want your product, know it well and know its manufacturing process.
It is important to be clear and to know well what you want because not all Chinese factories know the needs of the western market but, despite the communication problem, they are experts in producing the product you would like and understand all your technical requirements.
Furthermore, another reason for choosing Chinese manufacturing factories is that, in the last few decades, they have improved a lot in their offerings, their working practices and their workers. In addition, many factories are enforcing the country's new pollution regulations and as the sector is changing, they are always differentiating themselves away from stereotypes.
What should I consider if I want to work with trading companies?
If you want to work with trading companies you must know that, in addition to being a help for factories in marketing and selling their products in the West (which is changing because now factories invest in direct sales), they also have a role of intermediaries because they resell the products they increase and buy from multiple factories and most of the trading companies, dealing with specific sectors and products.
But be careful because in China, commercial companies often say they are factories and this is also why due diligence is very important.
What are the benefits of working with trading companies?
The advantages that make it easier for you to work with trading companies are that:
- They often offer better communication
- They have a wide range of products with many varieties from different industries because they represent multiple factories and therefore it is beneficial for you as you could centralize most of your orders from them.
- They can get offers from factories because they have an affiliate relationship
- They can also get small MOQs from factories, which importers normally can't get.
What are the disadvantages of working with trading companies?
The disadvantages of working with trading companies are that:
- Prices are high
- You may have difficulty customizing a product because you don't have direct communication with factories
- Also due to indirect communication with factories, it will be difficult for you to control the quality of the products
- In case you request a sample, you will have to wait a long time for delivery because the trading companies do not have stock for their products and therefore have to procure them from factories
- In case you have disputes with suppliers, it is difficult to resolve them because trading companies sell on behalf of factories and therefore must be loyal to both suppliers and customers.
Now you must consider both the advantages and the disadvantages to make your choice and consider that most of the importers prefer to work directly with the manufacturer and that there are many trading companies that work professionally, with a high quality of work and with great customer service.
All you need to know about sourcing companies
The sourcing companies are different from each other both in their size, their scope and their complexity, making a distinction, there are:
- freelance sourcing agents
- small and medium-sized sourcing companies with 3 to 15 employees
- very large sourcing companies that work mostly for large retail companies
Sourcing companies are more interested and caring more for their customers in China, handling import operations and product quality control for them, in addition, for their customers:
- they develop samples of the desired products,
- they manage their supply
- they negotiate and manage contracts
- ensure quality control
- they often handle the logistics
Indeed, these companies adapt to them and their needs to better take care of their customers.
In fact, there are companies that are suitable for buyers who are just starting out and others that are great for buyers with other needs and who place large orders.
Sourcing companies are different from trading companies because the first ones are independent and don’t earn on the commissions of factories and therefore are not interested in protecting the producers but, in order to maintain their business, they focus more on their customer importers in China.
Another difference with trading companies is that for sourcing companies you have to know what you want to achieve because, as most aren’t product specialists, they don’t make promotions or recommendations on certain products.
What are the benefits of working with sourcing companies?
The benefits of working with sourcing companies are that:
- As they know many suppliers, they can get you better costs and it is easier to resolve conflicts of any kind that could arise about anything, such as the quality of goods, delivery schedules, pricing or violation of the Intellectual property
- They work to best satisfy the customer and in case of problems, they try to understand in order to be able to find solutions designed and suitable to satisfy the customer 100%
- Although they are not experts in the field, to ensure that the product satisfies all the conformity, certification and international trade procedures, they understand and respect all the regulations of the import market.
What is the disadvantage of working with sourcing companies?
The disadvantage of working with sourcing companies is that:
Especially for small orders, they are expensive because they work a lot and there is a lot of manpower and in addition, they risk because they invest to maintain strong relationships with a network of suppliers so that it will be easier for them to find the right company for the customer, communicate on samples and negotiate quotes and it is a risk for them because if the client refuses to continue a project, they waste their time, their efforts and their investments.
What should I do to find a good supplier?
Nowadays it is not difficult to find a supplier because there are several ways to do it and that we present to you in the continuation of the article.
In fact, if you have to find a supplier, you have to look for them on online channels, at trade shows, thanks to sourcing companies and in wholesale markets.
How can online channels help you find a supplier?
If you are an importer just starting your own business and want to place small orders of less than $ 10,000, online channels like Alibaba can help you find a supplier as these channels have a large choice of suppliers and are easy to use, in these platforms you can find all kinds of Chinese suppliers.
As there are so many online suppliers targeting overseas markets, to find a supplier on Alibaba, you have to rely on quantity over quality.
Also, you need to be careful and to make the right choice you need to know that on Alibaba you can find:
- "Suppliers" which cannot be a safe investment because they are illegitimate and exist only for a short time
- With over 70% of total business-to-business portal providers, many trading companies, as I mentioned earlier, consider themselves factories, despite not being
- Prices higher than usual and which do not have serious negotiations
Despite these things, in this market you can find many great suppliers who will allow you to earn excellent margins.
In addition to Alibaba, there are also other online channels that have proposals with different values, such as Global Sources, Made in China and HKTDC.
These three platforms monitor suppliers by preventing the quality problems we told you earlier.
Why is it important for an importer to participate in trade shows?
If you have a specific product in mind and you are looking for a supplier, the best idea and with which you are sure you will find a supplier, is to go to China and participate in the Canton Fair because it is the largest fair in the world and in fact it is considered the mother fair.
In this fair all kinds of suppliers are presented and the importers come with an idea of ​​a precise product because it is so big, they have to look for the right area at the fair for that precise product and find the different suppliers with samples on hand.
Furthermore, in addition to finding the right supplier for your needs, you can already start a negotiation there.
Among other things, fairs allow you to meet the supplier face to face and this is very useful and important to start a negotiation and to be able to build a relationship of trust that will allow you to continue to have an excellent service for your customers and therefore to improve your business and consequently to increase your earnings. In case you don’t have a precise idea of ​​the product you would like, you could participate in it because many suppliers take the opportunity to present new products and therefore you could see what products could be imported from China and also learn about the news and events that happen in the market in general.
But even in the Canton Fair, like on Alibaba, you have to pay attention to the problem of quantity over quality and also to the fact that many trading companies present themselves as factories. In order to be able to differentiate between who is really a factory and who, on the other hand, is a trading company, we advise you to attend specialized events such as the Global Sources Trade Show in Hong Kong in which all participants demonstrate that they have all the factories that they are supposed to possess.
This event takes place at the same time as Canton biennial fairs, to allow importers to participate in both of them.
Why can sourcing companies help you find a supplier?
Sourcing companies can help you find a supplier by outsourcing the research process to them and then effectively making them your supplier.
This will save you a lot of time in finding a reliable and suitable supplier for you.
Also, it is a good idea because sourcing companies have systems and processes to recognize merchants from factories and, based on your criteria, these companies can control factories thanks to the processes they use. Plus, using government databases, they should be able to check supplier backgrounds.
What do you need to do to find a supplier in the wholesale markets?
In China, you can find many wholesale markets that have merchandise on display with sellers looking for wholesale buyers who will be able to choose an item and place an order based on how many units they would like.
Furthermore, the advantage of wholesale markets is that your orders are not obliged to meet the large MOQs and consequently you can buy small stocks of ready-made products, you can mix and match different types of products and this means that you cannot personalize or privately ticket your products.
What do I need to do to source from a supplier?
Once you have found the supplier you must:
- Contact him/her to be able to make a Request For Quotation on the product you would like
- The supplier will send you some informal quotes
- If the price satisfies you, to make sure you get what you want and ensure the quality of the real product, you need to request samples. This request, in the trade sector, is very important for you so that you avoid receiving and selling low quality products that do not satisfy you.
It takes much longer to receive the samples than new importers think. This is because many factories, as if it isn’t a standardized product, don't have the samples immediately available, they need 10 to 12 days to create one.
So to have an approved sample in your hand right away, you have to ask for it already when you brainstorm on a possible product you would like and this means, at least 6/8 weeks before.
As a result, you will need to continue communicating with the supplier to refine and improve the product based on what you would like, from the packaging, to the precise components of the product, etc.
What should I do to negotiate with suppliers?
You must know that you will have two different occasions to negotiate with the supplier, the first to fix an initial quote suitable for both of you, the second opportunity is after receiving the samples.
In order to deal with a supplier and make sure that the supplier will respond immediately and with interest with an excellent quote suitable for your request, you must be specific about your needs for the product and for the order and more, in order to be considered as a interesting prospect, you need to present the value of your business to the supplier.
On the other hand, if you are just starting out and need to place your first order, in order for the supplier to notice you as an interesting potential customer, you must:
- Make it clear to the supplier that you know the product and the market well
- Present yourself as an activity and not as an individual
- Owning a business website
- If you have just started, you have to write a couple of lines on the presentation of your business and previous imports made from China, it is very important because the suppliers pay attention to this detail
In any case, you don't have to look like a new importer and you need to point out to suppliers that you are well versed in the industry and that you know the whole business well. It is very important because in this way, the suppliers will give the right weight to your Request For Quotation.
What are the shipping methods?
To ship your cargo you can choose from three different options which are by sea, by courier and by air. We will explain everything you need to know about these options.
What is best for sea freight?
All importers know sea freight as a standard shipping method in which your goods are loaded into containers and then slowly shipped by sea.
It is best to use an FCL when the volume of your cargo is large and therefore with a 20ft, 40ft standard or 40ft high cube container.
On the other hand, if the volume of your load of goods is small and therefore a few cubic meters you have to send an LCL but you must know that they are more expensive and that they take 10 to 14 days longer than FCL shipments because with an LCL shipment your goods are transported together with other goods and therefore take longer because all goods must be gathered in the port of shipment and then they must be separated in the port of destination. This process of union and separation of goods is done by the groupage company which is a separate third party.
For the paperwork of the clearance of goods and the payment of transport costs to you, normally it is your shipper or your procurement company that takes care of it.
Most importers use shipping by sea because it is the least expensive method but it takes time depending on the ports of origin and those of destination and sometimes it could take months between the departure and arrival of the goods.
What is the Difference Between FCL and LCL?
The acronym FCL (Full Container Load) indicates a full load having a single sender and, usually, a single recipient and precisely for this reason, it is more efficient and if you have a large volume, it is less expensive and more convenient. Also, shipping times are faster and there is a low chance of receiving your damaged goods.
With LCL (Less than Container Load), on the other hand, we indicate a shipment in which multiple shippers send goods to the same destination, each with a different final recipient and therefore your goods will be transported together with that of other importers. Know that if you opt for an LCL, you must foresee delays of at least two weeks both in the departure and arrival ports because the shipping process, as we have already said, is different from that of an FCL and since it has more steps , it takes longer.
For a complete shipping process of an LCL, the steps are:
- The recipient sends the goods to the port
- The groupage company cleans the container in their name
- They gather your goods, together with the others, in a single container and in fact, must wait to have as many LCL orders as possible to be able to send the full container and also for this reason, there may be longer delays than usual
- The container reaches its port of destination
- The groupage company empties the container
- It divides the goods into different shipments which are labeled and sent to the recipient. And this stage also takes time because the documentation is done for different types of products.
What does it mean to ship the goods by air courier?
Shipping goods by air courier means that you have to book the shipment, sit down and wait to receive the shipment and in fact it is a "door to door" service.
The courier takes care of the bureaucratic procedures and the invoicing of the customs duty, which has a variable amount depending on the goods you transport and your country.
Air courier is an expensive shipping method, but it is fast and less complicated and should be used if high-value, low-volume or urgently needed products are being shipped and you need to receive them as soon as possible.
Furthermore, you must know that to make a shipment with an air courier, the total weight must be less than 400 kilograms and then you will have to choose the air courier method you want.
 When is it advisable to use air freight?
This method is rarely used in China and it is advisable to use air freight for shipments when you have a very large weight of goods that need to be delivered as soon as possible and therefore quickly.
You should know that air transport is much more expensive than sea transport and in addition, as it is an airport-to-airport service and therefore doesn't take care of deliveries, you must pay the transport rates separately in order to transport the goods from the airport to your door or warehouse.
If you choose this shipping method, in order to clear your goods at customs, you will need a customs broker that you will have to pay separately and who will add other costs.
If you find a good shipper, they could offer you an All-in-one quote and this means that all expenses are included in one price.
What is the impact of the Chinese New Year on international trade?
The actual timing of the Chinese New Year changes every year and is based on the lunar calendar, which absolutely does not synchronize with the Gregorian calendar we are all used to.
That said, it doesn't seem that there is anything strange and that the Chinese New Year could have an impact on the activity of many importers in international trade but instead yes, very often it is underestimated and if you don't have ready-made solutions, it can have a negative impact on the business and we explain why and how.
What impact does the Chinese New Year have on factories and on your business?
First of all, you need to know that factories are closed for a month when Chinese New Year comes around, so nothing is produced during this period.
And in addition, in the period both before and after the Chinese New Year, you may experience more problems regarding QC.
Before the Chinese New Year, factories are pressured by customers to be able to get goods out before they close for the holidays.
And after the Chinese New Year, there are usually new people in factories working on your products because most of the workers decide to stay in their hometowns with their families and this means that the product may be slightly different than usual.
Another negative impact it has on your business is that during this period, transportation costs increase three to four times the usual rate. And because of this extra cost, if you have to ship a large volume of goods and are forced to ship it during the Chinese New Year period, you could have heavy losses and put your business at risk.
What to do to avoid the negative impact of the Chinese New Year on your business
To avoid the negative impact the Chinese New Year could have on your business, you could:
- Have a budget ready for this period
- Anticipate the Chinese New Year and plan to get your last shipment out three weeks before the last factory business day
- Last orders must be made at least two months in advance, especially for goods that have long production times and for those that will be shipped by sea
