Sourcing Road Map
China was a low-cost, manufacturing-for-export market for decades, but with years of government efforts and economic development, the country has moved up the value chain. Production of many low-cost items has since moved elsewhere, but many foreign companies still look to China to source more technically complex products and to create competitive advantages by integrating China into their global supply chains.
On this page
- Before you begin
- Sourcing research
- Placing orders
- Quality control
- Receiving goods
- Sourcing contacts
Before you begin
Assess whether sourcing from China is really what your company needs. Questions to consider:
- What are the benefits of sourcing from China
- Are there better locations aside from China that you may source from
- What sourcing model you would like to adopt, such as:
- simply buying from a local manufacturer
- through an intermediate agent
- setting up a strategic partnership with a local manufacturer
It’s important to know your requirements and prepare proper drawings and specifications for the products that you are looking for. You need to have a clear understanding of the category, as well as what type of suppliers you are looking for, such as:
- a manufacturer or a third party supplier
- a large manufacturer or a family-owned business
- a third party supplier with in-house development capability or one that buys-in and sells-out
- vertically integrated manufacturer or assembly-based manufacturer
There are various resources that you can approach to find suppliers.
The internet is a good place to begin your search, and will give you a good sense of the range of options available to you. Many foreign buyers start from www.alibaba.com. You will obtain hundreds of results, which can be overwhelming, but treat your internet research as a preliminary examination of what options are available.
Exhibitions serve as good one-stop shops for you to find potential suppliers and meet people face-to-face. There are numerous exhibitions all over China focusing on different industries. Find the top ones with the largest size and exposure, for example those with more than 200 exhibitors and more than 20,000 visitors.
Seeing is believing! It is important to:
- talk to potential suppliers face-to-face
- pay a visit to the local factories if possible
- ask the supplier for its certification or qualifications
- look for recognizable standards e.g. ISO
- ask whether the supplier has any experience in exporting overseas, particularly to your region
- conduct due diligence in advance to minimize risks
- ensure that your order will not be subcontracted to smaller manufacturers
Ideally a supplier will provide you with a point of contact at several of its clients to act as references, particularly any clients based in Europe or North America. You may wish to consider using a third party to conduct various levels of credit checks and due diligence.
Find suppliers that have the right operational size for your intended sourcing needs so that they will take your business seriously. For instance, a manufacturer will not give priority to a $10,000 project if it often deals with $100,000 projects.
Provide specifications and drawings and ask for samples. Note that you may have to pay the shipping costs. Remember that a high quality sample does not mean that you can avoid conducting quality control during mass production.
Understand relevant import & export regulations. These may apply to payment terms, import duties, shipment terms, logistics costs, etc.
Consider pricing, service, lead times, and terms and conditions well before you make any decision. As you make your selection and negotiate specific terms, be cautious of simply negotiating down the price, as when one manufacturer offers a much lower price than the average, you can be confident that there will be quality issues. Offering a reasonable margin to your supplier can help ensure they will not be forced to lower the quality just to make ends meet.
A well-written contract may not prevent you from any disputes with your suppliers but it can provide you options when disputes arise, including the threat of legal action. A good contract needs to:
- be clear, comprehensive and enforceable
- address payment / safety / quality control / compensation terms, inspection rights, and dispute resolution
If intellectual property is a key consideration for you, then consider signing a Non-Disclosure Agreement (NDA) that is drafted in Chinese by Chinese lawyers.
According to the 2016 World Bank data, China ranks fifth among 190 countries in terms of enforcing contracts, meaning that a high-quality, enforceable contract is useful in mitigating risks while doing business in China.
It is also important to prepare your contract in both English and Chinese. A Chinese-language contract will better protect you in the courts and avoid your supplier using language barriers as a pretext for any non-compliance.
Watch our YouTube video: Protecting your IP through Well Drafted Contracts
Ask the manufacturer to provide samples before production starts, to ensure that the samples are in keeping with your drawings and specifications.
Pay attention not only to the samples, but packaging. Good packaging can protect your products from any damage caused during shipment.
Count Chinese holidays into your lead time. There are two long holidays each year: Chinese New Year (usually around January or February), and Chinese National Day in early October. People often take weeks off around these holidays, which slows production significantly.
Allow for a gradual learning curve by working closely with your supplier and helping them through any production issues that arise at the beginning of the process.
How you conduct quality control will depend on the volume and value of your order:
- For small orders, such as those amounting to just 1% of the supplier’s total production, you may have to rely on the supplier’s quality control methods
- For large orders, you should consider hiring a dedicated person who can be on the ground to keep a close eye on quality control throughout the production process, including raw material procurement
- For large volume orders, you may consider hiring a professional service provider to conduct the inspection on your behalf
Quality control is a never-ending process. There are many ways to help ensure the quality of the products you source.
Ensure your order is quality checked before shipment. Do it either through your own staff or through a third party quality inspector.
Ensure your goods are packaged according to your requirements. Poor packaging may ruin the quality control efforts made during the production, particularly if your products are delicate or fragile or sensitive to the environment.
Use a freight forwarder to organize shipping and paying of duties and taxes as needed. Many Chinese manufacturers quote on an ex-works or Free on Board (FOB) basis (i.e. quotation from the factory gates or at the port) so you have to arrange the shipping and delivery to your warehouse. Alternatively, you can ask for quotations based on Cost, Insurance and Freight (CIF) during your initial negotiations.
Check your goods as soon as they are delivered to your warehouse. Provide the manufacturer detailed feedback and tell them clearly where improvements can be made for the next shipment.
Decide whether to continue the relationship or terminate it. Make sure that you have some substitutes which can start the production as soon as needed. And make sure that you always have some inventory in your warehouse for any contingency caused by failed performance of your supplier.
To learn more about importing to Canada, please refer to the website of Canada Border Service Agency.
Your search for products from China can begin in Canada. There are a number of Canada-based, overseas organizations that can provide useful information and assistance. Below is a list of contacts - in Canada, China, and Hong Kong - that you may approach to begin your sourcing research.
The CCBC is a private-sector, non-profit membership organization incorporated in 1978 to facilitate and promote trade and investment between Canada and China. In addition to its head office in Toronto, CCBC has offices and staff in Montreal, Calgary, Vancouver, Beijing, and Shanghai. CCBC provides a range of services, including:
- event management
- facilitation & marketing
- policy advocacy & mediation
- business operation and administration support
- access to analyzed information
As the traditional champion of Canadian research and development, CATA's mission is to stimulate global business growth through the forces of Canadian innovation and strategic partnership.
CATA's goal is to provide:
- market intelligence
- business connections
- on-site support
to help Canadian companies build their map to success in China. Anything that is marketable in technology can now be developed, designed and manufactured in China, and any company with global ambitions needs a presence in China.
TFOC was founded in 1980 by the Canadian International Development Agency to help developing countries export to Canada. Two decades later, TFOC, operating as a non-governmental, not-for-profit organization became the primary provider of information on the Canadian import market and a source of training for exporting and investment attraction for developing and transition economy countries.
TDC is the global marketing arm and service hub for Hong Kong-based manufacturers, traders and service exporters with more than 40 offices around the world. Its activities are especially geared to:
- helping small and medium-sized enterprises (SMEs)
- enhancing Hong Kong's reputation as a partner and platform for global business
With an unparalleled database of Chinese companies, suppliers and manufacturers numbering in the thousands and covering multiple sectors, Canadian firms can use this trusted intermediary to find goods made in China. Of particular strength are its knowledge of and links into the South China/Guangdong industry.
In addition, TDC also provide an affordably priced customized business matching service. The aim is to match Hong Kong product suppliers, service providers, agents, distributors, licensees, and franchisees to technology transfer, joint venture and strategic partners.
This internet trade portal has over 13,000 daily hits. With its roots in Hong Kong, the company's reach now extends into China and Taiwan. Its mission is to link both buyers and suppliers. Via the portal suppliers can:
- promote their products
- spread their trade messages
- build up their brand images
Buyers can benefit from the business matching system to easily locate desired products or business partners.
Marketplace International also attends most major trade shows in the region and can act as your “eyes and ears.” The company also publishes magazines to help link buyers and suppliers.
IMC is an organization developed and established by the Shanghai Municipal People's Government. It serves as a fully functional international merchandising-expediting organization. It provides services ranging from policy to promotion and from information to exhibition, such as:
- Product Promotion and Buyer Services
- international sourcing conferences
- major industry-related events
- information exchange services
- newest international market news and international trends
- specialized training to suppliers
- assistance to companies that are establishing and developing sourcing operations in Shanghai
- policy assistance
- help clients join buyer's clubs
- provide agents for procurement, import and export of products
- A Permanent Display Centre
The international trade mart display area of Shanghai Mart (190,000 square meters) allows both domestic and international manufacturers to permanently display and promote their superior products in a low cost, world-class professional working environment.
Chinese sourcing websites
Founded in July 1988, with more than 6,500 members, this nationwide trade organization engages in machinery and electronic products related activities.
This comprehensive B2B directory includes Chinese and Taiwanese products manufacturers, exporters, suppliers, producers, and various other service providers.
Companies can use this online B2B trading and cooperation community to:
- post buy and sell offerings
- publish product and service information
- interact with targeted business partners
This site also provides:
- daily updated breaking Chinese business news
- China fairs and exhibitions directory
- China customs tariffs database
- China top 500 importers and exporters search
- yellow pages of China companies
- selected China trade laws and regulations
- reports written by leading trade experts and industry leaders
- China business consulting services
This site creates and facilitates global trade in multiple vertical markets between buyers and suppliers that purchase in volume for resale through integrated sourcing and marketing solutions.
This site provides access to Chinese products and suppliers, manages online activities in virtual office, and provides access to a wealth of information on the latest trade developments both in China and abroad.
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