Overcoming Changing Sourcing Costs

What do you need to consider before making the decision to change suppliers (especially if it is offshore)?

The Scenario :

You have identified the perfect product online and have told your existing supplier they are too expensive and to never call you again!  You place your order and find the cost quoted online has just doubled.

What do you do? To avoid to above scenario from happening with your business, consider all additional expenses outside of the original quote, especially if your product is currently sourced locally.

Additionally, follow these 5 tips to ensure you have a realistic initial quote.

1. Get your specification absolutely correct so the supplier quotes for what you want
2. Get multiple quotations from different manufacturers
3. Work with manufacturers rather than agents
4. Always allow some “slippage” in the total cost - around 10%

Global sourcing can be very cost effective for your business, if you approach it intelligently. However, the process can be time consuming. Moreover, fostering a relationship with suppliers overseas costs not only money, but also time and energy. Most likely a lower priced, higher quality manufacturer does exist, but make sure you don’t jump ship on a current relationship solely because the grass appears greener on the other side.

 If you would like help assessing your supplier options, the professionals at Mawson Global can give you peace of mind. 

3 Steps to Avoid Recalled Products due to Packaging and Labelling Errors

The Scenario:

The product you imported has now been distributed all over Australia and Europe and you have found  it does not meet labelling laws and needs to be recalled – at your expense!

We’ve all seen it happen before, a product gets recalled, not because it is faulty or subpar, but because a business overlooked the importance of following all rules and regulations for labelling and packaging. The question remains, how can you ensure your new product is not recalled because you overlooked a labelling requirement in another country?

Follow these three steps to ensure your business does not have an expensive product recall.

1. Find consultants in your country or the countries you do business in to draft the labels and help you understand all the requirements for import
2. Use third party inspection agents to check labels prior to shipment
3. Use a customs broker to find out what paperwork you need to import the product

Over preparing and double checking is the first step to saving time and money in the long run. You do not need to be the expert on each rule and regulation your business will face, but it is important to hire someone who is an expert.

What other precautions can you share to make sure a labelling mistake does not lead to an expensive recall?

How to Evaluate Suppliers

Every company should have expectations that their suppliers will be honest, socially conscious, lawful and proceed with strong safety measures.

Firstly, suppliers should strive to minimize the total cost of their products and services, so your company can offer the greatest value to your customers. Remember value is not just about product cost so make sure you evaluate the other costs of the relationship. Additionally, suppliers should be able to provide a stable supply stream and respond quickly to any problems or inquiries that may arise. Suppliers that can support your company’s local, regional and global efforts are best. And finally, a work environment where suppliers keep the health and safety of customers and employees in mind is critical.

If you are presented with list of a few hundred potential suppliers, begin your evaluation by narrowing that list down to five suppliers at most. Make an effort to keep the key factors mentioned above in mind. Next, contact each of these suppliers and perform a set of checks you see are important. The feedback you get from this interview should help you to further narrow your potential list of suppliers from five to two or three, having done so by considering both the pricing and non-price factors.

After narrowing your list, confirm the legitimacy of those two or three suppliers. You should verify:

• that the supplier has loyal customers.  All the certificates and promises in the world mean nothing if the supplier cannot give you satisfied clients for you to contact!
• that the supplier has a strong control system and that they have quality experience in production so they’re able to supply your company with what they say they will.
• that the supplier is financially stable and has a good reputation. Professional service providers are available for your company to use in order to conduct these verification factors at relatively reasonable prices. Professional services are great if your company does not have the resources in place in-house that are necessary to assess suppliers.

Lastly, negotiate pricing and then move into the actual production process.

Once you have chosen the appropriate supplier, begin to establish an on-going relationship. Perhaps you can consider not requiring advanced payments once you have a strong business relationship set-up with a supplier, or be open to renegotiating conditions down the road if there is fair reason to do so with your chosen supplier. 

Quality Sourcing Tips –Tips for China Product Sourcing

If you are buying product from China or planning to have your product manufactured in China, take the following steps to ensure you get good quality from China. This strategy is best for hands on buyers who require a certain quality standard.

1. Qualify New Suppliers – perform background checks and make sure you know who is really making your product. This should also include audits on the factories and an evaluation of the new suppliers to make sure they fit your business model. If you are sourcing small orders, the largest factory may not be your best fit.
2. Review the Purchasing Method – make sure the contract has fair terms and conditions. Some Chinese suppliers are not motivated by your next order, so your leverage is the money you still owe them.
3. Perform Quality Control – prior to placing an order, take the time to define precisely what you need and expect to receive. Do not overlook describing limits and tolerances. Furthermore, perform regular product quality inspections. This should be done before and during production as well as prior to shipment.
4. Create a Buyer-Supplier Relationship – make promises with your suppliers and keep them!  As long as your buyer-supplier relationship is good, don’t bounce around to save a few pennies. In China, business is often performed face-to-face, so rather than cultivating these relationships via email or the phone, take the time to travel and have personal meetings with your suppliers.

Sourcing can be a daunting task, but with a little patience and the desire to form a lasting relationship with your manufacturing partner, it is a great way to save your business money. What other tips do you have for having a successful relationship with new suppliers in China?

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