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Do you have any step-by-step advice for sourcing successfully from China?

Posted: 2012-05-22

Full Question

Our company is looking to source the following micro drives: CompactFlash+ Type II hard disk micro drives. Some example models are Seagate ST68022CF, ST66022CF and ST64022CF.

Answer

Fundamentally, there are two paths you can take.

Option one is DIY.

Option two is to outsource your sourcing. For example, the company I started 10 years ago, PassageMaker, conducts research to help buyers narrow the large pool of potential suppliers down to the top 2 or 3 at a national level which fit your targets for price, quality and lead time.

But for those that wish to DIY, here are the steps and some tips.

The single most important factor in determining the success or failure of your sourcing program will be finding the right supplier. It sounds obvious, but making apples-to-apples comparisons of vendors at a national level can be daunting.

Initial research generates a list of 50-100 potential suppliers using web directories like www.GlobalSources.com and industry/trade show directories.

Assume the vendor is a middleman until proven otherwise, not the other way around.

Avoid factories that refuse to list the name or location of the production facility. If they only show a Hong Kong, Taiwan or other non-PRC (People's Republic of China) address, then they probably don't own the PRC factory and are a middleman of some sort.

Focus on those factories that can clearly show production experience with your particular product or production method.

Be aware that polished English skills do not reflect production skills. Often the most polished websites are set up by trading companies.

Look for clear information about operation size, equipment and staffing.

Review the 50-100 candidates' websites and brochures against client's desired attribute list (but hold off on price until later) and narrow the field down to 15 to 20 candidates. At this point, "first contact" is initiated in the follow ways:

Send an e-mail to ask for initial product-specific information (price, minimum order size, lead time).

Are samples available? If they don't have samples readily available, they probably don't deal in your product on a regular basis.

Granted the sales team will be the most polished in terms of English skills, but how is their understanding of your basic requests? If you ask for information on a red umbrella and get sent a sample of a blue shoe, you are going to have problems with communication down the road!

Confirm the actual production location and ask for ownership papers of the factory. Be explicit that the production location may be audited and that this location cannot be changed without approval of buyer. (You would be surprised at the number of middlemen who will take the buyer on a visit of a factory only to change the location to a less expensive and poorer quality option after the buyer leaves)

The above research should narrow the field down to about 5 highly qualified candidates. At this stage, quality auditors are engaged for a few hundred USD to verify the factory has a sufficient quality control system in place to make the desired product. It is also wise to conduct due diligence to confirm the factory has a good reputation, no legal problems and is sound financially. In other words, verify they are not going to disappear with your deposit and will be around long enough to complete your order! These are essential yet often overlooked steps by those looking to cut corners during research. Unfortunately, due to the massive number of trading companies and aggressive China sales staff who will say almost anything to get your business, visiting the production line in form of an audit is the only way to confirm the real situation.

Based on the results of the factory visits, the next phase is sampling, trial order or even Purchase Order placement with the top vendor or two.

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