China has become a popular place for companies from throughout the world to source goods. Without a doubt, companies may profit from purchasing from China because they can provide a wide choice of goods at incredibly low prices.
However, whether you are a new business or even having a lot of experience in your business, there are chances of committing a few mistakes as dealing with Chinese companies is a complex job.
Unless you have planned well and are proactive enough, you may end up with financial loss, reputational damage, or even a legal problem. This article aims to list out the common mistakes that most businesses may commit while purchasing any goods from China.
This will help you to be a little more informed so that you can purchase goods from China smoothly. The following are a few common mistakes that most businesses may commit while dealing with any Chinese company.
1. Not auditing the supplier
Supplier directories with a low reputation can be found on sites like Global Sources, Made-in-China, Alibaba, and others. It is crucial to exercise caution because some statements made on these platforms might be wholly untrue or exaggerated. The worst-case situation is that you may have to deal with a trading corporation that raises your prices.
Usually, an audit of a Chinese plant entails a visit to the location, either by yourself or through an outside auditor. Meeting the supplier in person can significantly enhance your business relationship. If visiting China is not possible, do not skip the audit altogether just because other factors seem satisfactory. It is crucial to ensure thorough due diligence to avoid potential issues.
A factory audit is essential for evaluating a supplier's quality management systems, staff size, business license, and customs registration certificates. It provides a comprehensive understanding of the supplier’s operations and allows you to meet the decision-maker at the factory, who could become your primary contact for all dealings.
In-person visits also offer valuable insights into the supplier’s transparency and reliability. By observing non-verbal cues, you can gauge the supplier's openness and assess their practices.
For instance, you can verify whether product inspections are conducted for every batch and at various stages of production and whether the factory performs laboratory testing on randomly selected samples. A factory visit enables you to evaluate suppliers more accurately and select one that best meets your needs.
2. Not being aware of regulations
It is important to understand that a product may be subject to several laws and regulations that set its standards before ordering it. However, vendors might not disclose these compliance expenses to you or include them in the product price.
To ensure your product meets all necessary legal requirements, consult with your inspection company to understand the relevant regulations and certifications. If you are already working with an inspection company, they typically provide this information at no additional cost.
3. Not ordering product samples
Whenever you purchase goods from China it is certainly important to discuss about product and its specification, but that is not good enough. It is quite possible that your Chinese supplier might have not gone through it well.
To mitigate this risk, it is common practice to order samples from various suppliers. These samples serve as proof of the supplier’s capability to produce your product according to the specified requirements.
Ordering samples also allows the supplier to better understand your exact requirements. If the quality is satisfactory, with only minor adjustments needed, you can provide feedback and ask the manufacturer to make revisions. However, if the sample does not meet your standards, you may need to consider switching suppliers.
Keep in mind that suppliers often present their best work in samples to win your business. There is a risk that the sample you receive might be a ‘golden sample’ sourced from another manufacturer. Consequently, the final product may not match the sample’s quality if it is produced at a different, lower-cost factory.
A sourcing agent mitigates this risk by overseeing quality control at the factory and ensuring that your product is inspected at various stages of production. The agent might assign a representative to be on-site at the factory to perform regular inspections.
They will also carry out a pre-shipment inspection, either approving the merchandise for dispatch or addressing any issues with the manufacturer. This approach ensures you receive full value for your investment and helps prevent disputes related to quality defects.
4. Believing that the manufacturer fully understands your requirements
The language barrier can complicate communication and make it challenging to convey your requirements clearly and efficiently. Additionally, the concept of 'losing face' is significant in interactions with Chinese suppliers. Unlike individualistic cultures, 'Chinese face' focuses more on relational aspects.
Chinese businesses are concerned with their social reputation and often act in ways that are considered socially acceptable, which may include exaggerating the truth to maintain their image.
While your supplier might have an English-speaking salesperson to address your inquiries, these individuals may not be on the factory floor or possess decision-making authority. Communicating technical specifications to sales representatives can be challenging, as they might not fully understand your requirements and may be reluctant to seek clarification to avoid 'losing face'.
You should not assume that the supplier understands your requirements just because they have not reached out with questions. Document everything in writing and review your checklist through a video call or phone call with the factory manager or a relevant staff member on the factory floor.
Encourage them to ask for clarifications and emphasize that the product must be manufactured to precise specifications to be market ready. You can also mention that a successful outcome could lead to a larger order in the future.
When dealing with numerous product details, it becomes even more crucial to ensure that the supplier comprehends all your specifications. Failing to do so might result in unsatisfactory product quality or unexpected price increases once production starts.
From the moment you order a sample, clearly communicate your expectations both verbally and in your manufacturing agreement, addressing the following:
- Product requirements such as dimensions, colours, and finish, etc.
- Packaging requirements such as size, shape, quality, design, labelling, etc.
- On-site procedures and tests.
- Sending a random sample to an offsite laboratory.
If your product must meet strict regulatory standards, inform the supplier that you will be conducting lab tests on the items. Should the supplier refuse your order, it will indicate that they may not be able to meet the necessary requirements.
Conversely, if the supplier raises their quote, it could be a positive sign, suggesting that they are committed to ensuring high-quality production.
5. Not monitoring your order
When you purchase goods from China this is very crucial, as you cannot simply place the order and assume everything will proceed smoothly. It is critical to stay in constant contact with the supplier. While daily check-ins are not necessary, it is wise to follow up at least once a week, especially when coordinating inspections or shipment dates with your inspection company or logistics provider.
Unfortunately, suppliers often handle numerous orders, which means smaller orders might receive less attention. Regularly remind them of your deadlines to ensure your order stays on track. It is not uncommon for details like shipping marks or packaging to be discussed after the order has been placed.
While it is impractical to overwhelm the supplier with all the information at the time of order placement, you should cover the essential details. However, it is crucial to have all your preparations completed on your end before placing the order. Having your instructions ready beforehand will help streamline the process and save you time.
6. Not having agreements
Many first-time buyers overlook the possibility of delays or issues during production, which can impact planned promotions or specific delivery dates promised to clients.
Therefore, we strongly advise having a “Purchase order term” or a separate buying agreement in place. This can be invaluable if you encounter delays and need to expedite shipping to meet your deadlines.
7. Not performing pre-shipment inspection
When production is around 80% finished, the goal of a pre-shipment inspection is to confirm the number and quality of items. This makes it possible to find flaws or non-compliance problems and take corrective action before shipping.
A third-party inspection service will examine random samples from all batches of your order. It is essential for the inspection company to have a detailed checklist and be familiar with the quality standards relevant to your business.
Make careful selection regarding the pre-shipment inspection agency you choose. Be advised that certain agencies might not fulfil their ethical obligations, particularly if the supplier provides them with benefits, incentives, or gifts.
Establishing clear expectations and obtaining proper acknowledgment from the inspection agency is crucial to ensure they act in your best interests. Many third-party agencies may limit or refuse liability if an inspection is not conducted properly.
Therefore, if you end up with a large batch of goods that have poor packaging or incorrect dimensions, having retained that agency would be ineffective.
Many buyers from the western countries prefer to work with a reliable and trustworthy sourcing agent, who can coordinate the inspection activities more diligently, if you tell them about the proper format for inspection. Most agents have their own team to perform this task.
However, if the agent is not capable to take up this task, then he can introduce you to any third-party inspection company to perform quality inspection at the manufacturing plant where your items are being produced.
Such inspectors can check the quality of your product during the manufacturing stage, after the production and also before shipping the products to your country.
Implementing multiple levels of inspections significantly lowers the risk of receiving sub-standard shipments. Knowing that their work is being reviewed by an independent third party encourages suppliers to be more diligent in meeting your requirements.
8. Forgetting about Chinese New Year
Chinese New Year is one of the most important holidays when all factories remain closed for a few weeks. The date of this day does not remain fixed on every year. It can be sometime during third to fourth week of January or sometimes it may fall during the first week of February.
Factory workers often do not receive annual leave. Instead, factories typically provide them with 3-4 weeks of time off, during which production is halted. While the official holiday period might only be 4-5 working days, factories extend this break to give workers a longer period of rest.
9. Not having an insurance on your shipment
Make sure to request insurance for your shipment from your freight forwarder. It is a straightforward process, and any freight forwarder or courier like DHL can arrange it. The best part is that it usually costs less than 1% of your order value. For an order value of $1000, all that you need to pay for insurance is maximum up to $10. Most likely that it will be much less than this amount, that you can easily afford.
10. Neglecting intellectual property protections
When you are working with any Chinese company then IP is one of the biggest concerns as there are many occasions, businesses have found the incidents of IP theft. Therefore, the best thing that you can do is register your trademark in China, too. You must get acquainted with Chinese rules while registering your IP in China.
11. Failing to have a backup plan
Whenever you are dealing with any foreign supplier, it will be your biggest mistake if you only rely on a single supplier. You never know when some problem can take place and as a result, your items may not arrive well in time. Therefore, you must develop multiple number of sources in China so that you can always fall back on some other suppliers if there is ever any emergency situation ever occurs.
Conclusion
Most businesses of the world prefer to purchase goods from China as China can offer variety of products at an affordable cost. However, there are many challenges too, which one must remember while dealing with any Chinese supplier.
It is important to do proper research before choosing your supplier and thoroughly investigate about them before you go further. Make sure that you have communicated with your Chinese suppliers well and make them understand your requirements before it is too late.
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