You have been searching online for reliable suppliers and just came across a Chinese supplier whose organization look good. You see potential for a business opportunity and decide to go for it. BUT before making any decisions you may consider to lift the lid and see what kind of organization they are and investigate further in order to avoid unpleasant surprises.
China is the largest exporting country in the world, which means there are an enormous number of available suppliers, and this is where the challenge lays. You may consider a greater number of suppliers as a good thing because it offers you as a buyer more options. However, a long list of suppliers can be a good thing but it can also mean greater risk if you select the wrong supplier for your business.
Below are six practical tips that can help you reduce your risk when choosing reliable suppliers to manufacture your product.
1. Background Check
When you find a potential supplier online, it is a good idea to check what they claim before doing business with them. You can gather more information about the supplier by running background checks on their company. A supplier background check can prove invaluable before entering into business with a supplier. You can find a lot of information and other relevant data from various public sources online, such as bank information, credit reports and licenses. But most of that information is in Mandarin and hard to find. However, it is therefore a better idea to get all relevant information and all reports about the supplier by hiring a company or get help from a lawyer or accounting firm that are based in China who specialize in this field. By doing that you will get a better overview of the supplier and you can more easily decide whether or not you want to start a business relationship with them.
When you work with Chinese suppliers you should also problably know that there can be significant communication barriers, even with suppliers that employ English-speaking staff. But the language problem is not the only barrier when doing business with Chinese suppliers. The cultural differences can also severely slow down the development of the solid relationship that you would like to achieve. If you want to improve the communication between you and your supplier and avoid future problems, you need to understand the differences in how communication is viewed between cultures. Often, people from western cultures sees the communication only as a way to exchange information, while for most Chinese, communication is an important part of relationship building. This differences in viewpoint can often lead to barriers in communication when doing business with Chinese suppliers. However, you should always have in mind to treat each communication as a way to both exchange information and to build a relationship. It is also important to have an experienced international team in place in order to faciliate effective communication.
3. The importance of quality
Don´t choose your supplier based on price only. If a factory is offering you the lowest price, then you can absolutly be sure that they are either going to get back those costs in some addtional charge, or they will use cheap materials. This can lead to poor product quality and a disaster for your business.
It is also important to check the quality of your products before the whole production is completed. It can take weeks or even months to re-work goods that are defective, and even longer if all the goods must be reproduced. If you want to be sure of the quality of your products then it is a good idea to send an inspector and perform quality inspections, to make sure that issues are discovered early and that corrective actions can be implemented on time by the factory.
4. Get a sample
You have been inspecting your potential supplier and the audits results are acceptable. If you really want to be sure about your product quality and verify your products conformance to standards, you can request a product sample before production starts. If all goes well and you are satisfied with the result, then you are one more step closer to placing your future orders and finding a reliable supplier in China.
Make sure to order multiple samples from your supplier in order to be sure that you will get the same standards as your final product. The supplier can make a perfect and a high quality version of your product and pass it off as a sample of the final product if you only order one or two samples. Prices for samples can vary, some offers a free sample while other suppliers gives a discount or take normal price of manufacturing the product.
5. Visit the factory
To visit the supplier in person obviously won´t be an option for everyone, but it´s highly recommended and is the best way to verify your suppliers. It is common that suppliers utilize fake pictures of the company and give the impression that they are a big and reliable manufacturer. Your first meeting with your supplier is therefore a very important part of the sourcing process if you want to avoid unnecessary surprises in the future.You can also discuss directly with your suppliers when it comes to prices, delivery time, quality inspection and other important terms of your business. Your visit will also reinforce the relationship that you are trying to build and is good for your future business transactions.
6. Contracts and agreements
After months of searching for a reliable supplier, you finally found a good one that matches your requirements, and now its time to sign a contract (also called "OEM" agreement") to cement your relationship. If you want a contract that you can be able to enforce in a Chinese court of law, then make sure that the contract is drafted by a Chinese lawyer. All intellectual property that is used to manufacture the product, including copyrights, trademarks, patents should be licensed to supplier, for the purpose of complying with its obligations under the agreement. You should also carefully draft related terms in order to restrict your supplier from exercising any rights of ownership to the licensed IP. Include detailed product specifications and quality control and inspections procedures in your supplier agreement, and make sure to seek warranty from your supplier and include it into the agreement.