My Products Lies Over the Ocean: How to Start Sourcing Safely from China

Navigating the intricate world of sourcing and supply chain management is a formidable challenge for businesses. Charlotte Sweet from the marketing department sat down with Fergal Dempsey, Commercial Director of Exertis Supply Chain Services, to ask for his thoughts on the challenges businesses face and strategies for success in global sourcing.

Could you please begin with an introduction to you and your position in the company?

I’m the commercial director for Exertis Supply Chain Services, managing the private label and own-brand business. I have 25 years’ experience in own brand sourcing from China and private label services into retail B2B and customers all over the world, including Europe, the US, and some other territories.

I’ve been told that sourcing is a complex topic, what does your position entail?

We offer an end-to-end solution for our customers that delivers own brand or private label services where we handle all the back-office activities, allowing our customers to focus on front-end sales and channel management. We provide this service for multiple businesses throughout Europe and the US, value add services for global brands, resellers and retailers.

On the topic of China sourcing, for someone who is completely new to sourcing products in China, what are the two to three most important things to understand before they begin?

Sourcing from any foreign country, particularly China, is very complex. The most important things to understand are:

  1. Your product requirements, specifications, and price points from the start. Understand if there are development costs and whether your business plan can carry these costs.
  2. Building strong relationships with your suppliers is crucial, especially if you don’t have a presence in that territory. This ensures honesty, openness, and integrity, which isn’t always guaranteed as with any new partnership in business.
  3. Compliance is vital. When you import products, you’re liable for all aspects, from regulatory requirements to safety standards. Non-compliance can lead to severe penalties, including imprisonment, particularly for consumer electronics that pose serious health risks if faulty.

Once you have reliable suppliers, you need to visit them or have a third party do so to build a relationship. This ensures that miscommunications are less likely to happen. Managing compliance, choosing the right factory, and ensuring strong relationships are essential for successful sourcing.

I assume that’s not just in China, but other countries as well?

Yes, the same rules apply to other countries, especially with recent US tariffs. Many Chinese factories are setting up in places like Vietnam and Thailand. However, the risks are higher due to immature supply chains and infrastructure compared to China. While companies are moving to Southeast Asia, these regions lack China’s experience, thereby increasing risks.

What are the biggest misconceptions people have about sourcing from China?

A major misconception is that it’s always significantly cheaper. While labour is cheaper, other components are commodities with global prices. The real advantage of China is scale and flexibility, not just cost savings. Another misconception is that once a product spec is agreed upon, it will remain unchanged. Factories under cost pressure have been known to substitute cheaper, non-compliant materials over time. This is a risk for smaller businesses buying remotely without strong relationships or local presence.

How do you recommend finding reliable suppliers in China? Are there online resources or trade shows that are particularly helpful?

Trade shows are excellent for finding good suppliers – reputable suppliers attend these. Online platforms like Alibaba and Global Sources are also useful but require caution as anyone can list there. It’s also a good idea to go to the Canton Fairs in Hong Kong, which happen twice a year. You need to research potential suppliers, understand their export history, and focus on those exporting to Western markets. If they are exporting for premium brands into Western countries with high standards from the compliance and quality perspective, that is a good sign. You need to understand how big they are, their revenues, where their entities are, and whether they are a Chinese-only entity. One further thing to be aware of is that if the worst happens and you have legal issues with your supplier, it can be extremely challenging to enforce contractual terms across different litigation systems.

What are some key questions to ask potential suppliers to assess their capabilities and fit for your product?

Key questions include:

  • The size of the factory
  • Countries they currently export to
  • Location of their R&D
  • Customers they work with (if they can share)
  • Their business structure, including quality and compliance personnel
  • Compliance and certification partners they work with

These questions help ensure they are experienced and capable, reducing your risk.

Is it a red flag if they are not willing to share their current customers?

No, it’s actually a good sign if they don’t share customer names as it shows they respect confidentiality agreements. However, understanding the types of customers and the countries they export to is important. Research can help verify their credibility.

What red flags should people watch out for when evaluating potential suppliers?

Key red flags include:

  • Prices that seem too good to be true
  • Poor English communication (as it suggests they lack experience dealing with Western companies)
  • Chaotic factory conditions
  • Lack of an online presence or website

Visiting the factory and conducting thorough due diligence is crucial. Working with a reputable third party to do that on your behalf can also mitigate risks significantly.

What are the best practices for communicating effectively with suppliers in China considering potential language and cultural barriers?

  • Face-to-face meetings and handshakes are important.
  • Put everything in writing, including product specifications and agreements.
  • Use engineering specifications and drawings for clarity.
  • Strong contracts are essential.
  • Day-to-day communication should include video calls and written follow-ups.

Building relationships through social interactions like lunches and respecting cultural practices are vital as Chinese people value relationships and showing respect can build strong business ties. See our previous blog series from our Shenzhen GM Roger Luo here for tips.

How can you ensure clear product specifications and avoid misunderstandings during production?

Document everything and be specific. Clearly specify materials and all aspects of the product: strong documentation and agreement are key to avoiding misunderstandings.

Thank you so much for sharing your insights, are there any final thoughts you’d like to leave us with?

In summary, as you’re liable as the importer of your product into your territory, having a third party as a strong partner local to that business and being able to use their leverage to negotiate on your behalf and to agree on commercial terms is vital. Having them monitor your production and ensure that you’re getting what you paid for is extremely important. Additionally, having them build a relationship with the factory on your behalf is crucial.

At the end of the day, the risk is on you as the brand or as the person bringing the product into the market. To mitigate that risk, you need to have a very strong supply chain with a solid relationship in place. Using a strong third party is one solution, like Exertis Supply Chain Services’ branch in Shenzhen, or having a presence on the ground yourself is another solution. However, the risk is too high to take a chance and simply buy over email, bring the product into the market and selling it to your customers – this process needs extreme care to mitigate all of risks to your business and your customers. You will be fully liable for all the problems that you have brought to the territory, therefore the importance of a partner or presence in the supply chain cannot be understated.

If you have further questions on this subject or other supply chain topics, don’t hesitate to contact us by using the contact button below!

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