How would you make your purchasing decision when you have a few price lists in hand that are sent from different suppliers?
Unfortunately, if you ask 20 Chinese suppliers for a quotation on the same product you may very likely get back 20 different quotation formats and perhaps 20 different prices. While price, quality and lead time are the holy trinity, there are other critical items that are often overlooked by new to China buyers. Here is a rundown of some of the key items to consider beyond price/quality/lead time.
1. Set up/tooling cost
During the Request for Quotation (RFQ) phase, it is essential to pay close attention to the tooling costs in addition to the unit price. By simply asking about the set up costs you will begin to get a feel for what is the appropriate cost of tooling and identify which supplier is playing games and who is legit.
2. Payment Terms
(Example: 30% deposit + 70% at shipment vs. 100% up front vs. Letter of Credit for example)
Everything is a negotiation in China. Expect to pay a higher per unit price in exchange for preferential terms.
3. Quality Requirements
If you don’t spell out your desired level of quality in detail, more than likely, the quotation will not be based on your desired level of quality. Therefore it is important to give the specifications for materials and finishes in the RFQ process as well as defining the certificates of conformance (CoC) you desire.
4. Communication Skills
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!
Wishing you successful China sourcing!