If 1990’s rapper Big Daddy Kane was sourcing from China these days, he’d probably say “anything goes when it comes to PO’s but sourcin’ ain’t easy , sourcing’ ain’t easy (repeat hook 6 times)”. Never thought I’d get a chance to sample a BDK lyric in a blog about China, but it’s only fair as he sampled everybody else back in the day.
Anything goes when it comes to PO’s
In many cases, because money starts to flow as soon as a PO is signed, suppliers may not bring up concerns about their ability to produce a given product until after funds arrive and buyer is on the hook. So it is very wise to do your due diligence and auditing in advance. Placing the PO is easy. Following thru to ensure what is on the PO is actually produced is another matter.
But Sourcin’ Ain’t Easy
Back home, when you place an order to a catalog, retailer or even factory, that step is towards the end of the sourcing process as the desired goods will arrive and there is not a lot of follow up work needed between placing the order and delivery. Almost the exact opposite in China. Placing the PO is just the start, and quite often, the buyer, rather than the supplier ends up doing the project management work to coordinate the order. I have run into a number of new buyers who failed on their first China sourcing attempts because they didn’t calculate the time and energy needed to manage the projects. When going factory direct, you really need to roll up your sleeves and get involved.
My friend Renaud over at Quality Inspection Blog created a great Checklist for importers in China and low-cost Asia which walks the reader thru all the steps in a typical medium to small sided China sourcing project.
With his permission I would like to reprint part of his checklist. Notice that the placement of the PO is far from the end of the process. So plan your time and budget accordingly.
Describe the product
§ Write down precise product specifications
Identify and pre-qualify supplier(s)
§ List potential suppliers that offer the right kind of product
§ Communicate your standard terms (about payment, QC…)
§ Ask a rough quotation
Share product information with potential supplier(s)
§ Ask the supplier to sign and chop an enforceable NDA
§ Share product specs with supplier(s)
§ Send a sample to supplier(s), if applicable
§ Get feedback about product specs
Develop special tooling/molds with supplier(s), if necessary
§ Find a price agreement
§ Get a development agreement signed and chopped by the supplier
§ If necessary, wire money
Develop samples with supplier(s) [for a new product]
§ Supplier sends 1st sample
§ Client comments about 1st samples
§ If necessary, supplier sends more samples
§ Approval of golden sample
§ Comments for production
Develop samples with supplier(s) [for a new labeling or packing]
§ Supplier sends 1st sample
§ Client comments about 1st samples
§ If necessary, supplier sends more samples
§ Approval of golden sample
§ Comments for production
Finalize product specs
§ Confirm with supplier that product specs are correct
Issue PO, confirm 1 supplier
§ Select a supplier
§ Export product spec sheet, as an exhibit of the PO
Authorize the supplier to start production
§ Get a manufacturing agreement signed and chopped by the supplier
§ Launch the payment process (transfer of deposit / opening of letter of credit)
§ Remind the supplier to book the materials/components immediately
Comment on production samples
§ Supplier sends samples taken from mass production
§ Comment on samples
§ If necessary, supplier sends samples again
Inspection/testing during production
§ Share PO & share product specs with inspection firm/staff
§ Get an estimate of the price/time necessary, and confirm
§ Tell supplier about inspection plans
§ Supplier proposes timing of inspection
§ Get report & give feedback to supplier
Book shipment with a forwarder
§ Get quotes and compare them
§ Confirm a quote
§ Start tracking shipment with forwarder
Approve quality before shipment
§ Share PO & share product specs with inspection firm/staff
§ Get an estimate of the price/time necessary, and confirm
§ Tell supplier about inspection plans
§ Supplier proposes timing of inspection
§ Get report & give feedback to supplier
§ If necessary, proceed to re-inspection and issue a debit note to supplier
Shipment
§ Forwarder advises closing date
§ Authorize shipment
§ Forwarder confirms the products were made available in time
§ Forwarder confirms the products were shipped out
§ Supplier sends a copy of the documents
§ Confirm that the documents are all correct
Final payment
§ Check the quantity of shipped products
§ If payment by bank wire: transfer the balance
§ Supplier sends all original documents
§ Confirm receipt of all original documents
Customs clearance
§ Forwarder/agent applies for clearance
§ Payment of import duties
Domestic transport
§ Arrange domestic transport
§ Confirm receipt of products
Warehousing
§ Arrange sufficient manpower and space
QC on incoming products
§ Share PO & share product specs with internal QC staff
§ QC service checks conformity & quality
§ If necessary, give feedback to supplier and inspectors
Wishing you successful China Sourcing!
Best Regards,
Mike Bellamy
China Operations Director, PassageMaker Sourcing Solutions (3rd party assembly & inspection to protect intellectual property and ensure quality.)
Chairman of the Advisory Board, China Sourcing Information Center
Author, The Essential Reference Guide to China Sourcing
LinkedIn Profile: http://www.linkedin.com/pub/michael-bellamy-author-business-owner-volunteer-advisor/8/52a/389
