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Sourcing overseas, specifically from China, can have significant benefits for your online business. Importing products from China can give you lower costs of goods, custom labeling and packaging, flexible minimum order quantities, reduced lead times, and more.

Ultimately, Chinese sourcing can globalize your business, connecting you to one of the greatest manufacturing regions in the world.

Still, some people are hesitant to source from China.

What are the perceived risks of Chinese sourcing and how do you manage and mitigate these concerns?

The Risks Of Sourcing From China And How To Overcome Them map of China with airplane and delivery boxes

Perceived Risks Of Chinese Sourcing

1. Product Quality

The “Made In China” myth has put a stigma on Chinese sourcing. A few poor quality products coming out of China have built a reputation that “all Chinese goods are low quality.” However, this is one of the greatest myths of sourcing from China.

China is one of the greatest and most extensive manufacturing countries in the world. This means that there are thousands of factories making hundreds of thousands of products. The odds are that some of those products will be poor quality because some of those thousands of businesses are low quality.

The majority of Chinese factories, though, are high quality with great products. Because China is saturated with manufacturing, factories have to deliver high-quality service and products to stay competitive in the game. With a little research, you can have some of the highest quality goods available on market.

Nevertheless, there are still some concerns with ensuring product quality. If you partner with the wrong supplier and don’t have quality processes in place, you could end up in that poor quality myth.

If you don’t have a quality product, you’ll upset your customers, have a high return rate, get customer complaints and claims, and receive negative stars and reviews. If this happens often enough, you could even get your account suspended. So overcoming this product quality concern is of high importance for most sellers.

 

2. Scams

China is a hub for manufacturing, which also means it’s a magnet for scammers. There are a number of false companies who will try to take your money with no or low return before disappearing into the abyss.

This doesn’t mean that all Chinese manufacturers are scams. This just means that you have to be aware of potential rip-offs by prepping yourself with research.

We recommend working with a sourcing partner like Ask Idea Sourcing. We already have established relationships with legitimate factories in China, and our global team performs factory quality inspections firsthand.

 

3. Cultural Differences

You’re making international deals, which means that there may be language or cultural barriers during communications. While some companies have English-speaking managers, some concepts can still get lost in translation. If you don’t have someone on your team who can speak Mandarin, you could have difficulty communicating or agreeing on production standards.

Moreover, there are additional cultural differences to be aware of. For example, you should know about Chinese New Year traditions, since Chinese manufacturing shuts down for nearly an entire month.

The Risks Of Sourcing From China And How To Overcome Them globe clocks representing time difference

4. Time Difference

There is also the barrier of timing. Different time zones across the world can make communication challenging. In many cases, there can be a 12 or 13-hour time difference, which means your team is sleeping while the factory is working and vice versa. This often leads to late night or early morning conference calls, delayed communications, and lengthy lead times.

This is another reason sellers will often opt to work with a middleman like Ask Idea Sourcing. Our global team handles these communications for you so you don’t miss out on addressing critical concerns while you’re sleeping.

 

5. Compliance

“Sweatshops” have given a bad reputation to overseas manufacturing. Inappropriate working conditions are not uncommon in other countries where labor laws are more lenient. With a global economy, social accountability has become a much stronger focus for consumers and businesses alike. This accountability ensures that there is no forced or child labor that’s endangering or damaging a workers’ quality of life in any way. OSHA has created laws and regulations to try to maintain labor standards.

It’s critical to ensure factory compliance with regards to working conditions, compensation, and disciplinary practices. Not only is it ethically wrong to subject workers to poor working conditions, but it can also reflect poorly on your brand image.

 

6. Logistics

Global supply chains can be complex and intricate. For sellers, shipping overseas can feel overwhelming. You have to balance shipping methods, lengthy lead times, shipping delays, U.S. Customs, international law, and more.

However, new technologies are making supply chains leaner, which is helping to reduce this logistics concern.

 

7. Payment

Importing is an international transaction. Some people are worried about where they are sending their money overseas, especially with gray areas with regards to the law of global money transfers.

However, just like any other payment, you want to make smart financial decisions. This means only sending money through reputable sources and not agreeing to pay in full until the product is delivered to your contract standards.

 

Risk Management

Whether the risks are perceived or real, you want to mitigate concerns to optimize on all the upsides of Chinese sourcing.

What are the steps you should take to reduce these risks when sourcing from China?

 

1. Choose a supplier wisely.

The supplier you work with is the basis for all of your sourcing. Choosing the wrong partner can land you with quality, compliance, communication, logistics, and payment concerns. They could even end up scamming you out of a significant amount of money without you even realizing.

Learn how to choose a supplier with our article: 5 Reasons You Can’t Choose A Chinese Manufacturer—And How To Overcome It.

You should also consider working with a sourcing partner like Ask Idea Sourcing. We have established partnerships with quality, reliable manufacturers. If you want to work with another factory we aren’t currently partnered with, we will verify their registration, certification, and license, visit the location firsthand, and build lawful communication and contracts.

Find out more about supplier assessments here.

 

2. Perform consistent quality inspections.

You need someone on the ground in China looking at your factory and product firsthand. This ensures a high quality product and an appropriate social compliance. Factory visits can also be a great opportunity to overcome language and time barriers towards improving communication and relationships. These inspections (before agreeing to a partnership) can also ensure the legitimacy of your new supplier.

Learn about our supply chain inspection services here.

 

3. Draw up a thorough contract.

A strong, comprehensive contract will ensure that the factory always meets your standards. It protects both sides from any disputes or concerns. Contracts become the basis for communication between the parties moving forward. This can help overcome any concerns of quality, payment, communication, compliance, logistics, or payment.

Your written contract should always include:

  • Definition of product quality and delivery
  • Terms of samples, price, logistics, and management
  • Payment terms
  • Penalty clause
  • Dispute resolution
  • Choice of law
  • Arbitration clause

Find out the 11 must-haves on every sourcing contract here.

We recommend having a professional sourcing company or attorney draw up and review your contract. Learn more about our contract services here.

The Risks Of Sourcing From China And How To Overcome Them businessman working at computer desk

4. Choose a safe payment method.

Protect your finances and your business by watching your finances closely. Always choose a safe payment method like a bank line of credit or an escrow service. If the company insists you pay via wire transfer or credit card, you should be alerted for a red flag.

You should also never pay in full up-front. Most companies will ask for some sort of a deposit with a payment plan as different milestones of production are met.

We recommend starting slowly with a new supplier. The first order should be small, with increasingly larger orders. Think of it like a probation period where you ensure your supplier is able to deliver on their promises. The contract is a great way to outline expectations if a dispute arises with regards to payment.

 

5. Be aware.

If their promises sound too good to be true… then they’re too good to be true. A low unit cost attracts a lot of sellers, but you want to be aware of scams and hidden fees.

You should always request to visit your factory (even if you don’t plan to go). If they aren’t willing to have you visit, don’t work with them. Reliable suppliers will be happy to show you their factory. You can also work with a sourcing partner who can visit the factory to ensure legitimacy as well.

 

6. Have a sourcing strategy.

You want a blueprint of your sourcing plan. This outlines exactly what you expect from your supplier based on price, quality, lead time, shipment, and more.

What is the production capacity you’ll need now and in the future? What is your price range? What are your quality standards? What is your approximate inventory capacity? What is your tolerance for technology and communication standards?

Contact us to start building your sourcing strategy today.

 

7. Have a sourcing partner.

If you want to ensure legitimacy and mitigate these sourcing risks, you need to work with a global partner. Your sourcing partner can be on the ground in both countries to build relationships firsthand, overcome cultural and time barriers, and establish a physical presence in the factory.

At Ask Idea Sourcing, we have the experience to assess suppliers, inspect products, overcome differences, draw up contracts, ensure safe payment, watch for compliance, streamline logistics, and more.

You want to benefit from the advantages of sourcing from China. But you don’t want to put your business at risk.

That’s what Ask Idea Sourcing does. We ensure you gain all the advantages of overseas sourcing while maintaining strong relationships with credible supply partners.

Contact us today to get started.

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