As an American or Canadian entrepreneur, choosing a supplier overseas can be a difficult and daunting task. We’re several thousand miles away, primarily English-speaking and largely unfamiliar with Chinese law, business practices and culture. So how can we possibly be certain that we’re choosing the right supplier in China? There are several techniques to source suppliers in China that should be used together for the best results.
To make the task a bit easier for you, China has many industry-focused cities. We don’t know if China planned it this way, or if just sort of happened… The town that makes water faucets is called water mouth and all the companies in that city of 2.5 million make faucets and fixtures for sinks, baths, showers, etc. This makes things easier since you’ll know something is questionable if corrugated box supplier is located in the city of lamps. It also makes your trip to China more affordable and a lot less complicated because you won’t have to run around the whole country to visit several suppliers for your product. For example:
- Shenzhen specialized in electronics.
- Guzhen specializes in lamps.
- Foshan specializes in furniture, building materials and appliances.
- And on and on…
How to find legitimate suppliers in China?
There are thousands of suppliers in China, each specializing in their own area of expertise. Do they all offer the same level of quality? Definitely not. This is why due diligence is needed when it comes to selecting the best supplier for your business needs.
Attend trade shows.
If timing is right, attending a trade show in your industry can be a great way to meet legitimate suppliers and interact with them face-to-face. Before attending any show, come up with a list of pre-audit questions to help narrow down your choices. Trade shows can be overwhelming so the list will help keep you on track while helping you remember key points about potential suppliers.
Stalk potential suppliers online.
Unless it’s a paid ad, there are no laws governing online marketing in China. This means websites in China are permitted to inaccurately promote services and facts on their websites. Pretty confusing right? This means, for anyone scouring search results pages in search of the best supplier, a company’s compelling website should never be your last step in the decision-making process. After generating a list of potential suppliers, scour the web for all the customer reviews you can find. Be wary of unprofessional, poorly written or unrealistically positive reviews. Social media is another online medium you can look to for customer reviews, although not all suppliers will be on social media.
TIP: To quickly identify recurrent fraudulent suppliers, run a Google search containing your potential supplier’s company name alongside the world “scam“. The results should provide you with any public horror stories.
Inspect for quality assurance.
Once you have a list of potential suppliers, it’s time to take things to the next level: inspecting for quality assurance. There are many activities that can be carried out to ensure that a supplier is legitimate and trustworthy.
While booking a flight to China and hiring a Mandarin assistant for a week is probably the best idea, it’s not always feasible in terms of time and finances. It also might not be the most efficient option for a busy entrepreneur. Luckily, you can hire experienced factory inspectors in China to get the job done more efficiently and effectively. Inspecting the factory is important since it ensures that the supplier in question actually exists and is in business at that given address. It also confirms that the factory specifications provided to you were legitimate. The inspector should provide you with photos of the factory and equipment, a detailed report with information critical to your needs as well as their unbiased opinion on whether or not you should enter into a business relationship with that supplier.
Audit potential suppliers.
Supplier auditing takes place before inspecting a potential supplier and throughout the factory inspection. If for any reason you cannot audit a supplier with clear and accurate documentation, you should not do business with them. Here are a few supplier criteria that should be included in a supplier audit, however certain criteria might be of higher importance depending on your business’s needs.
- A profile of their factory (business registration, number of employees, etc.)
- Their production capacity at each step in the manufacturing process
- Factory infrastructure (power outages, generators, transport, security, etc.)
- The condition and age of their machinery and equipment
- What quality assurance systems they have in place (make sure quality control is not carried out by the production department)
- Social compliance (employee conditions, basic amenities, safety, etc.)
- Material supply chain (where are materials sourced and how are they transported)
A few of suppliers red flags:
- Supplier offers abnormally deep discounts: In China, suppliers in the same category typically charge the market price so be wary of any suppliers charging 20% over or below that market price.
- Supplier has a lack of online reviews: I would completely disregard any suppliers that have a complete lack of online word-of-mouth. It’s true that everyone has to start somewhere but as a product developer located 7,000 miles away, it’s just not worth taking on that level of risk.
- Supplier offers too wide of a variety of goods: Your safest bet is to focus on suppliers that specialize in specific areas.
Protecting your intellectual property (IP).
Before providing a supplier with any sensitive information, such as product renderings, be sure to have them sign an non-disclosure, non-uses and non-circumvent agreement (NNN) instead of the standard North American non-disclosure agreement (NDA). NDA agreement will not protect your intellectual property from being re-produced and are not even enforceable in China to begin with. Your NNN agreement should be written based off of Chinese law and none other since that is governing law in China. In order to avoid translation errors and misinterpretations if you end up in court, the contract should be written in Chinese. All of this to say, if sensitive information is a concern for you (it should be), to fully protect your intellectual property you should hire a business lawyer highly familiar with Chinese law and a professional Chinese legal translator.
Be aware that when it comes to pricing in China, price really does reflect quality. Also, when requesting a first quote from a supplier, never reveal your target price. You’re most likely to get a quick response if you give them a phone call, versus a copy-pasted email. Suppliers in the same area will generally provide similar quotes, if market price is fair, eliminate all outliers. Anything too low is either poor quality or potentially fraudulent, anything too high is either overpriced or of higher quality. Since price equates quality in most cases, it depends what you’re looking for.
Need help finding a supplier in China?
Over the years, SurfaceID has developed relationships overseas with manufacturers in many different areas of expertise. To ensure the job is done right and done fast at the cheapest possible price, our experienced team has got you covered. We will search our extensive database of quality manufacturing relationships to come up with the one that meets your exact requirements. If need be, we will search out a new manufacturer to make sure your specifications are met at a price that won’t stretch your budget out of proportions.