Ultimate Beginners Guide Sourcing Checklist

It can be difficult to know where to start when sourcing from China for the first time. For the best chance of success, follow these steps:

Before starting
1. Determine if sourcing from China is right for your product or service.
–Can you afford to carry more inventory?
–Are you willing to give up some control to achieve cost savings?
–What is your ROI?
–Is it better to manufacture your product locally or in China?

2. Determine your outsourcing model – are you buying from a specific factory, or setting up a strategic partnership or joint venture.

3. Prepare proper CAD/engineering drawings – The factory won’t quote based on changing, incomplete or no drawings

Finding and selecting a factory
4. Prepare comprehensive information pack for the factory to ensure they take your RFQ seriously. Factories get multiple RFQ’s daily.

5. Find a quality factory using a China sourcing agent or a manufacturing directory. Companies like China Works can help you find quality factories from their contacts.

6. Information packs should be sent to factories with the right capabilities for your project. If you send an RFQ for a $5,000 project to a factory used to dealing with $100,000 projects, it will quickly put to the back of the priority list if a big order comes in.

7. Understand payment terms. Some ask for 100% upfront, while others accept 30% downpayment. Some may require a telegraphic transfer, while others accept a Letter of Credit.

8. Determine your import duties. These are based on the HS code of the products you’re importing, the country you import from, and destination you import to.

9. Work out your landed costs with the help of a freight forwarder. Many factories quote on an ex-works or FOB basis. This means you will have to determine shipping costs, VAT and duty for delivery to warehouse.

10. Select your factory based on service, pricing, lead times and terms and conditions. Choosing a factory based on price alone can be a disaster.

11. Agree clear terms and conditions clearly specifying what will happen if things go wrong. Ask the factory to sign an NDA. Reputable factories will be worried about their reputation if accused of stealing.

12. Work out who you’re actually buying from. Ask company to clarify if you are buying from an export agent or ‘trading company’ rather than the factory itself.

13. Ask the factory to prepare pre-production samples before placing your order. Make sure they conform to your drawings, and samples are kept by both you and the factory.

14. Specify everything to the factory to make sure they understand the end use of a product. If what you’re ordering needs to fit another set of parts, send these to the factory for testing at their end.

15. Factor Chinese holidays into your lead times. Chinese factories take the Chinese New Year in February, and China Week in October. Some factories can take up to 6 weeks off, while it is normal to take 2 weeks off in China Week. They do work over Christmas and the Western New Year.

16. Authorise production to start when you’re satisfied. Production usually starts upon receipt of your downpayment.

17. Stick to your lead times. Putting pressure on factories to shorten lead times may be the cause of project failure

18. Plan for the unexpected and prepare for a learning curve. Yo should work closely with your factory to get past any issues.

When order is ready
19. Arrange quality checking before your order is sent. You can send someone to sign-off the order yourself or haver a 3rd quality inspection company inspect it.

20. Specify packaging details clearly. Poor packaging may cause product damage.

21. Arrange shipping to your warehouse. Have a freight forwarder to organise for shipping, duty and VAT payment.

Receiving your order
22. Inspect the goods immediately upon arrival. Factory terms and conditions often stipulate that you must report any issues within a given time period.

23. Give the factory comprehensive feedback and continue to grow the relationship. Let the factory know what was good and bad. If everything was to your satisfaction, thank them.