If these past few years have shown us anything, it’s that our business needs to stay nimble in the supply chain. No matter how large or small your business is, being able to move with the rolling tides is important, and sourcing from new overseas factories should be something you can move quickly on.
Whether it was the trade war imposing massive tariffs on your imports, the Chinese New Year impacting your inventory levels, or COVID-19 extending your lead times and lowering your margins – it’s important that you hope for the best, but prepare for the worst. Sourcing from China or anywhere overseas is no easy task and should never be put on the back-burner.
In this article, I’m hoping to arm you with the right tools to make sourcing from Asia a more secure and streamlined process.
Detailed Breakdown of Sourcing from Overseas Manufacturers
It’s assumed that you know what products you want to source from overseas, but I’ll break down the general steps every business goes through and explain them in-depth.
Create a Request for Quotation (RFQ)
A general guideline of what to put into the RFQ
- Budget (remember customizations may require tooling/molding)
- Target pricing range
- Similar product URLs
- CAD Drawings
- Specifications with tolerances
- Overview of how you’d like it packaged for maximum protection
- Similar product URLs
- How soon you plan to place an order
- How long you believe XX amount of inventory may last you
- When you need your listing to be live
Create a project need and a wish list
This should help you guide through your company progress as well as communications with your supplier & freight forwarder.
- Need list example
- I need a DDP price of no more than US$5 in order to break-even
- I can’t spend more than $4,000 on an initial order
- Based on the 1-star reviews, this product needs to have these customizations and focuses on quality in order to beat the competition
- The product needs to be put into bubble wrap and enclosed by styrofoam to ensure safety in transportation
- The outer packaging needs to have a sticker with my logo on it as well as the FNSKU label
- The master cartons need to be less than 50 lbs and have my FBA master carton labels to be FBA compliant
- This product needs to arrive at the Amazon FBA warehouse by February 1st, 2020 in order to launch for Valentine’s day
- Wish list example
- I wish for a DDP price of $3.80 in order to have a 50% margin in sales
- I’d like my supplier to give me 50% upfront 50% upon delivery payment terms
- I want to keep 1,000 units at a 3PL warehouse in California to sell on other platforms as well as a safeguard in case I run out of FBA stock
- I’d like the product to include these customizations because no one else has this customization
- I wish to include this complimentary item in the package to be able to market that keyword as none of my competitors is currently bundling these items
- I want the packaging to have my brand printed with the FNSKU barcode to provide a better customer experience
- I want to create 5-packs of this product
- I’d like the packaging to include a card insert to promote my brand further
- I’d like for my supplier to shorten my lead times to 20 days to lower my inventory overhead.
Search for suppliers
When searching for a supplier, you’ll want to make sure you do as much research as possible before making a selection. These will be your long-term partners and should be there for you through the good (and bad) times.
- Pro-tip: Many of those listed on these sites are trade agents that can help you get lower MOQs. Trade agents are not factories but can be great for those just starting out.
- Sourcing Companies
- Find more on www.sermondo.com
Set clear communication with your supplier
The supplier you choose is your partner as you’re relying on them to not just sell you a product, but help your business grow and be there for you through even the most difficult situations.
- Avoid approaching them with the following statements
- Saying “I just want to order XX amount now to test the market and if it’s successful, I’ll place larger orders”
- Long questionnaires for them to fill out
- Threats of penalties if they don’t supply within a certain time
- Remember, a quick “no” is better than a long “maybe”
- Honesty is always the best policy. Don’t make empty promises because many times the representative will use that as leverage to get the manager’s approval. If the manager sees that you made empty promises, they are less likely to do you any favors.
Get pricing and samples
When receiving quotes, remember that they’re quoting for what you asked. If there was an important detail that you forgot to mention, or a spec that needs to be changed, expect a cost-difference.
- Make sure all of the specifications match your needs
- When ordering samples, you may want to find a sourcing agent or freight forwarder that can consolidate all of the samples for you.
- If your product has customizations, then the sample is actually a prototype which may require improvements or more iterations. Manufacturers typically do not cover these changes.
- Pro-tip: You can ask your supplier if they’ll refund the sample costs when you place an order. It’ll give them something to look forward to.
- Any time a supplier changes the product in any way (no matter how minor), make sure to ask them if that comes with a price increase. This will mitigate any last-minute price increases.
Select a supplier & a potential second/third supplier in case you need to pivot.
- Don’t ghost anyone that spent time to quote you. You never know if you’ll need them in the future.
- Make sure to let the runner-up factories know that they are runner-ups and to check back in with you in 6 months to see if you have any new needs. Most of who you’re speaking with are in sales and like to create lead-lists.
Get quotes from Freight Forwarders
It’s highly suggested you do this early on to make sure the margins make sense & to calculate the customs & clearance duties associated with the product.
- You can use an FBA address on the West Coast, East Coast, and one in the middle of the country to get some pricing estimates since you won’t immediately know which FBA Fulfillment Center Amazon will assign you.
Recommended Guide: Amazon Freight Forwarders.
Place your order
Make sure you have everything in writing to be able to refer back to if anything goes wrong. Anything they might have promised in communications won’t matter if they’re not in the contract.
- Include all detailed specifications
- Include packaging information and all markings/labels that they’ll need to put onto the products
- Make sure to tell your overseas supplier how often you’ll be checking in on production so they can plan to have the updates for you around that time.
- When placing your order, make sure to re-emphasize any concerns you had about the sample and if possible include it in your contract.
Quality control (QC) Inspection
Be sure to include an additional $150-300 for QC inspections as they’re your last chance to ensure you’re getting a quality product before they start going to consumers. Pass along a Key Quality Indicator sheet to your Inspector so they know what you’d like to inspect aside from just the general specifications.
This step should NEVER be skipped and can save you thousands of dollars in the long run.
Skipping the QC can result in selling non-conforming or defective products which can negatively impact your:
- Best Sellers Ranking (BSR)
- Rate of Returns
- 1-Star Reviews
- Overall Seller Performance
These are all processes that we help streamline here at Noviland. Noviland Is a supply chain management solution that works with eCommerce Sellers to help them streamline their overseas sourcing, QC, logistics, and 3PL fulfillment.
We make a traditionally complex international supply chain, simple with the ultimate goal of helping your business scale its supply chain and empowering you to focus on what matters most… GROWTH!