Sourcing in Asia – 5 Critical Mistakes To Avoid
Posted on 2016-07-11 by AQF Team
When sourcing in Asia, we all face certain challenges; every project is unique with its own pitfalls to take care off. Protect yourself against these challenges – delivery delay, scams, money loss or poor quality (potentially, unsellable) products – by avoiding the following 5 common mistakes.
Failing to establish a timeline when sourcing in Asia
It’s important to be methodical and consistent from the very beginning when choosing a supplier. We suggest creating a clear roadmap before starting the process. For instance: choosing the sourcing method > finding suppliers online or at trade shows > checking suppliers > selecting suppliers > defining Quality Control strategy > and so on.
Vague or Non-Defined Standards
It’s important to consider current as well as potential requirements when choosing a supplier. Some may choose to place a first, small, trial order, to test the supplier and avoid big losses dues to poor production quality. However, each order is different and doing this doesn’t guarantee quality is maintained for future orders. Once again, it maybe a good idea to outline your requirements. For example:
Where in Asia is the vendor based? How will this influence production costs, shipping, etc.?
A smaller factory may not be able to meet deadlines when the order quantity goes up; a big company, on the other hand, may not give enough attention to small orders.
A factory should put in place a proper Quality Management process. The international reference for this is the ISO 9001 standard. However, in practice, some factories choose to skip the set up of proper processes. This can be verified via a Simple or Extensive Factory Audit, which the AQF team is happy to carry out.
QUALITY STANDARDS AND VERIFICATION
What are your products quality requirements and how do you implement / check them in another part of the world when sourcing in Asia? Here is where recognized Third Party inspection companies are preferable, as they can provide a neutral opinion and communicate with the Asian supplier locally .
A budget line needs to be drawn at some point to ensure you choose the suppliers whose products you can afford – remember to include your quality assurance and quality control budget within your cost: a simple factory audit is approximately USD298 while product inspection services start at USD298 per man-day.
TECH. AND R&D
When it comes to high-end items, electronics or expensive goods, knowing that the supplier has a professional team and necessary equipment is essential. You can get this verified while performing a factory audit. A professional Third Party inspection company in Asia will check this for you in detail and report back.
No Due Diligence Performed
This is probably the most important step when looking for suppliers in Asia. Due diligence may include:
- Checking online reviews
- Asking for a copy of all documents: registration, certification and Business license
- Visiting suppliers at trade shows such as the coming HKTDC Hong Kong Electronics fair or the HKTDC Hong Kong Gifts fair in April 2016
- Visiting supplier’s factory via a factory audit: this will allow you to verify the original documents previously received, and that all aspects of the factory are to your Quality standards.
No Written Contract between Asian supplier and buyer
Oral agreements, promises and invoices will not offer protection if anything goes wrong. That’s why a written contract in English and Chinese is an essential requirement forsafe, long-term cooperation. A good contract would specify involved parties, payment, QC, logistics, liability for breaching the contract, choice of law, dispute resolution, order and product specifications and more.
Failure to understand the local culture
Being able to communicate with the suppliers in their own language is definitely a huge advantage. However, even more important is the ability to understand local culture. It helps to anticipate misunderstandings and identify critical situations that would only lead to miscommunication and potentially serious conflicts or quality issues.