Supplier selection is likely the most asked question for someone just starting in the import business. And even though the question of supplier selection seems like a silly question, everyone should stop and ask themselves this question the moment they decide on onboarding another supplier.
There are different supplier selection criteria one should be looking at before even deciding to obtain quotations from a shortlist of selected suppliers.
Supplier Track Record
This may not be so easy to find, as b2b traders tends not to be so vocal with their concerns or even their praises. The suppliers that do end up having their name tarnished in reviews thus tend to be the worst choice you can make, so steer well away from them, even if their pricing seems good. Speak to as many trade persons possible to find out if they have used the suppliers you have in mind.
Supplier Communication Skills
One must remember during supplier selection that the people you will be in contact with have a vastly different cultural background and many will also have a significant language barrier. Find a supplier that you feel you can talk to about the product specifics without too much difficulty. Not only will this save you time, but also expenses arising from misunderstandings later on. Suppliers with knowledgeable salespersons that clearly want to foster a lasting relationship should be top of your list. Unfortunately, this information is only learned over time, so try and communicate with them as much as possible, without talking too much. Chinese culture tends not to favor small talk.
These communications would also give you an insight into their work ethics and how they deal with errors from both parties.
Supplier selection criteria give you some certainty that you know what you will get –
some risk remains if no personal visit is made.
Supplier Financial Security
Any supplier worth their salt should have financial information published somewhere. Having a look at these during supplier selection, you could easily weed out the ones who may disappoint you at a critical time, costing you both face and money. Find a list of suppliers that reports large enough cash flow so that orders can be supplied timeously. The cash flow needed differs on a case-by-case basis, but as someone just starting out; rather pick large suppliers that are willing to work with you.
So now you have come to the point where a shortlist for supplier selection has been drawn up. This then brings us to the second tier of the selection process.
Quotation Process for Supplier Selection
Having started the communication process of the supplier selection with your shortlisted suppliers and finding out that you feel comfortable dealing with them; the time has come for requesting quotes from vendors. Remember to specify exactly what you want the vendor quotation for and what incoterm pricing you require. It is best to ask for FOB pricing, as factories are not knowledgeable on the various taxes and duties for the destination country.
Having had a look at the pricing structure you will likely see two pricing groupings, clearly separated from each other. The first group is made up of bulk suppliers who purchase directly from the factory and resell the product for a profit. This group may be of value, as they tend to offer a one stop service related to a specific product group. But this comes at a price, and the value that they add may not even be needed.
Our second, lower priced, group are the factories themselves. It may require more administrative work and negotiations to finally land the product at its destination, but if your sales volumes allows for this, it will be a much more profitable process.
Unfortunately, a third group may have slipped through the selection process as they are experts at pleasing you, and may focus a lot of energy on having a shining presence online. These are the con artist.
They may not be easily spotted, but their pricing structure normally gives them away. That being said, if anything alerts you to a possible scam, it is best to move on to the next supplier. There will be more than enough in any field other than a handful of highly specialized niches.
Pricing alone however does not seal the deal in supplier selection. Pick a few suppliers of which their pricing structure suits you and ask for specifics of the product, even better still, a sample of the product.
Most large suppliers will happily provide free samples and only charge you for shipping. Compare the detail of the product specifications or the quality of the received sample.
Only after you are satisfied with the quality you will be receiving, can you place a small order. This will allow you to see real-world performance of the supplier, as this order will likely pass through the factory like any other, not received the special attention the samples has had.
If you are happy with this order, you can then proceed to order larger orders, increasing the size as you grow more confident with the supplier’s abilities.
Having found done your supplier selection we can now wish you all of the best in your quest to become the most successful importer in your area.