If you’re importing products from China, suppliers are not the only party you will deal with, you also need to negotiate with freight forwarders in order to get the best shipping quote. We know that the shipping cost can play such an important part in your bottom line. Sometimes, a good product can become unprofitable product because…
When it comes to sourcing, there is nothing more important than finding a good supplier. Because they control your product raw materials cost, product quality, packaging, shipping, and so on, literally they can make or break your business. If you’re ready to…
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If you are seeking information about what your competitors are importing, which suppliers they are working with, which market has the potential for your products, and what products are with the biggest requirements, then this article is quite helpful for you.
In the last post, I have written why you need a sourcing agent? Now you know the importance of having a sourcing agent on your side to help you with import business, it gets you relieved from many unnecessary paperwork and gives you more efficiency, so you can focus on your core activity.
If you are about to hire a sourcing company to assist your business, the following are the 5 things you need to consider before you make up your mind to choose them.
The sourcing company should have a solid knowledge of the products they deal with, otherwise, it’s with little chances for them to do the work well, especially when it comes to technical or electrical products, like Mechanized products, LED products, etc.
For example, if you’re in the LED lighting business, they should know the specification and parameter of the products, such as the type of LED chips (2835, 3030 or 5050, domestic chip like Sanan or branded chip like Cree, Lumiled, Nichia) and LED driver, which includes isolated, non-isolated and flicker-free version, etc.
Furthermore, a sourcing company should also familiar with how the products are being produced? What are the production processes? Which components or materials have a big impact on quality? Therefore they will know how to arrange the quality control inspection, and able to spot the potential quality issues before delivery.
Having the experience means that you know about what you are doing and how to do it. If a sourcing company does not have related experience in sourcing and export field, they have no idea where to find the right suppliers and how to evaluate good quality products. It will take them a lot of time to know the ropes and they also have to learn it from the start.
Additionally, lack of experience sometimes also means they do not know how to deal with the suppliers properly, which is very important to keep good business relationships with them and to let them work in your way.
For you, it means you are hiring a green hand to do the job, wasting your time and money.
Conduct out a background check of the sourcing agents you are planning to hire. For example, you can check their Linkedin profile or Facebook page to see his or her former job experience and company information, such as founded time, services, company goal, number of employees, etc. The background information will help you to know what kind of capability they have, how many resources they can provide for you, and how well they can do the sourcing job.
If the sourcing agents’ former work experience is in the import & export field or other relevant work, they tie-up with vendors, suppliers, and logistics partners. By working with this sort of sourcing agent, you will be connected to other reliable agents for your whole business. This will reduce the level of your personal involvement, freeing up sufficient time for you to concentrate on core business operations.
Location can have a direct influence on whether they can do the work well because your suppliers are dispersive in different areas, it will be a difficulty if the sourcing agent is far from it.
In China, the industrial clusters are mainly in coastal cities, which are mostly in the provinces like Guangdong, Zhejiang, Fujian. If the sourcing companies you selected are far from the industrial clusters and located in other provinces say Hunan, Guizhou, or other areas from the north/west of China, it will be a problem for them to visit the suppliers and do the routine works. Cost is very high in terms of transportation and accommodation.
Cities like Shenzhen, Zhongshan, and Foshan, are the industrial clusters for LED lights, in these cities mean you have more access to reach a variety of lighting suppliers, and you can even visit 3-5 suppliers a day.
Hence, if the sourcing company located in the right position, it is more efficient and quick for them to arrange the daily task for you, such as factory audit, pre-production inspection, quality surveillance, shipment arrangement, etc.
Before you choose a sourcing company to assist your import business, please ask them first which markets they focus, or where are their customers from. Since different countries have their own different cultures, regulations, standards, and certification requirements.
For example, in terms of certification, CE is a must if you want to sell in European countries, and if you want to sell in the USA, UL or ETL is also indispensable. The others like SAA for the Australian market, BIS for the Indian market, SASO for Saudi Arabia, etc.
LED lighting product is with electrical components inside, the usage, installation methods, and safety requirements also vary from country to country. A sourcing company can easily get it and avoid unnecessary troubles if they have already worked in the market.
Different markets are also with different taste in the products. If you’re from the USA or Europe and you’re looking for high-quality products, but the sourcing agent’s customers are mostly from India or the Middle East, then they are not suitable for your business.
After first round of 25% tariffs on $34 billion worth of products imported from China, the Trump administration imposes another 10% tariffs on $200 billion worth of Chinese goods, both of the tariff lists are including led lighting products, it will be terrible and have big impact on the importers and consumers, because you need to pay more to buy the products now.
Firstly, let’s check what kind of led products are on the tariff list.
In the first round of 25% tariffs, which is already come into effect on 6 July, the following LED products will be affected:
The affected LED products are Light-emitting diodes, backlight LED and some LED related devices, all of these are a kind of raw materials and therefore it will not have a big impact on your lighting business if you are importing mostly end-products. However, to those who also have requirements for led related devices, like LED chips, transistors, you need to pay 25% more to get these items from China.
Although with 25% LED tariffs now, there are 2 ways to avoid it in the short run. One is to produce it locally in the United States, another is importing these items from other areas outside of China.
If produce the LEDs inside of America, due to the limited of equipment, technical expertise, and intellectual property rights, it’s too expensive of manufacturing and packaging in America to attract local manufacturers bring into production. What’s more, as the LED manufacturers were meant to compete with the products imported from China, with the increasing cost on LED devices, the price pressure is bigger.
The second way seems to be a solution, to purchase LEDs from other areas such as South Korea (Soul LEDs), Malaysia, etc. But there is also a challenge on the production capacity for these Non-Chinese suppliers, when in the face of the quick rising of requirements.
In the second round of 10% tariffs, it covers a broad range of LED products, including more than 10 items of LEDs and lighting categories with a higher trading amount, below are the lighting products that will be affected:
From the LED tariffs list we can see that it covers all the lighting products, including the lighting fixtures used for Christmas trees and some other lighting such as chandeliers, ceiling or wall lighting fixtures, fitting, table lamps, bicycles lights, sealed beam lamps, flashlight accessories, etc.
These items are nearly all finished products, it will surely have a big impact on the U.S. importers if the tariffs go into force. However, the 10% LED tariffs are still pending, it will undergo a two-month review process with a public hearing held from August 20-23, and Post-hearing rebuttal comments will be submitted on August 30. After these processes were finished, it might be going into effect. Thus there is with only 1 month or so left for us before the taxes are activated.
Since China is the global industrial center, the lighting businesses in China have great advantages in overall cost compared to other areas, more than 85% of led lighting products are assembled and manufactured in China. As a result, it would be difficult for the consumers in the U.S. to find alternatives made in countries other than China even with the 10 percent or more tariffs. It is estimated that the extra cost of tariffs will be shared by the U.S. consumers and Chinese producers.
To counteract the LED tariffs and keep you products stay competitive, following is the “3R strategy” that will help you avoid the tariffs hit your led business:
1. Request discount on the ordered products by increasing the quantity.
You can place orders for a much bigger quantity than usual and to get for a 10% discount on it, and deliver goods by partial shipment. Normally suppliers are willing to do it as they can also get cheap price from raw material suppliers with big quantity. In the lighting industry, costs are of huge difference based on different quantities.
2. Redesign the products to cut the cost.
Modify the structure, using another material or apply a new design, etc, either method can bring you a cost down for led lighting products. In led industry, there are numerous new designs and special materials appear every year. Keep your eyes open for it, you are very likely to get for the same product but much lower price.
3. Recommend alternatives.
The main purpose of the LED lamps or LED luminaires is to emit light, therefore you can easily to find another kind of LED lamps that can serve the same purpose. For example, in U.S. market the LED troffer is really popular and user-friendly for retrofit projects, but it’s a little expensive compared to LED Panel light, which it is also a pretty hot product serves with same functionality, in this circumstance you can recommend the panel light to your customers. Not just the LED troffer has alternatives, for other led lamps you can also look for alternatives that can fit the original criteria, and recommend the new one to your customers, such as LED Glass Tubes, instead of using LED Alu Tubes.
The trade war seems to be inescapable in the short term, although it will result in damage on both sides, we can prepare in advance and come up with a counter plan to minimize our losses.
Nowadays, importing from China is becoming increasingly popular and a strategic imperative, if you are looking for good products at cheap price but without having to compromise on quality. There are thousands of various factories in China specialize in different products, how to find a right and the high-quality manufacturer is often one of the first steps to start up your importing business – and it is absolutely one of the most important
Importing from overseas involves too many aspects, if you cannot manage this by yourself, you might need help from a sourcing agent that can handle those tasks.
Sourcing agents are a shortcut to finding your ideal supplier. They cut out all the legwork that you would have to do and minimize the risk involved in trying a new factory.
Why you need a sourcing agent?
There are many reasons to hire a sourcing agent but the main one is that you are more likely to find a high quality product quickly and efficiently.
Sourcing from overseas means it’s difficult to follow up suppliers locally, you cannot keep an eye on the quality of the products you buy. Also, communication between you and suppliers is inefficient and not clear, if it’s not face to face, (you are dealing with people of different culture and language). A large part of ensuring that the goods you receive conform to your standard and are able to be resold in your market is finding a reliable supplier.
A professional sourcing agent acts as a trusted middleman, who is ready to invest his time and efforts to ensure you access reliable suppliers so that you can get the correct products at a reasonable price. With the help of a professional sourcing agent, you are more likely to save time, minimize costs and maximize profits.
What you will benefit from sourcing agents?
With a sourcing agent on your side mean you are not alone! Sourcing agents live in your supplier’s native country. They are from your supplier’s country – and they know how to navigate it far better than you will:
- Sourcing agents can immediately spot scams;
- You don’t have to pay suppliers anything until you’re 100% sure of them;
- Sourcing agents can identify new suppliers that make your products at the right price and quality levels;
- Sourcing agents speak the native language and navigate the culture, which means there will be fewer communication barriers;
- They help develop new products/styles with these suppliers;
- You don’t have to do any legwork;
Reduce Overall Expense
If you do not have the plan to set up sourcing office to manage the operation in China, then a sourcing agent can be your local representation and work closely with your company to research, find, negotiate and manage suppliers in China. They can also assist with market research, quality control, pre-shipment inspection, customs clearance, and supplier network development.
The investment of hiring a sourcing agent will reduce your overall operating expense to increase revenue.
Sourcing agents can visit factories and quality check in person.
90% of the goods shipped from China are without quality check from 3rd party or from customers themselves, normally the quality control is implemented by factories. Whether you receive good quality products or not mostly depend on the suppliers’ integrity. In this case, a sourcing agent can arrange quality check for every order before shipment and give you 100% sure about the quality.
Enhanced security and safety
Doing business always accompany with risks and benefits, it’s very important to see the possible risks and know how to avoid them. Sourcing from overseas is not an easy work, there are many uncertainties could happen, for example, you have visited a supplier and the first impression to you is that they seem OK, but in fact they’re bad suppler only do one-time business, or the supplier meet financial crisis at a time and couldn’t produce your orders, or they send you substandard products, etc, What’s more, as your suppliers are on the other side of the planet, you can’t check on site regularly to see what’s going on.
This is where you can benefit from having a sourcing agent. A sourcing agent knows the ins and outs of the business in their country, they can visit the suppliers constantly to see what’s going on and report to you immediately if there is anything goes wrong. They can ensure you access trusted suppliers so that you get the qualified products.
What’s the downside of using a sourcing agent?
Profession – In China you can find many sourcing agents that employ themselves in various industries, sourcing all sorts of products. You should be careful of these sourcing agents if the products you need are relatively technical and professional. They are more likely do not have the expertise and experience to find these products for you, and of course, cannot find you the good quality product at a reasonable price.
Transparency – Your sourcing agent’s job is to get you the best quality product at an affordable price that they can find – end of. Sometimes, they might just tell you the price and the product details and that’s it. This means that you aren’t aware of who your supplier is and you have no idea whether or not the price they offer is the initial price from suppliers. They might add a little commission in it, or they take red envelope from suppliers, you don’t know.
Responsibility – Sourcing agents being as a third party, liaise between you and the suppliers since they work closely with suppliers, it’s important to know who they will defend if any mistake happens in the supplier management process.
Penglight is a sourcing agent and service company, unlike the other common sourcing agencies, we specialize in LED light and we do it well. If you are looking for a professional sourcing agent to help you with importing business, Penglight can be the right choice!
Have you ever got the situation that you asked the same product from several different kinds of factories, one offer you lead time in 35 days, but the other can deliver it in 20 days, why?
There are many reasons that could tell the differences, here is an overview of the important ones.
1. The lack of materials
There is an old saying in China: If you have no hand you can’t make a fist. Similarly, if a factory does not have kept stock for the needed materials, then they’re unable to produce your order in time, they need to arrange the procurement for materials first. It will be weeks later until they receive those materials from suppliers to arrange the production. There is no double that lead time is longer with the addition of materials lead time.
2. Lead time of raw materials is different
As we know lead time of raw materials is also vary from each other. For example, if you buy led lighting products, of all the materials like electronic components, structural parts, etc, electronic components take more time to prepare, at least 20 days, structural parts can be faster, takes 10-15 days. Lead time is longer if there is a lack of electronic materials.
3. Not standard products
If the product you ordered is a new product for a factory, not only they need to make preparation for these materials but also need to build up the working procedures, QC evaluation standard, etc, and need to arrange pre-production to check further for product quality.
4. Too many procedures
Different factories have different processes to run the order production, for a big factory, when they receive your PO, they need to input the order information to their system first to have it approved by each principle of division. Procurement team will start to prepare materials after approval. To a small and medium-size factory, there have fewer procedures and as soon as they received your PO, they can start preparing the materials, save a couple of days and lead time is faster. To see further differences, you can refer to this post “Big factories or small and medium size factories?”
5. Production schedule is too late
For many reasons, although the factories have kept stock for all needed materials, they probably will not produce your order on time. Because the production capacity is changeless, each order is produced according to production schedule. If there are many other orders waiting in line already, then your order will be postponed until the earlier orders are finished. Another situation is they have bigger orders, considering the production cost and efficiency, they are very likely to produce big orders first, as a result, your order need to wait for another few days before in production, makes your order production lead time longer.
6. Deposit payment not received in time
Usually, the lead time is calculated from the date that they received the advance payment, the factory starts to run the order against advance payment, not PO. Thus if you have not arranged the advance payment in time or it gets delay, lead time can be longer. Unless you have cooperated with the factory for a long time and have built up a good relationship with them, they are willing to run the process for your order as soon as PO received.
7. Production efficiency is different
Factories are varied from labor force, manufacturing scale, production facilities, production capacity, all of it could make a difference in lead time. For those factories who have more production facilities or advanced machines, will be with higher efficiency and faster lead time than those factories who merely depend on the labor force.
8. Quantity not enough, far from MOQ
To a factory, if you are ordering less than their MOQ, you might need to negotiate with them to accept the small quantity order. Same to the factories, they also need to negotiate with the raw material suppliers and coordinate with them to get the materials prepared, spend more time and energy negotiating with related parties and following up the order.
9. The 3rd Quality inspection
When the order is finished and get ready to be delivered, if you required an additional quality inspection from 3rd party, it will affect the lead time too, with additional 1-2 days or more.
When you source products from China, you will be flooded with hundreds of thousands of factories, and they are way different in many ways. There are many big factories with modern workshops and well-organized, as well as many small and medium-sized factories that are also professional and reputable.
Now with the development of transportation today, it’s very easy and convenient to check on-site and see what are these factories like. But how to choose and decide which one to cooperate with? Big Factories or Small and Medium Size Factories?
Without further ado, let’s dive right in!
Big factories are fine but not for everyone.
Many people tend to work with big factories because they think it can give them the guarantee that big factories will make the products with good quality at the best price and offer them good after-sales services, fast lead time. But is that really true?
It is true that big factories in China are well established, with a professional team, standardized workflow and advanced equipment, etc. When you visit these factories, you surely will be impressed by their scale and have a feeling of “WOW”. It makes you feel that you can do so many good businesses with them. But, do you really think that they can fit your current business?
Before you make the decision to cooperate with the big factories or small and medium-size factories, please keep in mind that what’s the most important thing that you want to achieve from them, Price? Fast Lead Time? Flexible Payment Term? Strong R&D Ability? Zero Quality Problems? Modernize production lines? Or you just want more flexibility, simplified procedures, quick response, and high efficiency, etc?
Knowing what you truly need and what kind of factories you’re going to cooperate with, together then you can get the most out of it.
What are the big factories like?
- Long history, more than 20 years
- Sizeable staff force, minimal 500 employees
- Large organization with a clear division of works
- Standardized workflow
- Great scale of manufacturing
- Financial support, e.g. OA 30 days, OA 90 days, etc.
There are still many advantages that can be listed but it is also important to know its downsides:
- Required big quantity for an order (High MOQ)
- High operating costs
- Cumbersome process
- Long lead time if it’s a small quantity
You may think you can get good prices and good products by working with big factories, but as a matter of fact, the prices you get from big factories is not that cheaper than from the small and medium size factories, or it’s even higher (sometimes this happens a lot).
When you choose to cooperate with a big factory, it’s no doubt that they can offer you a very good product that is with quality assurance, high consistency, warranty periods and well after-sales services, etc. But they will also measure your business, whether you have a big order quantity, whether your products can bring them more margins, whether you place orders more frequently, etc. If they think you’re too small for them, then they will not treat you as first priority.
For example, if they start a production line to run your orders, they will evaluate first and if the order quantity is small, the production cost will be higher and production time is also inefficient. To start an assembly line, it requires 10 workers (or more) in position. If the order is too small and it has to occupy a line to run, it makes the production cost much higher and time wasted (then affect the lead time of the other order),
They probably will put your order wait in line and produce the big orders first. So if you’re not ordering in big quantity and the product value is also not high (say you just buy LED tubes, LED bulbs, LED panels, or LED Flood lights, these lighting products are very common everywhere and with low value, factories who produce these products normally require big quantity to make a profit), it’s better to look for the small or medium size factories.
What are the small and medium size factories like?
- Employees just fit, from 50 to 300
- Simplified procedures
- High efficiency
- More flexible
- Support small quantity order
- Not too long history, around 6-15 years
- Quality is not consistent
- Not responsible when faced with big quality problem
They may not have too many employees but they’re also well-organized, and due to simplified management, there are fewer decision-makers, it’s easier and faster to get an answer. If you have an urgent order needs to be delivered within 20 days, but the standard delivery time is 30 days, normally the small and medium size factories can meet your requirements.
For instance, when you place an order to a small and medium size factory, they can just run the production after 2-3 days. As it has fewer procedures to run and as soon as the management and supervisor confirmed, the order will be in the process, save more days compared to the big factories.
For a big factory, they need to input the P/O into a system (known as OA or ERP system that provides a platform and enable automation of the information processing and communication tasks in an organization) first, and then evaluated by each division like Sales, R&D, Procurement, PMC, QC, and Management, etc.
The best situation is it will run smoothly and takes 2-3 days to finish. But if one of the principals of the diversions is out of the office or on vacation, it might take several more days to run the system, probably it takes 7 days or more before the production order is placed. It’s been a week after you’ve sent P/O to the factory.
Note: Sometimes it might take much longer, even a month, if the product you order is changed a little, say you purchase LED Tubes or Linear Luminaires, you need to change the white PC cover or end caps into transparent, or you need the housing printed with other colors, but there is no such code for this product in their system, so they need to build a new code/BOM(Bill of Materiel) for the product you order, build a new code/BOM will take 5 to 10 days or more depends on the product specifications.
The other benefit of working with a small and medium size factory is that if your order is not too big and not too small, to them you will be their big customer and they will put you in first priority. They will attach more importance to your order that you will never get from the big factories. They can arrange production for your order first or at least put it into an earlier schedule, and if you meet any questions or problems you can also get a fast response and receive a solution more efficiently. There are better customer services you can receive from a small and medium size factory than a big factory because you’re their big customer and they will do everything to serve you well.
How the factories handle your product quality problems?
Everything goes all pretty well unless there are quality problems occurred. When this situation happens, the factory’s attitude is very important and could lead to a strong impact on your business.
To the big factories, it can be more relaxing for you that they can handle this issue pretty well and provide you the best solution. Not just because they’re more responsible and with a reputation in the industry but they also have strong financial resources. The big factories are able to bear the cost and pay the reimbursement out of quality problems. Also, their Quality Management Process can help to find out the reasons and offer solutions to solve it permanently.
Things go quite different for small and medium size factories. Some of them can be responsible enough and act just as well as the big factories, but some are irresponsible to pass the buck and sometimes even disappear. Whether they will solve this problem depends on many variables, such as the owner’s personality, factory’s financial situation, the relationship between you and the factory, etc.., it is hard to distinguish this kind of factories, there are many situations the small and medium size factories can assure you, or fail you.
So, big factories or small and medium size factories?
I think you may have your own answer now. In my advice, whether big factories or small and medium size factories, the factories that bring advantages outweigh disadvantages are good factories!
Still have questions? or you would like to have further discussion, you can leave your comments below or contact us at [email protected] Penglight is a professional sourcing agent that specializes in led light, we help customers handle their current suppliers and develop new products for them, adding more value to your business.
Penglight specializes in the sourcing and development of all kinds of LED lights and luminaires. We offer One-stop sourcing services for your lighting projects and help you gain more.
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