How to purchase industrial parts from China in 7 steps.

Although there are some changes affecting the factory of the world, including salary increase, tensions with US and other countries (Australia, EU), China is still the only global serious choice for subcontracting technical parts. Local supply chain improved a lot (availability of materials and semi-finished products, logistics) so has the general quality of the production, taking gains on heavy investment in high end equipment, improvement of local manufacturing equipment quality and slow but steady change of mentality toward quality. China is not anymore the mysterious country it used to be, but still, doing business there is different to the way we do in western countries. Therefore, let me share with you some insights about the different steps leading to a successful purchase experience in China. 

1- Identify a Chinese supplier

First step with no surprise is the identification of potential suppliers. See below chart on which tools may be used for this purpose :

• Alibaba / Made-in-china (www.alibaba.com / www.made-in-china.com): Not always easy to access real factory as many contacts are trading companies or factories that engage mostly in trading beside small manufacturing.
• Search engine (google.com / baidu.com/ bing.com): Can be efficient if you are looking for a very big supplier that is investing in international visibility, but many suppliers either don’t have website or their website are hardly accessible outside the Chinese internet great firewall.

• Industrial fairs (In & out of China, as international fairs are always populated by many Chinese companies): Good to have face to face discussion, but also difficult to identify trader vs manufacturers. Very limited during pandemic situation. Virtual fairs have yet to prove their usefulness. 
• Network (contact your pairs for recommendations): Don’t hesitate to share with your network good suppliers’ recommendations. 
• Sourcing companies : If you are clear about what you are looking and want to save your time, paid sourcing missions with professionals can be interesting. Be sure that these professionals understand you needs. Most prices range from several hundred USD to 2000 USD according to complexity of the mission. 

• Subcontracting service companies : Outsource identification, negotiation and production follow-up to a partner with local presence. One stop solution that guaranties a competitive pricing, an understanding contact and quality management. 

2- (How to) Contact chinese suppliers

Tip: to be sure to be taken seriously and avoid miscomprehension, spend time to define clearly your needs before contacting any supplier: specifications, drawings and quantities. 

As many companies are worrying, one should be careful about IP protection in China. NDA signing can help you feel better protected, but suppliers do sign several NDA per day and don’t really care about them as enforcement of a NDA in China is still challenging. Nevertheless, even if the legal impact of it will be limited, in case of sensitive products it still has the advantage of being clear about what you consider your property and what supplier should be authorized to do with it. From our experience the best way to be protected is to have no local supplier that supervise the whole supply chain of your product. 

For each kind of manufacturing process, you’ll be able to identify many companies in China, who they really are is not always easy to know. The best way to be sure that the company is technically able to produce the parts you want to subcontract, is still to visit it and review their equipment and products references. If you are not able to visit by yourself, you can still ask Quality Control companies to audit your supplier before ordering. 

3- Price negotiation

一分钱一分货 (yifenqian yifenhuo – ? you get what you pay for ?) that is always what you hear when it is too late and the negotiation has been too far, chinese suppliers are known to adapt the quality of the product according to the price you are willing to pay for it without being clear about the shift of the quality along the decreasing of the price. That being said, there is always place for negotiation. Try to be coherent, understand the process that will be used and optimize your specification and order quantities to be sure to get the best deal. Don’t hesitate to benchmark. 

If the price has been fairly negociated in a win-win situation, suppliers usually stick to it unless external influences (exchange rates, material pricing).

4- Ordering

Nothing very specific in this point, email ordering is perfectly fine followed by an AR from supplier confirming lead time. Wechat is widely used in China, but if you are using it, we don’t recommend you to use it for ordering (as it doesn’t keep documents in history) or ask a stamped document that you may save on your computer. (signature by itself has low value in China, always prefer official stamping on documents). 

For first business with a supplier, almost every time you’ll have to pay a down payment (from 30% to 50%), we recommend that you don’t pay 100% at the order, but keep a percentage to be paid after inspection on supplier site.  

5- Order follow-up

If you have ever been in a restaurant in China, you may have noticed that waiters are prone to answer to the last received request of customers firstly (LIFO*) and not according to who came first get served first (FIFO*). Factories are often organized in a similar way, it is then important to make the supplier feel that your order should not pass after others. For that, regular enquiring about your order is important and in critical cases local presence of buyer own staff or third party QC may help a lot to put pressure on the supplier.

*: LIFO : Last In First Out / FIFO : First In First Out

6- Quality issues follow-up

Tip : Check the quality of your goods before shipment as once your products have left China, even if willing to, supplier won’t be able to give much support. 

Quality is the key and should always be considered as top priority. When buying from China you should always keep in mind that you may receive a pallet of goods that cannot be used because of quality discrepancy. To avoid being in this situation here is our check list : 

• Ask supplier to provide sample before series, yes it takes time and money, but may save a lot of hassles. 
• Be clear about your critical specifications, so that your suppliers and inspectors pay extra care to the relevant details of your parts. Don’t hesitate to send golden samples or assembly parts so that the supplier or third party is able to check the functionality of parts by himself. 
• Ask for quality report from supplier and more often than never send an inspector to double check. After 20 years of subcontracting industrial goods in China our inspectors still find many discrepancies between suppliers own report and inspection of parts. 

• Do an IQC as soon as you receive the goods, and not just before using them as the more you wait the less you’ll have time to solve potential issues. 

7- Long term (keep quality ok)

One on two western purchaser generic quote: “With Chinese suppliers, quality of the first delivery is always ok, but then deteriorate with the following orders”.

Distance with your supplier added with relatively high employee turnover in supplier’s site makes it difficult to maintain stable quality over time, here again the same recipe needs to be followed:

•  Frequent contacts with supplier
• Clear specifications help a lot
• Check the quality before shipment of each batch or at least regular checks if very frequent ordering.
• IQC

Conclusion

We experienced a lot of unfortunate miscomprehension between western purchaser and Chinese manufacturers. Most of them are based on different appreciations of products specifications. Purchasing side, using same detailed specifications for their local manufacturing thinks their request is crystal clear and cannot be misinterpreted, whereas supplier may be used to other ways of specifying parts and wrongly estimate that he understood perfectly what to deliver.

We highly recommend companies without much experience of manufacturing in China to have a seasoned local support. Knowing both sides expectations and capabilities he would then be able to foresee potential issues. 

Don’t hesitate to come to us with questions or remarks on your own experience about purchasing technical parts and components in China.