7 Proven Steps in Finding Trusted Suppliers in China in 2022
Supplier or Liar?
UK Small Business Guide
We live in strange times – massive government intervention globally for the last two years has had a huge impact on small businesses, with rampant UK inflation the latest challenge to deal with, combined with a country benefitting from full employment. Some small companies are looking at the options of outsourcing production to China – but this comes with its challenges.
In this article, we look at the challenges facing small businesses sourcing from China. How can small businesses find suppliers in China? How do they know the supplier is legitimate and that they will meet your needs?
1. TO ALIBABA OR NOT?
Whilst the tendency can be to start looking for suppliers on Alibaba – some suppliers are labelled as “Verified Suppliers” or “Accredited Suppliers”. But beware that being “verified” at these sites only means these companies are verified to exist and it doesn’t mean that their production capability, reputation or quality have been verified. For example, you can become a “Gold Member” at Alibaba by paying for this status.
2. VERIFYING SUPPLIERS
The information given by a potential supplier on its website is a good place to start, but you need to check whether they in fact are what they claim to be. Some individuals pose as manufacturers when they are not – they simply have sufficient English to communicate. Others fraudulently claim they are subcontractors and offer unapproved facilities.
Four Ways to Check if a Supplier is Genuine
Checking trusted suppliers in China can be done in a number of ways:
Check Address. If the company’s address is simply an office building or even a residential complex, the chance of them being a trading company or an individual is high. Check out the address via Google Maps as that will show where they are located; for example, an industrial park where a manufacturer would unlikely be located.
Order Samples. Ask for a sample and tell them that your courier company will come and pick up it. You will see if the address matches their email signature.
Request Documentation. Ask for copies of the ISO documentation they hold and check the company name and address against the organisation that registered them.
3. PAYMENTS TO CHINA
It can take months of discussion to get to the point of placing orders, but remain vigilant – whilst a 50% deposit might not seem like a huge amount of money, it will if you get nothing in return. Be very careful before you pay for anything. Always check if the account name is the same as that of the supplier name.
4. LEGALS IN CHINA
All legal business entities have a business license which shows the year of establishment, the registered capital, business range etc. An annual audit is conducted by the local government, which is an important indicator legally mirroring the latest status of the company in the past year, including business operation, financial status, and any record/activities of misconduct or not in the past. Checking this is an important part of due diligence.
5. COMPANY IDENTIFICATION IN CHINA
A comprehensive company profile can be presented by a local representative experienced in desk research and credit checking in China. Information for reference will be inclusive of, but not limited to:
– Number of employees
– Revenue in the last 3 years
– Main Markets/customers
– Primary Processes or products
– Quality Management Certificates, i.e, ISO
– Production Capability and Capacity
6. FACTORY AUDIT IN CHINA
You’ll need to know whether the supplier has the right production equipment and experience to meet expectations in terms of quality, quantity and delivery times. A local representative can conduct audits if you cannot conduct them. Desk research and field research are two complementary ways to check whether the feedback you get from initial information gathering matches what it comes back after a visit to the factory.
7. BUYING WITH CONFIDENCE FROM CHINA
Finally – never rush to make a decision – outsourcing is not a good knee-jerk reaction and will likely lead to failure. Take your time to build confidence in the relationship and the quality of your parts. Video calls can be used to give you confidence that you are getting what you expect before you part with your hard-earned money. Take time to discuss all your requirements in advance to ensure your quotation is correct and that the factory has suitable equipment and the ability to supply exactly what you need. China offers a vast choice of suppliers – the key is finding one that is right for your needs.
Written by Forrest & Alex, July 2022
To find out more about finding suppliers in China visit our FAQ section on our website or email us any questions – email@example.com
Alex founded One Point Two (China) in 1995 and has been ever-present providing highly personalised support to both customers and suppliers for over 25 years.
Forrest heads up both the Shanghai and Seattle Offices. He has been assisting companies from Europe and North America with outsourcing production to China since 1998.