Importing Furniture from China in 5 Steps

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About to purchase furniture, or other home products, from suppliers in China? Keep reading, and learn what you must know about finding the right furniture suppliers, relevant trade shows and customization options. We also explain what furniture importers must know about fire retardancy regulations, quality control and shipping.

1. Finding the right Furniture Manufacturer in China

When sourcing Furniture manufacturers online, there’s a variety of factors to use when assessing potential candidate suppliers. Below follows a few examples:

Registered Capital: A low registered capital may indicate that the supplier is a small trading company. As there are no real benefits of buying from a trader, you want to avoid that. A Furniture manufacturer should have at least RMB 1,000,000 in registered capital, which is specified in their business license.

Business Scope: Possibly even more telling than the Registered Capital, the Business scope explains what the company was set out to do. Look for “furniture” and “manufacturing”, or “production”, to assess if the supplier is a true manufacturer. Traders, on the other hand, tend to have business scopes, including a wide range of very different products, and include terms such as “Wholesale”.

Quality Management System: A Quality Management System, for example, ISO 9001, is implemented to track and prevent quality issues. Why does this matter? Because it only applies to manufacturers, not traders.
When buying furniture from Chinese suppliers, why is it important to first filter suppliers? Because the majority of Furniture manufacturers are not geared towards developed markets, offering the quality options and stability you need to compete.
If you don’t feel like browsing supplier listing online, you may want to consider visiting a Home products trade show in Mainland China or Hong Kong. Below follows a summary of relevant, annual, trade fairs in the Furniture and home products industry:

Globalsources Gift & Home (Hong Kong S.A.R)

• Home Living & Decor
• Kitchen & Dining
• Home Improvement

Canton Fair (Phase 2) (Guangzhou, Guangdong)

• Bathroom Furniture
• Outdoor Furniture
• Office Furniture
• Hotel Furniture
• Living Room Furniture
• Household decoration

HKTDC Hong Kong Houseware Fair (Hong Kong S.A.R)

• Artificial Flowers
• Hardware & DIY Products
• Bar Accessories
• Health & Personal Care Items
• Bathroom Accessories
• Home Decorations & Handicrafts
• Kitchenware & Gadgets
• Cleaning & Supplies
• Eco-Friendly Products
• Silver Generation Products
• Small Electrical Appliances
• Gardening & Outdoor Accessories
• Tableware

2. Furniture Customisation Options

What differs a retailer, or even wholesaler, from an OEM manufacturer? When you buy a product from a retailer, take Ikea for example, you know that their products are made according to the very same specification sheet. There is no variation in terms of materials, design, dimensions and functions. Yet, many importers of home products, including furniture, make the assumption that this is how OEM manufacturers in China, also operates.

OEM manufacturers operate according to a ‘make to order’ principle. While they may have “catalog products”, these are mere references, at best. What this means for you, is that you must provide the supplier with a spec sheet – even if the product is based on a factory design. There is no uniform Furniture spec sheet template that can be used. However, below follows a few examples of what you must include in your specification sheet:

• Wood Quality (i.e., German Beech Wood)
• Fabric Specifications (i.e., PU Coated Polyester, 550 gsm)
• Metal Parts (i.e., 316L Stainless Steel)
• Foam (i.e., High Density Fire Retardant Foam Rubber)

3. Assess Applicable Furniture Regulations

In many markets, there are mandatory Fire Retardancy Regulations, applicable to various types of furniture. In the United States, there’s no federal framework to which American importers must comply. However,California Technical Bulletin 117 (TB117) has become ‘de facto’ mandatory, as it is asked for by both retailers and customers.

However, In the European Union, there are mandatory Fire safety standards, to which buyers are forced to comply. Below follows an overview:

• EN 1021-1
• EN 1021-2
• EN 597-1
• EN 597-2
• EN 14533

Keep in mind that you must communicate to the supplier, to which standards your product must be complied with. A few years ago, I remember how we performed a quality inspection on upholstered furniture in Hangzhou. As we started testing the fire retardant of the cover fabric, it turned out that the goods were in no way going to pass a third party audit.

However, the present sales manager, quickly brushed off any responsibility. Instantly, he underlined that they are indeed capable of ensuring compliance with all European and American substance and fire retardant standard, but that this customer did not communicate that their product had to be compliant with a certain standard.

Hence, the procurement officers, working in the factory, did not make this specific request to their subcontractor for cover fabrics… and indeed, they didn’t ask either, so the result was a batch of a non-compliant goods. As such, you must first assess which regulations apply to home products in your market, and then communicate this requirement to your manufacturer.

4. Quality Control

To ensure that your supplier is not shipping substandard or damaged goods, which is perfectly possible, you must hire a quality inspector to check up on the goods. There are several companies offering quality control services, already in China. However, you need to communicate what they should look for. Below follows explanations of two of critical checkpoints, when importing furniture from China:

Visual Inspection: Check for potential damages, or usage of incorrect materials and components.
Fire retardancy testing: While most compliance tests can only be carried out in a laboratory, fire retardancy of fabrics can be checked just as well with a lighter and a stopwatch.

5. Shipping & Logistics

Furniture is heavy, and can easily break under the weight of stacked units. Many manufacturers understand this, while others routinely fail to apply common sense when packing furniture. As such, I suggest that you request packing, as following:

• Outer Cartons with plastic wrapping (to prevent mold)
• Pallets (for easy unloading)

As furniture is not only heavy, but also taking up quite a bit of space, most buyers in this segment base their imported volumes on a container basis, rather than a unit bases. Hence, request your supplier to quote a volume based on an FCL 20’’ or 40’’ HQ container, and let them specify the number of units that can be loaded in each.



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Product Import Budget Calculation: A Case Study

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Making a Product Import Budget Calculation is the first step before investing in a new venture, or product. However, it’s far from as easy as simple as counting a profit directly on a quoted FOB price. In this article, we show you what an Import Budget Calculation might actually look like. As costs vary depending on a several factors, such as product, imported quantity, destination and mode of transportation – we have made the following assumptions:

• Product: Wristwatches
• Quantity: 3000 pcs
• Pre-production sample required: Yes
• Transportation: Air freight
• Third party service provider assistance: Essential services only
• Destination: United Kingdom
• Targeted procurement price: $30
• Estimated retail price: $220

1. Cost Overview

a. Product Costs

Unit Price

The unit price makes up a majority share of the total procurement budget. In order to obtain a unit price, you must first draft a product specification, which is the basis for your price research. For more guidance on how to manage price research in China, read this article. In this Case Study, we set the unit price at $19.6.

Product Packing

Product Packaging is another cost to take into consideration, when making calculations for an import budget. The product packaging cost varies, depending on the materials and the quantity. However, in this Case Study, we assume a cost of $1.85.

Pre-Production Samples / Tooling Costs

While a product sample, or prototype, is a non-recurring charge, it can still add on significantly to the startup cost of launching a new product. However, as this Case Study is based on Wristwatches, we can assume a relatively low pre-production sample and tooling cost, of $640.

b. Third Party Service Costs

Supplier Sourcing & Due Diligence

Manufacturers in China are not created equal. They all have different track records, qualifications and technical expertise. As explained in this article, there are various ways to assess suppliers in China. You may of course do it yourself, or you may hire an agent or service provider to do so for you. If you choose the latter, there is essentially no maximum amount of money that you can spend on conducting due diligence.
Hence, this may cost you anything from $200, to $2 million – depending on how “sure” you must be. However, in this article, we assume that you’ll be buying a Chinaimportal.com Industry Report, for a total cost of $349.

Quality Inspection

Buying from Chinese manufacturers is a bit like flying with a low cost airline. No extras are included. While many Chinese manufacturers indeed have their own, internal, quality management procedures – you must still pay a third party for an independent quality check on the goods. If you order a Quality Inspection from Sofeast.com, it’ll cost you $299. That also includes travel expenses.

Compliance testing

If you are based in the United States, the European Union or any other developed market, your product may be regulated by one or more product safety standards. Third party laboratory testing may, or may not, be mandatory. Regardless, non-compliance is by definition illegal, so you are strongly recommended to submit a pre-production sample for compliance testing. As this shipment is heading to the United Kingdom, we assume the following tests as necessary:

• REACH: $720
• RoHS: $420

c. Shipping, Duties and Other Taxes

Freight

For the sake of simplicity, we decided to assume that the shipment will be delivered by air freight. The cost of Airfreight is based on the following two factors:

• Weight (Kilograms)
• Volumetric Weight (Cubic meters)

Assuming a weight of 369 kgs, and a price per kilogram set at $5, we can add a cost of $1845, to our import budget.

Freight Insurance

The freight insurance cost usually as low as 0.5% of the freight cost. In this Case Study, that’s not more than $9.5. However, it is of some significance when calculating the Customs duties. As such, we decided it’s worth mentioning.

Import Duties

Customs duties vary depending on the product, and are calculated based on the Customs value – which in turn is based on the total value of Unit price, freight and insurance. This is what’s sometimes referred to as the CIF (Cost Freight Insurance) Price, a commonly used Incoterm. However, the method for calculating the customs value differs, but now the assumed destination is the United Kingdom, which applies the same customs value as the European Union as a whole. As such, we can now calculate the Customs Value as follows:

• Unit Price (Including Packaging): $21.45
• Freight (Per Unit): $0.615
• Freight Insurance (Per Unit): $0.0036
• Total Customs Value: $22.07

The duty rate in the UK, for watches, is currently 4.5%. Hence, we can now calculate an import duty of $0.993. Let’s just say $1, to keep things simple.
Note: The the value of the pre-production sample and/or tooling, may be included in the first shipment, or divided on later shipments. However, to not further complicate the calculation, we don’t add this cost.
Note: Importers in the United States and Australia, must only declare a customs value based on the FOB (Free on Board) value, which does not include the freight cost.

Value Added Tax (VAT)

The VAT is also calculated based on the customs value, plus the customs duty. In the UK, the current VAT rate is set at 20%. Hence, we need to add on another $4.6. Click here to read more about VAT, when importing to the United Kingdom, and other EU member states.
Note: VAT is only relevant to buyers in the European Union. Different taxes apply in, for example, the United States and Australia.

2. Import Budget Calculation

Cost	Calculation	Sub-Total
a. Product Costs
– Unit Price	$19.6 x 3000 pcs	$58,800
– Product Packaging	$1.85 x 3000 pcs	$5,550
– OEM Sample & Tooling Cost	$640	$640
b. 3rd Party Services
Supplier Sourcing & Due Diligence	$349	$349
Quality Inspection	$299	$299
Compliance testing	$720 + $420	$1,170
c. Shipping, Duties and Other Taxes
Freight	369 kgs x $5	$1,845
Insurance	$1845 x 0.5%	$9.5
Duties	($19.6 + $1.85 + $0.615 + $0.0036) x 4.5% x 3000 pcs	$3,000
VAT	(($19.6 + $1.85 + $0.615 + $0.0036) + $1) x 4.5% x 3000 pcs	$13,800
Total Investment	$58800 + $5550 + $640 + $349 + $299 + $1170 + 1845 + $9.5 + $3000 + $13800	$85,462.5
Unit Cost	$85,462.5 / 3000 pcs	$28.49

Note: The calculated procurement price, per unit, is below our target price. Hence, we can motivate the necessary investment.

3. Summary

This Procurement budget calculation only considers the most essential costs. That said, there is no universal method for outsourcing production to China, and, as such – the costs vary from case to case. Below follows an overview of additional costs, that you may need to take into consideration, when making calculations for your own import budget:

• Business travel expenses
• Social compliance audits
• Design and engineering services
• Legal assistance
• Consultancy fees
• Licenses and permits
• Transaction fees

Talk to us about your business ventures ... we can bring you to the best sourcing place in China, Vietnam, Cambodia etc. Whatsapp: +60126694217 email us alveolegame@gmail.com

8 Tips for Successful Business Development

BY ERIC GRAFSTROMMay 24, 2013

This post originally appeared on the American Express OPEN Forum, where Mashable regularly contributes articles about leveraging social media and technology in small business.

Many founders and CEOs come asking, “we need to hire a biz dev person, do you know anyone?” Few roles have more varied job descriptions than business development. It’s no wonder why it is hard to figure out who to hire, what this person should do and how to measure success. Read below for tips on successful business development for startups, including how to avoid many of the typical frustrations with business development.

1. Hire the Right Person at the Right Time

A person with deep industry knowledge and strong network ready to “do deals” can turn into a disaster if it is too early in a company’s product life-cycle. There are three stages in the commercialization process and not everyone is suited for every stage.

• Scouting: The earliest stage of a company. At this point, business development is about identifying various routes to market, points of leverage and providing the internal team early market feedback. The ability to work with product and engineering teams is a key skill.
• Testing: At this stage, biz dev will close a few deals to test assumptions and provide measurable input before you scale the business. Analytical skills to set up a framework for what to measure, and examining the data, will determine if and where to scale based on the company’s strengths and vision.
• Scaling: After gathering data from early deals and validating a path to achieve your goals, business development is ready to start replicating deals and putting a support structure in place.

2. Business Development Is Not Sales

In general, business development will identify and create partnerships that enable leverage for driving revenue, distribution or that enhance the product. Sales is focused almost exclusively on driving revenue. Similar distinctions will apply when hiring a sales leader for an early stage company versus a more mature organization.

3. Post-Deal Management Is Crucial

All successful deals are a result of accountability and proactive management — by both biz dev and account management. In most cases, the account manager is a different person than the biz dev person who did the deal. Ideally, the account manager has variable compensation or incentives tied to meeting the goals established by both parties. If you are not ready to allocate the resources to support a deal, think twice before signing it.

4. Qualitative Versus Quantitative

Companies sometimes try to build a business purely around a qualitative value proposition, which is difficult and has a higher likelihood of failure. The market is less willing to pay for a better user experience or the promise of increased engagement, even if they like the product and find it useful. A quantitative value (lowers cost, drives revenue, more customers, etc.) dramatically increases the odds of success. One way to remember this rule is the pacemaker versus the hearing aid analogy: If you could only have one, which one would you choose?

5. Support for Business Development Is Essential

A good business developer will engage internal resources along the way to ensure the company can meet the goals and expectations of a partnership. A lack of support will almost certainly lead to finger pointing and blaming when things go south. Everyone should own part of the success or failure from the start.

6. Establish a Framework for Assessing Opportunity

In order to gain support from your team, everyone needs to understand why the deal makes sense for your company. Does it drive revenue, lead to new users or enable the company to enter a new market or vertical? When the goal is clear and measurable, it makes it easier to address issues like, “Why are we converting below projections?”

7. Make Deals Carefully

There is a difference between doing deals and doing the right deals. A good deal-maker can help identify a false signal –- when there is just enough market momentum and revenue to mask the greater opportunity. Conversely, a less experienced deal-maker or one with the wrong incentives can generate enough momentum and distract the company from the bigger opportunity. Many companies have been weighed down by a bad deal they later regretted -– this is where you want to develop a level of understanding and trust with your business development person.

8. There Are No Legal Issues

A legal agreement codifies a business arrangement and includes commercial terms as well as what happens if things do not work out. This requires business development and legal counsel to assess the business opportunity versus the business risk and explain the trade-offs to management.

Building a company is hard and requires a lot of things to go well including having a great product and team. Watching an idea become a product and a product generate revenue that becomes a successful company makes it all worthwhile. Bringing in the right business development person at the right stage, and following these other guidelines, will keep your company on the right track.

Outdoor Wear Manufacturers in China: A Complete Guide

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In this product guide, we explain what you must know before importing Outdoor wear from China. In similarity to our other apparel and textiles guides, this article will give you insights into Outdoor wear manufacturing clusters, product specifications and minimum order quantities. In addition, we also explain what you must know about relevant technical standards, labeling requirements and more.

Outdoor Wear Manufacturing Clusters in China

In recent years, Chinese outdoor wear manufacturers have faced increasingly tough competition from producers in other Asian countries. Primarily, Cambodia and Bangladesh. That said, as this industry is largely reliant on technical fabrics, which are also made in China, the country maintains a strong competitive advantage.
Most, exporting oriented, Outdoor wear manufacturers are located in the following cities and provinces:

• Quanzhou, Fujian
• Fuzhou, Fujian
• Xiamen, Fujian
• Jinjiang, Fujian
• Shenzhen, Guangdong
• Guangzhou, Guangdong
• Suzhou, Jiangsu
• Wuxi, Jiangsu
• Hangzhou, Zhejiang
• Ganzhou, Jiangxi

As you can see above, Outdoor wear buyers are wise to visit the southern, coastal, provinces of Fujian and Guangdong, as this is where most relevant manufacturers are based.

Outdoor Apparel Tech Packs and Material Specifications

China’s Outdoor wear manufacturers are OEM suppliers. Hence, you shall not expect a catalog with ready made designs for your selection. While most Chinese Outdoor wear suppliers do have such catalogs, they are to be considered for reference only. Most, so called, ODM (Original Design Manufacturing) products are designs ordered by previous customers. Hence, the suppliers rarely, if ever, have a full Tech pack.
Now that you know that you cannot rely on the manufacturer to provide you with a Tech pack, you need to know what to include in one, when importing Outdoor wear from China:

• Design Drawings
• Size Table
• Bill of Materials (Component List)
• Material / Fiber Composition (i.e., 98% Cotton, 2% Spandex)
• Weight (i.e., 240 gsm)
• Yarn Count (i.e., 40 x 40)
• Yarn Type (i.e., Combed)
• Colors (Pantone or RAL)
• Treatment (i.e., Flame Retardance)
• Coating (i.e., PU Coating)
• Applicable Standards and Regulations
• Label Files

For more information about preparing Tech Packs for your outdoor apparel designs, read this article: Apparel & Textiles Product Development Explained – Interview with Saral Kochar of Techpacker.com.

Minimum Order Quantity

The Minimum Order Quantity (MOQ), in the apparel industry, is sometimes rather complicated. What many overseas importers miss, is that there’s actually more than one MOQ to keep track of. So, in order to just get to the point, I explain them all below:

• Product MOQ: This is the minimum number of units the supplier must produce to make a reasonable (albeit very low) profit. This MOQ is, as explained, set by the manufacturer.
• Size MOQ: In addition to the MOQ per product (or design), all manufacturers have some sort of minimum quantity requirement set per size. While lower than the Product MOQ, the “Per Size MOQ” can be at least half as big. Hence, an MOQ order of, say, 500 pcs, may only leave room for two sizes.
• Fabric MOQ: This is set by the material subcontractor. It varies often between different materials, and even subcontractors. Sometimes, the Product MOQ is a reflection of the Fabric MOQ.
• Color MOQ: Same as the fabric MOQ, but per color instead of each fabric.

For further clarification of how the MOQ is structured, an example follows below:

• Fabric MOQ: 500 – 1000 pcs
• Product MOQ: 500 – 1000 pcs
• Color MOQ: 300 – 500 pcs
• Size MOQ: 150 – 300 pcs

Regulations, Safety Standards and Labelling Requirements

Outdoor apparel is not regulated as a group of products. The very samestandards and regulations that apply to all types of clothing, is also applicable to Outdoor apparel. As such, buyers in the United States and the European Union must keep track of the following standards and regulations:

• California Proposition 65
• REACH
• Care Label Labelling
• Fiber Composition Labelling
• Country of Origin Labelling

Notice that I am drawing a distinction between mandatory substance regulations, and “voluntary” technical standards. For the latter, there are actually various standards that do apply, more or less specific, to Outdoor wear. Below follows a few examples, from the list of ASTM (American Society for Testing and Materials) standards:
a. ASTM D1047 – 11: Standard Specification for Polyvinyl Chloride Jacket for Wire and Cable
b. ASTM F2732 – 11: Standard Practice for Determining the Temperature Ratings for Cold Weather Protective Clothing
c. STP900: Performance of Protective Clothing

ASTM standards are normally (there are exceptions), as mentioned, not mandatory safety standards. However, they do define the performance and quality of the product. As such, you should identify if any ASTM, or other, product standards apply to your product, and then communicate these as specific requirements with your supplier. While some manufacturers may apply certain product standards as part of company policy, most will not, unless explicitly instructed to do so by their customers.
Outdoor wear buyers based in the European Union, looking to identify applicable standards and directives, can purchase ready made lists onProductIP.com. However, as far as we are aware, no equivalent exists for American standards.
Note: Additional regulations apply to Outdoor apparel, and other clothing, for children. Follow the links below to learn more about importing Children’s clothing from China:

• Children’s & Baby Clothing Manufacturers in China: A Complete Guide
• CPSIA – Importing Children’s Products from China to the US
• EN 71 & Toy Safety When Importing from China

Outdoor Wear Trade Shows in Mainland China and Hong Kong

Asia Outdoor Trade Show

• Location: Nanjing, Jiangsu
• When: June / July
• Website: Click here

Product list

• Outdoor clothes
• Outdoor shoes
• Mountaineering and climbing supplies
• Related products and services, accessories, equipments and materials etc. in the Travel & Tourism industry

Global Sources Fashion Trade Show

• Location: Hong Kong S.A.R
• When: January (Fall / Winter) and July (Spring / Summer)
• Website: Click here

Product list

• Bags & Luggage
• Fashion jewelry
• Scarves & Gloves
• Belts & Footwear
• Accessories
• Socks
• Eye-wear
• Fabrics, Lace & Trimmings
• Sweater & Knitwear
• Sportswear
• Casual Wear
• Down Jacket & Outerwear
• Underwear & Sleepwear
• Swimwear & Beachwear

Canton Fair Phase 3 (Guangzhou)

• Location: Guangzhou, Guangdong
• When: April/May and October/November
• Website: Click here

Product list

• Men and Women’s Clothing
• Kids’ Wear
• Underwear
• Sports and Casual Wear
• Furs, Leather, Downs & Related Products
• Fashion Accessories and Fittings
• Home Textiles
• Textile Raw Materials & Fabrics
• Carpets & Tapestries
• Shoes
• Office Supplies
• Cases and Bags
• Sports, Travel and Recreation Products

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Procurement and Purchasing Agents in China: A Complete Guide

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The Procurement Agent is a freelancer, or part of a larger organisation, arranging various aspects of the trade between China and the buyers around the world. There is no set standard for what exactly a Procurement Agent shall do. For the sake of clarification, I list a few examples below:

• Supplier Identification & Price Research
• Sample & Prototype Development
• Quality Assurance & Quality Inspections
• Social Compliance Audits
• Product Compliance Consulting & Product Testing
• Shipping & Logistics
• Customs Procedures & VAT

This industry, which has grown very big in Asia in the last few decades, includes everything from rogue agents to major trading houses. The purpose of this article is to explain what a Procurement Agent can be expected to do for your business, and how they differ.

Evaluating a Procurement and Purchasing Agency in China

a. Product Expertise

Knowledge about a product and industry is a decisive factor. First, and an insider has a much more comprehensive product expertise, which is required to understand what makes good quality (and price) for a certain product. Second, this may also speed up supplier sourcing and vetting procedures, as they can utilize an existing network of suppliers.
However, don’t expect to find an existing Procurement and Purchasing Agency for every single niche product out there. And, even when you do, it’s up to you to communicate your quality requirements and product specs – to properly educate your agency.

b. Offered Services

There is no set standard for what exactly a China-based Procurement and Purchasing Agency should offer. Some offer more of a ‘one stop shop’ solution while others are strictly specialized, only performing specific functions. We will get back to the latter later, but first, let’s dig deeper into what various Procurement and Purchasing Agencies actually offer:

Service	Description
Supplier Identification & Price Research	Supplier sourcing is the foundation of any Procurement and Purchasing Agency, unless they are working with an existing supplier network. However, the methods used to select suppliers varies greatly. While some agents base their selection entirely on relationships, kickbacks and low prices, others have sophisticated methods of identifying suppliers.
Design Capabilities	Some agents act as commodity traders, while others are specialised in developing custom designed products. Each one of these have their places, and shall not be handed projects for which they aren’t qualified.
Quality Inspections	Some Purchasing Agencies have in house Quality Inspectors, while others subcontract this to a specialised Quality Assurance agency. In most cases, it makes sense to find your own QC partner, as this is not only more cost efficient, but also more secure. Specialised Quality Inspection firms tend to operate according to international evaluation protocols, for example AQL. In addition, they also have local offices all over China, thereby reducing travel expenses and speeds up the process.
Product Compliance & Testing	This one ties in directly to Product Expertise, so read the following closely: There is not a single individual, or even company, in this world, that possess the expertise and experience needed to ensure compliance with all regulations, in all markets, for all products. At best, a Procurement Agency may have relevant experience in their field, but most may not even have basic knowledge. Product Compliance is such a complex area in itself that you shouldn’t even expect your agency to know what is required. You’ll need to find a specialised, probably local, partner for this.
Shipping & Logistics	Purchasing Agencies normally have partnerships with freight forwarders, which can help you to manage shipping from point A to B. You also may use a local partner that is what you prefer.
Customs Procedures, Import Taxes & VAT	Customs Clearance and Tax Declarations are normally not managed by the Procurement Agent. Instead, this is within the service scope of most Freight Forwarders. However, some Purchasing Agencies have subsidiaries in their target markets, helping their clients to manage this part of their business.

c. Procedures

Finding a supplier isn’t hard. You can just go on Alibaba.com or Globalsources.com and you’ll have millions of options right in front of you. However, identifying industry leading, and in relative terms, reliable, suppliers is a whole different thing. Let’s make a broad comparison between different types of Procurement Agencies:

Type	Description
Relationship Based Supplier Selection	This is the sort of agency you don’t want to work with. Instead of selecting a supplier based on their product expertise and compliance and manufacturing capabilities, this type of agent choose suppliers based on recommendations from relatives, friends or the size of the kickback they can get. This sort of agency rarely have any operational protocols whatsoever. Stay away.
Method Based Supplier Selection	A proper supplier selection shall be based on customers specific needs. This requires that the agent understands the products technical specifications, and how a supplier’s ability to manufacture the product can be assessed. This requires a supplier assessment protocols that takes various data points into consideration. For example, the following: Product Compliance & Test Reports Company Data: Location, Registered Capital, Registered  Business Scope Quality Management System: QMS Certificates and on site inspections CSR & Social Compliance The agency shall be able to explain how they make this assessment, and provide documents outlining the details.
Established Supplier Network	Many organisations don’t offer supplier sourcing and vetting as a service, but prefer to work within their existing network of suppliers. This has many benefits, but only works if your product is covered. However, for good reasons, these agencies may be reluctant to share information about their suppliers.

d. Revenue Model

There’s more than one way for a Procurement and Purchasing Agency to make money. While many importers assume that all agencies make their way by charging commissions based on the order value, that is not the case. Below follows an overview

Revenue Model	Advantage	Disadvantage
Commission	Lower costs before the product starts. Maybe.	Gives the agent an incentive to focus on large volume orders of products that require little to none development, prior to production. Not suitable for OEM products.
Fixed Price	Suitable for customized products that takes time to develop before they are ready for mass production. As you pay a fixed service fee, the agent has no incentive to cut corners to speed up the process, or convince you to place large initial orders.	Higher costs upfront
Kickback	For you, none.	The agent selects a supplier willing to pay the biggest kickback, or bribe if you will. That’s all there is to say.

Some Procurement agents combine two or more revenue models. For example, they may charge a commission based on the order value, while charging you for additional services, such as Quality Inspections and Supplier Sourcing. Many also receive kickbacks from the suppliers, as an alternative side income. This may, however, come down to individual employees of the agency, rather than kickbacks as a company policy.

Summary

I don’t recommend attempting to find a ‘one stop shop’ managing all procedures involved in buying from China. This is regardless of your industry. You must works ‘hands on’ with the supply chain, and ultimately maintain control. The alternative, to let a consultancy set up a functional supply chain, is simply too expensive for most SME’s. This is how I would do it:

Phase	Our Recommendation
1. Supplier & Price Research	Use a specialised Sourcing Agency or manage the process yourself. You must know which suppliers you’re going to work with, and on what merits they are selected. Vetting ten to twenty suppliers at once is a lot of work, so you better have a specialised partner for this.
2. Prototype Development	You are the product expert. Submit specifications and communicate your quality requirements directly with the manufacturer. Otherwise, important details may be lost in translation. In addition, having a middleman between you and the supplier is not only risky, it’s also inefficient.
3. Product Compliance, Certification and Testing	a. Find a local, or China based, Compliance Consultant that can help you assess which regulations and labelling requirements apply to your products, in your market. b. Submit reference samples to a China-based testing company, for example, Asiainspection or SGS.
4. Quality Assurance, Quality Control and Factory Inspections	Use a specialised Quality Assurance agency, for example, Sofest Limited. They can also help you with Social Compliance Audits and Factory Inspections.
5. Shipping, Customs, Import Licenses and Taxes	Use a local Freight Forwarder, with a presence in China. It’s critical that they know local customs procedures and tax regulations.

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