In the first of a series on importing from China, transportation and logistics specialist Heighten offers advice on what to consider when sourcing a manufacturer in China
China is still the first port of call for many companies looking to source products to import to the UK, but before you start sourcing, it is important to define what you (think) are looking for. What is important to your organisation? What is a must-have, a nice to have and an optional? What are your short- and longer-term plans, and will the products/manager you need change as your plans change? Having these before you start sourcing is a good foundation and a useful document to refer back to at later stages to reground you.
Below are a few examples of where you can start sourcing a manufacturer:
- Industry conferences and trade shows: Chinese attendees should be experienced in international trade and have the basic skills needed to work with you.
- UK online forums: Focused, niche forums can be a source of specific information including contacts, practical tips based on others’ experiences, and feedback on products bought.
- Alibaba: Alibaba has evolved tremendously over the last two decades, and while it is a powerful search engine with lots of information, it can still be quite hard to find a great partner. It helps to use filters effectively to find exactly what you’re looking for.
- LinkedIn: There are groups on LinkedIn focused on connecting manufacturers and agents with potential clients, although they vary in quality. Nevertheless, LinkedIn is a good place to post questions and requirements, as well as learn from others’ experiences.
- CBBC: Our CBBC teams may be able to offer advice or introduce you to other member companies.
The next best step is to reach out to 3-10 companies. Initial contact can be one of the best, early filters – who replies and how are communications? This doesn’t guarantee quality, but from a sanity point of view, it can be very important.
Try to select a mix of companies to find out which one is right for you. As an SME, for example, selecting a multi-billion USD supplier probably isn’t the best final choice, however, a large company can be a good source of information and resources which can be useful reference points when dealing with others. Ask for references in your country or region, and do engage with these references before you order.
What times and costs need to be considered?
If you are just buying a few units as a one-off, then it may be best not to buy from China directly. Even before the Covid-19 pandemic, if you wanted to ship by sea from China you needed to allow a couple of months from order to door, and negotiations and discussions may add on time before that.
Below is a brief review of the timeline you can expect at each stage of the process:
- Production: 30-60 days
- China export: 3-7 days for local transportation and export
- Shipping: 30-45 days to main UK/EU ports (be aware of trans-shipping where the container is transferred at another port such as Singapore or in Hong Kong, which can add 3-7 days)
- UK import: 2-5 days (note, the Economic Operators Registration and Identification Number, EORI, should be lodged before the vessel arrives).
Total: 65-124 days
In terms of costs, a container could be worth £5,000-200,000, and with lead times from factory to warehouse of 70-100 days, cash can be tied up for long periods of time. Furthermore, depending on business volumes, you usually want product in production, product on the water, and sufficient stock in the warehouse. Be careful to consider stock levels, turnover and production, as seasonality and varying stock turnover mean that it can be difficult to plan and forecast, especially with current levels of geopolitical uncertainty.
How to manage your manufacturing partner and ensure quality control is maintained
Quality management will depend on your business and its needs. As with anything, you get what you pay for in terms of quality. Third-party quality control (QC) companies with trained teams for onsite audits and inspections can be a sensible investment if you can’t visit.
On-site visits are important because there can be no end to misunderstandings and outright misinformation about where a company is. For example, if you see a factory’s address is in Shanghai, often this actually turns out to be a trade office. Especially on Alibaba, you’ll often discover multiple companies at one address.
Whether you tackle a pre-order visit internally or through a third-party company, it should usually include the following:
- Thorough visit and inspection, with the inspector taking pictures and videos of the site, key personnel and manufacturing processes.
- Production visit to inspect raw materials and current product in production, with a final pre-shipping inspection and/or loading inspection including:
Ensure packaging is correct (labels, wrapping, etc.)
Pallets are suitable for freight
Loading supervision and confirmation of container sealing.
A problem in China that is caught early can be solved easily and relatively cost-effectively for all involved. A problem that is not discovered until your client receives it can be challenging to solve and costly on multiple levels.
What payment terms are available and what should you look out for?
Standard terms for full container loads (FCL) are usually 30/70 or 20/80, though for an initial order many factories will ask for a deposit of around, say, 10% before they order materials. For smaller, less than container loads (LCL), the cost is typically 100% upfront before shipping.
Always double-check bank details before wiring funds. Confirm via a formal company email rather than an Outlook/Yahoo/163 type of address. Bank details may be in Singapore or Hong Kong, even though you are buying from a Mainland company.
What other legal risks need to be considered?
Businesses should be very careful if shipping by LCL, as it is very common that a lot of the freight charges will be applied as destination charges, meaning you may face a very large bill on arrival in the UK. It is worth checking with your own freight forwarder on services, options and costs based on the FCA China port.
It is always worth keeping a weather eye on IP and branding issues. When sourcing from China for the long run, register your brand, logos and names in China before you share this information with the factories. The Chinese IP protection system is very robust nowadays, but there are still issues with IP squatting.
Sourcing in China can be a great way to secure excellent products that are competitively priced from suppliers who are focused on quality and innovation. While there are plenty of options available to source remotely, with travel to China gradually becoming more convenient, it is worth visiting in person if possible, as it not only helps with business from existing suppliers, but you also inevitably discover new products and new suppliers. Problems that drag on via email can often be resolved quickly and new ideas exchanged, and suppliers are usually keen to hear about your business and customers.