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The issue of sourcing from China is a complex one, and as a purchasing company you will be faced with with many opportunities and many challenges at the same time. We asked a number of sourcing companies what they considered to be important in the sourcing process. Their answers give you an insight into the many risks that may be involved, and will hopefully help you to make the right decisions.

2.1.1. Be present in China or get assistance

The keys of a good sourcing in China is having someone permanently in China, to learn about the local technology level and production capabilities, to visit and establish a close relationship with the factories, to control the goods, and to know the new market opportunities right when they arise. If this is not possible, especially in the beginning stages of your sourcing activities, then work with a sourcing company.

A reputable sourcing company can eliminate unnecessary risks concerning quality and delivery dates, as well as of course avoid any fraud. They can also help you control the manufacturing process in the Chinese factories, and bridge the gaps between your needs and the supplier's capabilities. In short, a good sourcing company will save time, money, and deliver quality merchandise. You can focus on design, marketing, distribution of goods, and not worry about production. After all, that's what you're paying them for.

2.1.2. Be in control

You need to be in control every step of the way. Regular visits by yourself or your agent at the supplier's factory are a must; a quality control and process review system needs to be in place. Communication channels with the supplier need to be open and smooth, so as to avoid misunderstandings.

In case the products are complex or you want to avoid risks, the best thing is to send a technical expert from your company to the Chinese factory during the whole production process and final quality inspection.

2.1.3. Focus on reliability & quality rather than on price & friendliness

There are hundreds of thousands of potential suppliers in China. It is imperative that you choose a reliable supplier who can produce quality products.

Do not be fooled by cheap price quotes, wonderful promises, intoxicating flattery and warm-hearted wishes for mutual cooperation during exquisite banquets: look beyond the smiles and check out the company’s reliability, years of experience, export countries, production volumes, quality tests and quality control (this can be done through agents, consultants or banks). Be ready to check out ten suppliers before finding the right one.

2.1.4. Prepare for the worst in order to avoid it

What happens when things go wrong? Sure enough, many foreigners have fallen and are still falling into the Chinese wining and dining trap, only to discover that when things do go wrong even the seemingly most sophisticated Chinese factories become blind to ethics and contracts in the face of their wrongdoings.

The great friendship and trust that marks the beginning of the relationship with your Chinese supplier often translates into bad contracts and even worse dispute clauses. Spell out from the start what is acceptable and what not, and what the consequences are in case the parties deviate from the contract – consistently use product quality guarantees. Make sure that your dispute settlement mechanism is clear and that it allows for a fair settlement – the Chinese judicial system tends to favour the Chinese side big time!

We cannot stress enough that you need to acquire the expertise of local sourcing agents, consultants or lawyers concerning the possible pitfalls of the Chinese judicial system, especially in the initial and contract phases.

Having said this, there is another important way to help avoid trouble: to build up a strong relationship with your supplier.

2.1.5. Build up a strong and long-term relationship with your supplier

Chinese people are generally very friendly and eager to do business with you. In the course of your business talks, they will want to establish a kind of personal friendship which goes beyond pure business. They will invite you for dinner, maybe for a long evening of drinking, and in a later stage, when you have become 'old friends', to their home. Do not say no to this, and kindly accept this way of getting to know each other better.

This so-called friendship, which may seem a bit strange to us, is important because Chinese people make a very strong distinction between people they know as friends and relatives, and every else. In general Chinese people will do anything for their friends and family. However, in public and on the streets they could not care less what happens to strangers. The respect that a Chinese person has for someone else derives from their mutual acquaintance, and not from the mere fact that they both are human beings. As such, Chinese business people want to make sure that you are friends, which implies that you will respect and not deceive each other.

Making sure that the supplier feels comfortable with the business deal is another aspect of building up a solid relationship. So while you try to get the best deal you can for your own company, you must be aware that cutting the supplier's profits too much will lead to problems in the long run. At first the supplier may not say anything; but it is not inconceivable that one day the supplier, with whom you have worked for more than a year, convinces you to pay for a large shipment in advance, and that the shipment never arrives.

Sharing with your local supplier your knowledge, experience and profits. A win-win situation for both purchaser and supplier will foster a long-term relationship.

The same goes for your sourcing agent. Trying to negotiate a very low commission or fee will not promote a long-term relationship. Actually, most reliable sourcing companies are doing good business and are not inclined to work with you if they feel that you want to scrape every cent out of a deal. Be reasonable and accept the going rates; companies who offer less than that may have less to offer.

2.1.6. Be patient, flexible and creative

China and its people are complex, to say the least. What at first seems simple often turns out to be quite difficult. In a society where children are taught one thing only to discover, as they grow up, that most of what they have been taught is not true, it is difficult to find people who are completely straightforward. Getting correct information is a nightmare, and it is very difficult to know what people are thinking or how they will perform.

It is therefore important that you take time to learn how things work, and how you can get things done. When making up a plan, make sure to include a section entitled 'unexpected', as the unexpected is the one thing that you can expect to happen.

Successful sourcing in China requires time and a lot of effort, and things may not always go according to plan. Be patient and flexible, and don't hesitate to come up with creative ways to solve a problem.