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Product sourcing may sound simple, but it is certainly not an easy task. You don’t just find a supplier that will supply the products that you want to sell, but you have to consider key factors such as finding the right supplier, purchasing products on a low or reasonable price, ensuring product quality, etc.
In this article, we are going to give you some helpful tips which you can apply whenever you’re sourcing for products. So, let’s not take this any longer; let’s get started!
10 Helpful Tips to Level Up Your Sourcing Techniques
1) Define your ideal supplier
Of course, you need to work with the right supplier, but not all suppliers will work for everybody – you need to work with suppliers that are right for you.
In general, there are three types of suppliers: manufacturers, trading companies and sourcing agents. Each have their pros and cons, so you need to understand how each supplier works differently from another.
Manufacturer
Manufacturers produce the product themselves. Hence, production, inventory (supply chain) and quality control are their greatest assets.
Pros:
- Theoretically, less problems with supply chain as they control the very inventory of their products.
- They have total control of the product’s quality; if there’s a problem with the product’s quality, they can just fix their errors to avoid quality problems in the future.
Cons:
- Working with manufacturers is less flexible: if something went wrong with the manufacturer, your supply chain could be in great danger
- You can mostly order only in big bulk (not ideal for small businesses)
- They mostly only work with stable, medium-sized or big business to secure income. If you’re just starting out, finding a manufacturer that will work with you could be very difficult.
Trading company
Trading companies buy products from manufacturers and sell them to store owners. They work with different manufacturers to ensure secured supply chain in case one manufacturer had a problem.
Pros:
- You can order in smaller amounts. Oftentimes, you can even receive discounts if you buy in small quantities.
- They are flexible: because they work with different manufacturer, they usually won’t have a problem in case one or two manufacturers had a problem and won’t be able to deliver the products.
- They are more open to work with small and starting businesses compared to manufacturers.
Cons:
- Trading companies are still at the mercy of the manufacturers that they work with. If their manufacturer partners faced problems, it can hurt them as well, and so would you. (Of course, this is countered by working with multiple manufacturers, but it does not change this nature).
Sourcing agent
Sourcing agents don’t own the products. Instead, they’ll help you find suppliers at the best deal possible. Sourcing agents can appear either as an individual or as a company. Regardless, their role is the same.
Pros:
- They are willing to work with almost everybody, including starting businesses.
- If you found a good sourcing agent, they can lead you to some of the best suppliers in your market.
- Like trading companies, they are also flexible – probably even more flexible than trading companies.
Cons:
- Potential scam or fraud: because being a sourcing agent is relatively a low-barrier business, this is a target for many fraudulent individuals and companies – virtually anyone can claim that they are sourcing agents! Here are two common red flags for any potential “sourcing agent” scammers: 1) they make unreasonably good promises and 2) they are very eager to get the money first before doing their services.
Now that you know the different types of suppliers, let’s take a look at some of the factors that you need to consider before working with your supplier, regardless of the type:
- Compliance to laws and regulations
- Supplier location
- Factory size (mostly for manufacturers)
- Export market
Compliance to laws and regulations – needless to say, your supplier should be compliant to laws and regulations. Otherwise, they may lose their business and you can lose your supply chain. Even worse, you could be tangled with their legal problems!
Supplier location – find a supplier that is as near as possible to you or to your target market’s location to save time and cost. The nearer the supplier, the lower the delivery time and its costs.
Factory size – if you plan to work with manufacturers, consider their factory size: is it big enough to consistently meet my supply demands? While factories are big by nature, remember that they serve multiple customers. If the factory can’t keep up with the demands of their customers, it can cause problems.
Export market – it is ideal if the export market of your supplier is market or location of your customers.
2) Don’t just talk about the price – negotiate more than the price!
Negotiations are not only limited to price and costs. Consider negotiating about other factors such as labeling, packaging and compensation for any possible quality issues. When you’re talking about payment terms, consider a 30/70 payment term as this is better for your cash flow – not too much, but not too little!
3) Be very specific in your product specifications
When you bought your first brand-new car, you might be surprised that the black car you want is labeled as graphite black by the dealership. Even mind-blowing is that there are different kinds of black: graphite black, metallic black, black pearl, etc.! This is what we mean by being very specific: pinpoint exactly what you want.
In the example of color, suppliers will show you their “super exact” color options, so when you choose your color, go with their names and not the general name of color (e.g. “graphite black”, not just “black”). This applies to other areas of the product specs. Be specific as possible to get what exactly you want.
4) Communicate properly with your suppliers
We have already talked about being very specific about the product specifications that you’re looking for, and that’s just one example on how you should communicate to your supplier.
Be specific with what you want. When you send out e-mail, keep it short and simple. If you have to, use bullet points to make your message more concise.
Lastly, although e-mailing is the common way of messaging your suppliers, you don’t need to stick to professional e-mailing: if you have to, you can communicate via messaging apps like WeChat.
5) Protect your business from “quality fade”
Quality fade is a gradual decline of a product’s quality over time. While all products will eventually “fade” their quality away over time, “quality fade” specifically happens when the product is made up of low quality raw materials – hence, the product is “doomed” to lose its quality over time. Although there could be a variety of reason, one common reason why suppliers choose low quality material is to simply increase their profit margin – yes, bad business!
So, what can you do to protect yourself and your business from “quality fade”? Here are some things that you can do:
- Inspect every product that comes to you and see if they meet the quality standard.
- Source products from more than one supplier (this is a good sourcing practice in general)
- Hold your suppliers liable in case of any defect. Let them know that if the product does not meet the promised quality, they will be held liable for it.
- Whenever possible, consider conducting a pre-production inspection to make sure that they’re manufacturing your products at the highest quality level possible.
6) Inspect first before you pay
This is one great way to check your product’s quality control. Tell your supplier early on that you are going to inspect their products for quality check. Let them know that you’re willing to pay at least 30% of the advanced payment, but you’ll only pay the rest 70% once the pre-shipment inspection is done.
7) Plan your sales around Amazon FBA’s holiday selling dates
To ensure that your products are available during peak seasons, be sure that your supplies arrive at your fulfillment centers by the following dates:
- November 5 – Black Friday and Cyber Monday
- December 5 – Christmas
- December 17 – First day to start sending inventory
8) Plan for Chinese New Year holidays
When selling for Chinese New Year holidays, be sure that your inventory is packed for the months of January and February. If shipment is needed before the Chinese New Year, place orders as early as before Q4 because during Q4, many stores are already ordering their products for Chinese New Year. If you ordered only during the Q4, it may take a while before your product arrives, possibly even after the Chinese New Year! So, order early on so you’ll have your supplies ready before the Chinese New Year.
9) Try “trial order” for low MOQs
If the MOQ (Minimum Order Quantity) may come as low as 50% – that is, around 500 to 1,000 products – then you can order them from the supplier and tell them that you’re testing out the product. The supplier may increase the price in this deal, but that’s alright because you’re just buying in “trial” quantities.
10) Buy products in small quantities at Yiwu to test the products
Yiwu is a very big wholesale market. You can buy around 1-2 cartons to test your products on Amazon. This does not include special features such as custom packaging; the only purpose here is to test the products on Amazon. Nevertheless, Yiwu is the best source from China for testing product!
Conclusion
Product sourcing is not easy, but these tips will help you level up your sourcing process or even make it a little easier for you in the long run!
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