| When visiting your suppliers' offices the meeting | | | | of loading, you need to inquire which one is usually |
| normally is held in their showroom. Taking a close | | | | used because the applicable freight charges will |
| look at their presentation and product displays | | | | apply and you need that information to properly |
| should give you a pretty good idea how well or | | | | calculate your landed cost. Some ports have only |
| poorly that company is organized. | | | | one vessel departing per week and you must |
| Ugly, untidy, and dirty showrooms do not reflect | | | | know this in advance when planning tightly |
| well on the supplier's diligence. However, that | | | | scheduled shipments. |
| impression may deceive you because your | | | | Closest International Airport |
| supplier may still live up to your expectations. | | | | I want to mention that some products can only |
| I have found that at least 50% of most supplier's | | | | be shipped by airfreight. Notebook computers and |
| showrooms in Hong Kong look like a garbage | | | | MP3 players are typical examples. The key |
| dump and you might be too scared to work with | | | | components of these products are ICs that |
| these suppliers. Rest assured that you can work | | | | constantly fluctuate in price. At present, the prices |
| with these suppliers but you need to take some | | | | are in constant decline. Buyers need to receive |
| precautions. If you follow my checklist and | | | | their goods within a short time or they will not be |
| receive satisfactory answers from your suppliers, | | | | able to make a profit. The price they need to |
| you may still want to give your new supplier a | | | | charge will be higher then the price being charged |
| try. | | | | for goods that were air shipped. That makes air |
| It is all about competence and if you have the | | | | shipment unavoidable. |
| impression that your new supplier has enough of | | | | Banking Details |
| it, go ahead and make his day. | | | | When discussing the payment terms with factory |
| Effective Questions for the Supplier | | | | management, ask them for their banking details, |
| Which questions should you ask during your | | | | which will allow you to do a background check |
| meetings with each of your suppliers? You want | | | | before placing your orders with them. |
| to ask at least the following questions: | | | | Payment Terms |
| - What is your Fob price in US$? | | | | Finally, you need to negotiate the payment terms, |
| - What is your usual port of loading? They can | | | | which are usually by irrevocable letter of credit at |
| sometimes offer you a choice of several ports. | | | | sight (L/C). This is usually the safest way to pay |
| - Do they have their own factory, what is the | | | | the factory and also allows them to obtain loans |
| name, and where is it located? | | | | from their bank to start the production on time. |
| - When was the company established? | | | | Never ever let the factory convince you to remit |
| - Who are the owners? | | | | a down payment of let's say 20 or 30% of the |
| - How many production lines do you have? | | | | total order value by T/T to enable them to start |
| - How many workers does your factory have? | | | | your production. Ask yourself why are they |
| - What are your main export markets? If the | | | | asking for this? There is only one reason, which is |
| answer is Europe, your next question should be: | | | | that the factory has no money and obviously no |
| Which countries there? | | | | other orders. They want to jumpstart production |
| - Who are your main customers? Of course you | | | | with your cash. If something goes wrong and the |
| are mainly interested in customers from your | | | | likelihood is rather great something will, you lose |
| country but it would be interesting to know if | | | | your money and never receive a shipment. |
| large companies like Wal*Mart or Carrefour are | | | | If the staff member you are meeting with can |
| buying from them. | | | | answer most of these questions, you can be |
| - What is your delivery time during normal season | | | | relatively sure that it is not a trading company. |
| and peak season? | | | | Even if they pretend that they have several |
| - Are you subcontracting part of your production | | | | factories working for them, they are not likely to |
| and if so which parts? | | | | know all these details. |
| - Does your factory have their own injection | | | | I should point out that you should have already |
| machines? | | | | disclosed the content of your shopping list before |
| - Is your factory ISO 9000 approved? | | | | asking all of these questions. |
| - In the event the quantity from your shopping | | | | About Your Shopping List |
| list is not sufficient: What is your minimum order | | | | Here is the information your shopping list should |
| quantity per product? | | | | include. It needs to include all of the products that |
| - Which laboratory are you using for your | | | | you want to source. Your specific requirements |
| approvals? | | | | may go beyond this basic list: |
| - What approvals does your company already | | | | - Product description |
| have? | | | | - Target Fob price in US$ |
| - Which certificates have been obtained? | | | | - Quantity of the first shipment |
| - What new products do you have that are not | | | | - If possible an estimate of your yearly quantities |
| on display? | | | | - Requested earliest delivery date |
| - When can I see sketches, drawings, or photos | | | | - Destination port |
| of these new products? | | | | - Packaging information if other than standard |
| - Can you please e-mail me your bank details? | | | | - Number of samples needed |
| You will need this to pay the sample cost when | | | | It is not wise to inform all suppliers about your |
| you order product samples | | | | target price right away. You could end up with |
| Here is more detail about what should be | | | | prices matching your target price but you may |
| discussed based on the previous questions: | | | | have actually been able to negotiate a lower price. |
| Delivery Time and Order Backlog | | | | On the other hand, inform your supplier of your |
| You need to ask the factory management about | | | | target price if they quote a price that is not even |
| their delivery time during the low and peak season | | | | close to what you want to pay. |
| so that you have information about how long it | | | | It is essential to provide your company's |
| will take for your goods to ship. This is also | | | | specifications before asking for price quotes. Of |
| important to understanding the lead time needed | | | | course, you can play the hide and seek game by |
| when placing purchase orders. | | | | not disclosing your requirements to the supplier. |
| Something else that needs to be asked is their | | | | The big disadvantage with this is that you will be |
| current order backlog. This indicates how well the | | | | drawn into lengthy negotiations later because the |
| factory is doing. If they do not have many | | | | supplier will tell you that his price was based on his |
| orders, there may be a reason for it, which can | | | | own standard and everything above that must be |
| be important in your decision making. If the | | | | added to the originally quoted price. There can be |
| factory won't talk about low order backlog, there | | | | no doubt that the supplier is right. |
| is a chance that their competitor knows which | | | | I believe it is part of fair play to fully disclose your |
| proves one more time how important it is to visit | | | | requirements up front. To do anything less may |
| the factories in person. | | | | force your supplier to lower the product quality |
| Port of Loading | | | | by using cheaper materials in order to obtain the |
| Since factories sometimes can use different ports | | | | purchase order. |