by Renaud Anjoran in 'Quality Inspection Blog'
The CSIC just published another good article (Too small to go factory direct?), which adds up all the fixed costs of buying in China.From their calculations, it takes about $5,000 for visiting and qualifying one supplier, and for confirming product quality, for a first order. And about $600 just for checking the quality of following orders with the same manufacturer. That's excluding product safety testing, which might be required for your product (and which is quite expensive).
These numbers sound about right.
Some inexperienced buyers contact me from time to time, and tell me they received unacceptable products from a Chinese supplier. None of them has checked the background of that company, audited their factory, and inspected production (whether through the importer's staff, or through a third party).
These unfortunate buyers saved $5,000, but in the end they wasted a much higher amount of money (their whole order + shipment costs + import duties + all the time they spent). And they are back at square one, not knowing a single good Chinese manufacturer.
Now, many companies cannot afford to disburse this kind of money, especially if their orders are below $10,000. The reality is, China is not for them!
They usually know they are a small fish—for example, they often struggle to respect the minimum order quantities. The factories with English-speaking staff are not interested in their business, except maybe for a really fat margin.
Many would-be importers are aware of this, and yet they keep trying to find a supplier and a correct price. And it IS possible for them to find one: a small trading company.
Traders lure small buyers by using the following marketing arguments:
The only problem is, these $5,000 of expenses are also necessary when you purchase from an intermediary! None of these trading firms will do formal audits of their suppliers, or will prepare illustrated inspection reports. Someone has to pay for these services…
What happens behind the scenes? How can these small intermediaries accept such low volumes?
By launching production in small workshops that are desperate for business. The result, in terms of quality, is generally awful. This is a situation most importers MUST avoid.
The bottom line is: check every major step along the way, and understand your supply chain.