last year is a bad year for many China trading companies or factories. Drawing on the lessons of the past year, I decided to slow down the pace in the new year and go down to the right road. Therefore, I wrote this blog as a summary of some of my own experiences in the past, and it is also a reminder to others.
If you are an importer from American, European or other countries in the world, you will know what trading companies your working with is a good one after you viewed my this article. Meanwhile, you will find the reasons why your China factories don’t offer you the first time, or they aren’t aggressive give you best prices as usual.
1. If you plan to conduct a new business, myEntrepreneurial notes you should know – first fail.
I have been engaged in developing the international market for nearly 5 years, but before this, I have worked as an engineer more than 10 years with stamping parts, What I did before was about the design of automobile engines. In the beginning, I thought emotionally and thought that I could do a good job of trade with the help of “a few English letters”.
Under the impulse, I started a company with a college student(we sell custom progressive stamping parts for automobile). Obviously, not only did the company not make money and I have to borrow some money to help him pay an additional 100,000 debts (he was gambling and borrowed high-interest loans with this company). In order to save your time, so I do not tell you more details about how I failed with him, and at last, we have to go our own way.
2. Entrepreneurial notes – “the second-time undertaking”.
When I start to continue my new business lonely, I got several customers because 10 years of automobile stamping parts design experiences. However, the first trouble soon appeared: the quality problem out of my control with my outsourced parts, and I have to sell my car to pay back my customer’s money. At that time, every night I only can sleep 2~4 hours.
PS: Now, Chongqing Sipxmach was 100% owned by Chongqing Hegao Stamping parts Co., Ltd(main products: sheet metal components) to develop the international market. Once he is my supplier when I worked for another automobile intake and exhaust system Co., Ltd.
Maybe you doubt why China Chongqing Hegao will buy my trading company, I only can tell you is the credit, when he knew I sold my car to pay my customer, then he knows I can help him to develop international market
Nonsense ends here, we start to talk about the topic
3. Entrepreneurial notes – your China factories how to consider their offer prices.
First of all, let’s knowledge the conditions when you give an RFQ to a China stamping factory or CNC machining parts factory, or any other machinery industry parts, if this factory didn’t export parts before, and only heard some news from other people, they will think to export can sell much higher than domestic market. So many times, their offered price much higher than normal, this is why many sourced companies say trading company better than factories, you know this is just an excuse to help you choose him. Of course, some good traders can help you solve these problems, but you can not say a China factory better than a trading company or trading company better than a factory.
It depends on different conditions will get a different result, choose the trading company or factories.
My other posted explained the reasons: What you should choose as your supplier? Factories or trading companies?
In fact, if your company cooperated with and trading company located in coastal cities of China, like Guangzhou or Shanghai maybe you did not encounter many factories as above said. But you know most factories located in the west of China, they have cheaper labor cost, more land storage.
If you heard some news about the biggest human migration in the world is “Chinese new year”, why it is like this, it is because most people from the west of China work in coastal cities of China like Guangzhou, Shanghai, Zhejiang, Ning Bo and so on. Then you know why the labor cost of the west is cheaper than east, like Chongqing, Chengdu.
Your aim is to find the better “cost performance” factories or trading company in China, so you should find the reasons why it like this, and then you can find solutions
4. Entrepreneurial notes – One of the west company offer case for a stamping part
Take an example: when a Shenzhen trading company send parts to a factory which located west of China, and this factory is first time quote exporting parts, the China Supplier will instinctively believe that the price profit will be much higher than the domestic market, but in reality, the price is an uncertain factor.
5. Cost analysis – supply chain relationship for exporting parts:
Manufacture – B/M – Distributor – Wholesaler – Retailer – Customer, where every link should have a profit to ensure operation and circulation, and after many steps of increasing prices, the goods will finally arrive at consumer’s hand.
B/M: Brand manufacture
In general, B/M and distributors have the most experience in importing, are very familiar with the market situation, and even have purchasing offices in China. He can solve many problems from the exporting first step to the final steps, but I am sure you “cost performance” is not the best, so if you found a factory with good exporting experiences(for example a good punching and blanking manufacture), I should congratulate you.
6. Entrepreneurial notes – how to establish a united front with factory 01
After we discussed these factors with this stamping parts factory or CNC machining parts factory, and I simply think that the boss or sales manager of this stamping parts factory or CNC machining parts factory believe what you said, but he will say: “Since I can’t get a profit advantage, why should I develop the international market? Because if there have quality problem, I should take more responsibility about transporting cost, customs fees and so on”
7. Entrepreneurial notes – how to establish a united front with factory 02
7.1 From the exporting flow: Manufacture – B/M – Distributor – Wholesaler – Retailer – Customer, we will tell the manufacture of stamping parts or CNC machining parts we will develop a wholesaler group of customers. the supplier will think: “Should I sell you a high price?”, we should persuade the boss of the factory this should a win-win relationship.
7.2 If the customer’s profit is really high after analysis, and the sales price is also high, then it is recommended to share the profit with the supplier. In this way, you can have a supplier to establish a solid trust relationship. Their profits increased, which will help us to improve production quality, update equipment, increase certification conditions. And better to explore the international market, the biggest advantage is they will give you the biggest supporting your business, which includes prices, delivery time, offer quickly, if you really need a more competitive price to develop the market, he also will try his best to help you.
CNC machining parts made by Chongqing SipxMach
8. Why trading companies should share profit with factories?
Merchandise is the products that are produced. Production determines the cost of merchandise, not the final cost. The final cost also includes freight, intermediate link profit, intermediate link operating costs, tariffs, insurance costs, shipping charges (which may also include inland costs), warehouse storage costs, etc.. All costs need to be clearly stated with the China supplier. The value of the commodity is determined by the supply-demand relationship, your competition with your competitors and your raw material costs.
The trading company should sincerely to establish solid cooperation relationship with your suppliers, you can not just think to earn money in every situation.
You should explore the target market situation;
You should analyze the target market price;
You should analyze the profit of each intermediate link;
You should estimate the profit of the supplier, afterward, you can get the biggest support from the China manufacture.
Stamping parts made by Chongqing SipxMach
9. Marketing – Analysis of competitors prices
The Supplier of your products is not easy to find out the price changes of the entire link, and you want to win against your competitors. You can pretend to a purchaser to send an RFQ to your competitors (are you feeling a little guilty?). Machinery industries like Machining or stamping parts is a highly customized product, and the market is relatively simple. Most of the times, After the importer purchased these products, then they will sell to final purchasers who responsible for assembling these components.
A Netherlands camera company
Camera assembly line
10. How to establish a solid relationship with your suppliers?
After you checked the market, If the profit is good, you can advise you China supplier also should sell at a reasonable price, because to do so, you can occupy the market faster. otherwise, your competitors will catch up with you and replace you in the future.
You should try to with deep cooperation with your China suppliers, for examples, if you have RFQ from your customer, you should give your orders priority to those manufacturers who cooperate deeply with you, if their prices higher than others, you should tell him the truth. If there have a quality problem during your cooperation, you should aggressively to find the reasons with them, it is not just blaming them and ask them to take the responsibility completely.
If you are not considering supplier’s benefit, they will think you just a machine to earn money, how you want them to give you best support in the future?
11. Solid relationship – What kind of suppliers can not cooperate again? – Very important
After you told all the truth and your ideas to the supplier, but the supplier also think they should “make a big profit”, then I think you can give up this supplier. In the end, as a trading company, you should try your best to find the deep cooperation factories who willing to give you the best support. Not only just the best price is your choice, if there no manufacturer who willing to support you, once the trouble comes, then you will know how serious of the disaster!
11.1 When you analysis your customers, you should pay attention to your customer’s products grade.
For example, you buy a car compare with Santana and Porsche, it is impossible to sell them with the same price. Although some parts are the same, it is also a different price, because they have a different quality control system. This theory to China manufacturers also same, many China factories only make high-quality products, their machines are expensive than others, maybe your quality does not need to so high, but they only have this kind of machine, so their price is expensive than others.
Above means: every China manufacturer have their own advantages, some parts are expensive than others, some parts are cheaper than others. I take the machines as an example, I think their business model will be more important to affect their prices.
11.2 You also should educate your suppliers during your procurement process.
For a good trading company, they are not only should find the best “cost performance” manufacture in China, and control the quality, they also should educate their potential suppliers to the right business model with a win-win situation
In general, work with your sub-suppliers no matter a China supplier or in your own country, you should find their core-value are the same as you. Just like cooking, try a few flavors, find out what kind of taste is right for you. If you are a trading company or manufacture to look for potential China suppliers, the first step is to find more potential factories in China, then check if they have the same core-value with you. If not, give it up and replace it as soon as possible. Life and time are forbidden to waste.
Finally, I hope to be more experienced in quality control and customer development in the future. Come on, for yourself, for the family, for the partners who work hard with yourself.
At the same time, I hope that the partners on the road of foreign trade can provide some quality control methods suitable for who want to import parts from China, Thank you in advance!
If you like this article, please share it, thank you very much in Advance. and your favor will also be served as an incentive for me to share more of my expertise in my blog