HOW SMEs SHOULD SOURCE FROM CHINA

For SMEs sourcing from China, there are a few key tasks that must be undertaken to reduce risk, increase the potential benefits and guide the process. Obviously, due diligence is required as is an entry/exit strategy but more important than that, the SME must first fully and truly understand its own product and acquire local knowledge.

· Know Your Product - Before a company can source from a low-cost country it needs to first understand its own product. What are the main components? Is it labour intensive? Does it need high-skilled workers? Does it require long lead times? Every low-cost country has different strengths depending on the requirements. For SMEs, companies who are new to LCCS or for complicated products that require a lot of downstream suppliers, China is the best country to work in. Any organisation thinking of low-cost country sourcing must know exactly what they are looking for in terms of these categories.

· Know The Market - China is a completely different supply market. It has a different language, different currency, different geography, different politics and different culture. In order to enjoy the benefits that sourcing from China offers, SMEs must take the time to understand the market. Procurement teams need a local understanding and knowledge of how the Chinese supply chain operates, that includes having someone on the team who speaks the language. If a company doesn't have that ability in-house, then they need to work with a partner company who does. Jumping into the market blind is really difficult and mistakes can be huge.

 
Developing a sourcing strategy is crucial to establish a process and also realize the expected benefits . Depending on your needs, you can choose a supplier development approach or even a more traditional competitive tender strategy. Either way, you will require the services of an experienced company for vendor selection and contracting.

There are a number of non-price factors which will help drive your supplier selection decision and only an experienced Chinese based procurement service provider can help evaluate all these factors. (quality, delivery, innovation,…). They will help convey the expected performance and service levels requirements of their clients to the suppliers while also updating the suppliers about the consequences of non compliance. They follow a disciplined approach so your relationship with Chinese suppliers can be structured for maximum benefits.