How to Make Trade Negotiations in China More Successful – Part Three – Common Talking Points

When visiting your suppliers’ offices, the meeting usually takes place in their showroom. Taking a close look at your product presentation and display should give you a pretty good idea of ​​how well or poorly that company is organized.

Ugly, cluttered, and dirty showrooms don’t reflect the vendor’s diligence well. However, that impression may mislead you because your supplier may still live up to your expectations.

I have found that at least 50% of the showrooms of most vendors in Hong Kong look like a garbage dump and you may be too scared to work with these vendors. Rest assured that you can work with these providers, but you need to take some precautions. If you follow my checklist and receive satisfactory responses from your vendors, you may still want to give your new vendor a try.

It’s all about competition and if you feel like your new supplier has enough, go ahead and make their day.

Effective questions for the provider

What questions should you ask during your meetings with each of your vendors? You want to ask at least the following questions:

  • What is its fob price in US dollars?
  • What is your usual port of loading? Sometimes they can offer you a choice of multiple ports.
  • Do you have your own factory, what is it called and where is it located?
  • When was the company established?
  • Who are the owners?
  • How many production lines do you have?
  • How many workers does your factory have?
  • What are your main export markets? If the answer is Europe, your next question should be: What countries are there?
  • Who are your main clients? Of course, what interests you the most are the customers in your country, but it would be interesting to know if large companies such as Wal * Mart or Carrefour are buying from them.
  • What’s your delivery time during normal season and busy season?
  • Are you outsourcing part of your production and, if so, which parts?
  • Does your factory have its own injection machines?
  • Is your factory ISO 9000 certified?
  • In case the quantity on your shopping list is not enough: What is the minimum order quantity per product?
  • What lab do you use for your approvals?
  • What approvals does your company already have?
  • What certificates have been obtained?
  • What new products do you have that are not on display?
  • When can I see sketches, drawings or photos of these new products?
  • Can you email me your bank details? You will need it to pay for the sample cost when you order product samples

Here are more details on what to discuss based on the questions above:

Delivery time and order book

You should ask factory management about their delivery time during the low and high season for information on how long it will take to ship your products. This is also important to understand the lead time required when placing purchase orders.

Another thing to ask yourself is your current order book. This indicates how well the factory is performing. If they don’t have many orders, there may be a reason for it, which can be important in your decision making. If the factory does not talk about low backorders, there is a chance that your competitor will know, proving once again how important it is to visit factories in person.

loading port

Since factories can sometimes use different loading ports, you need to check which one is generally used because applicable freight charges will apply and you need that information to correctly calculate your landing cost. Some ports only have one ship leaving per week and you need to know this in advance when planning strictly scheduled shipments.

Nearest international airport

I want to mention that some products can only be shipped by air freight. Laptops and MP3 players are typical examples. The key components of these products are integrated circuits whose price is constantly fluctuating. At present, prices are in constant decline. Buyers must receive your products in a short time or they will not be able to make a profit. The price that they must charge will be higher than the price that will be charged for the products that were shipped by air. That makes air shipment unavoidable.

Bank data

When discussing payment terms with factory management, ask them for their bank details, which will allow you to do a background check before placing your orders with them.

Payment terms

Finally, it is necessary to negotiate the payment conditions, which are usually by irrevocable letter of credit at sight (L / C). This is usually the safest way to pay the factory and also allows them to borrow from your bank to start production on time.

Never let the factory convince you to send a down payment of, say, 20 or 30% of the total order value by T / T to allow them to start their production. Ask yourself why they are asking for this. There is only one reason, which is that the factory has no money and obviously has no other orders. They want to boost production with their cash. If something goes wrong and the probability is high enough, you will lose your money and never receive a shipment.

If the staff member you are meeting with can answer most of these questions, you can be relatively certain that this is not a commercial company. Even if they pretend to have multiple factories working for them, they are unlikely to know all of these details.

I should point out that you should have already revealed the contents of your shopping list before asking all these questions.

About your shopping list

Here is the information that your shopping list should include. It should include all the products you want to get. Your specific requirements can go beyond this basic list:

  • Product description
  • Target FOB Price in USD
  • Amount of the first shipment
  • If possible, an estimate of your annual amounts.
  • Earliest requested delivery date
  • port of destination
  • Packaging information if not standard
  • Number of samples required

It is not advisable to inform all suppliers of your target price immediately. You could end up with prices that match your target price, but you may have been able to negotiate a lower price.

On the other hand, inform your supplier of your target price if they quote a price that is not even close to what you want to pay.

It is essential to provide your company specifications before requesting price quotes. Of course, you can play hide and seek by not disclosing your requirements to the provider. The big downside to this is that you will be involved in lengthy negotiations later on because the supplier will tell you that their price was based on their own standard and all of the above must be added to the originally quoted price. There is no doubt that the provider is right.

I think it’s fair game to fully disclose your requirements up front. Doing less can force your supplier to reduce product quality by using cheaper materials to obtain the purchase order.

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