Procurement From China

In this article, we focus on Procurement From China. For many years, China has been an isolated country where communism ruled the way people approached their everyday challenges. The Chinese revolution and the Japanese war with China changed people’s attitudes. However, it was only during the 1980s that China started trading with the Western world and opened its borders to foreign trade.

Since this change in mindset occurred, China has been growing rapidly and has become the manufacturing capital of the world. It supplies companies all over the world and has incorporated Western standards into its companies.

Although China has been trading with the whole world for almost 40 years now, a number of African, specifically South African, companies are still very worried about the perceived quality they get from China. They seem to think everything you procure from Europe and the USA (United States of America) is superior, and hence, they are happy to pay a premium for these products.

This article will thus attempt to explain the procurement process when procuring from China and how to control the quality when procuring from them.

Procurement From China

The first step is to find a supplier in China to procure. It is to understand the platforms the Chinese community uses. They prefer communicating with WeChat and not WhatsApp, although they are starting to migrate to WhatsApp these days. China does not have Google as it’s banned; you will thus have to find a different way of searching for products in the Chinese community. The platform the Chinese use is called Alibaba. For a long time, people from the Western world believed that Alibaba was where Chinese companies tried to scam Western companies. But by now, Alibaba is one of the biggest companies in the world, and suddenly, the Western world has to acknowledge that it’s a real platform that works for procurement.

Alibaba has also launched AliExpress. This platform allows you to procure once-off products like a retail site and get them delivered to your home address in a few weeks. Products are thus shipped directly from China to your doorstep. This is convenient and opens China to the world from a retail perspective.

After the platforms are identified to operate on when searching for products from China, the search for quality products will start. Alibaba actually has a verification process that tells you how long the supplier has been registered with them and their status. The best suppliers are tagged as golden suppliers. When using the search function on Alibaba, several suppliers will pop up that can provide the products or services your company needs. You can then contact the suppliers via the platform, e-mail, WeChat or WhatsApp. The Chinese suppliers usually respond quickly with technical write-ups, lead times and pricing.

When all the proposals have been received, the shortlisting should start. Considering the quality of the submission, pricing, manufacturing capabilities, quality standards and track record, a few companies should be shortlisted to provide the product or service.

Once these companies have been shortlisted, it’s important to physically inspect their facilities. A number of companies offer this service, based in China, and will do the inspection on your behalf. This can work well, but often, the buyers want to visit the facilities themselves to get comfortable with the supplier.

Booking flights and planning a trip to China is not that expensive if you compare the amount of money that could be saved on this project and projects in the future. Work with the potential suppliers you are planning to see and get them to help you arrange the accommodation and domestic travel.

Once you arrive in China, Chinese suppliers usually treat your group like royalty. They make 100% sure you are comfortable. Just make sure you are prepared to eat and drink a lot every evening.

Arrange your meetings before you travel, and make sure you leave enough time to visit the factory that manufactures your products. Be very careful if they have a story about why you cannot see the factory. Once you are in China and go to the factories, you will see who the best-rigged company is. You often find trading houses that buy from any company in China and then sell to the rest of the world. They only have offices, and although they connect you with the factories, buying directly from the manufacturer is better.

A good indicator when you buy in China is the price; people often say that they buy products for less than half the price they pay in South Africa, but be careful as this is not the norm for good quality products from China. We have found that you get a big range of products from China, certain products are very cheap and follow no quality control or standards and then other products are more expensive but comply with all the standards and follow stringent quality control procedures. A typical saving that can be expected when purchasing good quality products from China is in the range of 20-30% after shipping and clearing costs have been taken into consideration. This range is what we found from experience in the technical equipment and materials sector, but it will probably change in each sector you procure in.

You also find that companies in China are very good at copying each other. When you get proposals from 10 companies, the proposals look very similar to each other. One company developed it, and all others adopted it for themselves. Thus, it would help if you spoke to the technical engineer in charge of the products you plan to purchase to ensure they understand their product and it’s the real deal. Chinese engineers are very clever and practical; you would find that they usually have one senior engineer in charge of the whole facility.

The inspecting parties should check international codes and standards. Chinese companies usually have all their approved codes and standards on their wall, but it’s also important to ensure this is valid and that they are approved and understand these codes and standards. The bigger companies in China are usually geared towards the export market and comply with all the international standards. The companies would also offer two prices when you ask them to price, one for local standards and the other for international standards. The Chinese standards are very practical but won’t work if your project is designed to other international standards.

Another interesting fact about Chinese companies is that government-owned companies are usually the strongest and best to procure from. With the Chinese government promoting state capitalism, you find several government-owned companies in various sectors. These companies are well-run and usually very stable. It’s the opposite when you enter Africa, and African companies often wrongly have an African mentality in China.

Once the inspections have been completed and the preferred companies are chosen to work with, ensure prices and lead times are fixed. China is very used to delivering products on time, and we have found that they are much more diligent than South African suppliers. Most South African suppliers are agents for European and American products in any way, so you get the product plus their markup on it, and they don’t have control over the lead times.

Procurement From China notes that although Chinese companies keep to their lead times, shipping is often a problem, and identifying the correct shipping and clearing agent is important for a project. Many Chinese companies have preferred shipping agents, but if you have found a good one, it makes sense to use them for all your shipping needs and build a relationship. Clearing the products on the Chinese and South African sides can often be challenging, and having a clearing agent who understands the process makes it much easier.

As a rule of thumb, we often send a representative to China to ensure the products loaded are correct and that they get loaded onto the vessel in time. Depending on your products and lead times, you can also use inspection agencies in China.

Payment terms with Chinese companies are also very important. Ensure you only pay a small deposit and the rest of the money once the products are ready to be shipped. You will battle to get better terms than this from Chinese suppliers, but as you build a relationship with them, they also become more lenient towards you.

Once your products arrive in South Africa, ensure you inspect them and are fully happy with your purchase. If you are not completely happy, contact the suppliers, and they will try to assist you as much as possible. If the products are in accordance with your requirements, make sure you give feedback to the Chinese company, as they really appreciate it.

If you have gone through one procurement cycle from China, you will feel more confident about procuring from them in the future. You can also continue to procure from the same company without having to do as many checks each time as you have already established they satisfy your needs.

It often helps to employ a procurement agent who works within South Africa and handles this whole process for you. You indicate what products you are interested in, and the procurement agent handles the whole process until your products are delivered in South Africa. It costs a bit more, but it makes your life much easier and reduces your project risk.