If you decide to start an e-commerce business with China, but don’t know how to find a responsible supplier with an active output, this article is for you. PartnerTrade publishes a “diary” of an entrepreneur that describes the basic concepts for those who want to work with Chinese factories.
What terms should the customer know?
Before contacting suppliers in China, read the terms of the contract. It contains specific terminology that you need to know to make a good deal.
Original Equipment Manufacturer (OEM)
The abbreviation OEM stands for “Original Equipment Manufacturer”. This concept refers to a factory producing goods that are subsequently purchased, labeled, and sold by another company.
Original Design Manufacturer (ODM)
ODM means Original Design Manufacturer. It not only manufactures and sells goods but also designs some models for sale to third parties.
The difference between OEM and ODM
The main distinction between the two concepts is that ODM companies are officially responsible for the design of their products. OEMs may be a party hired to fulfill an order by a third-party company.
Request for Quotation (RFQ)
Abbreviation RFQ means “Request for Quotation”.
What data does the commercial offer include?
What items must be present in the commercial offer between you and the supplier:
- Name of the product.
- Product color.
- Logo details.
- Product size.
- Product material.
- Shipping details.
- Attached photo of the product, logo, etc.
What data do you need to get from the factory?
It is important for an entrepreneur cooperating with a Chinese manufacturer to get as much information as possible about the thing you want to produce. For example, if your logo on a product contains more colors, then its execution will cost more. That’s because the factory has to create a separate ink palette for each color.
You also need to select the appropriate Incoterms. Make sure that the transportation of goods within the country or to the port is included in the contract. Do not forget about product certification: when importing to the United States, you may be required to have a product certificate.
The data provided by the factories also indicates:
- product information;
- the cost of the product;
- shipping cost;
- packing details;
- product pictures;
- output time;
- output time of 1 sample;
- the cost of preparing for the order (sampling and casting).
Minimum Order Quantity (MOQ)
The “Minimum Order Quantity” or MOQ is the minimum quantity of a product you need to order to complete a contract and receive a discount on the product of the entire lot. Most manufacturers are reluctant to accept orders below the MOQ, as this reduces profits, and sometimes does not generate income at all.
Quality Control (QC)
You probably already know this term, it stands for “Quality Control” of manufactured goods. There is an international quality control standard that all inspectors adhere to. It is performed against the AQL acceptable quality level table, which determines the passing score of the QC test.
QC is of paramount importance to the customer of the batch, as it shows whether it meets the producing requirements. Based on the ratings received, the customer can accept or reject the consignment.
What are samples? These are the models of your future products that you can evaluate before deciding to purchase the entire batch. To receive samples, you need to request an exact copy of the proposed promotional product. It can be used to judge whether the quality of the product satisfies you.
PartnerTrade can arrange the delivery of samples from China to USA or Canada at the time you need. Thanks to trial samples, you can be sure of the high quality of the product.
What else is important to consider?
This refers to the time elapsed from the moment the order was placed to the production till the goods delivery.
At this stage, it is significant to remember that Chinese factories usually delay production, so it will not be superfluous to place orders in advance and follow the factory producing schedule. Long production times lead to more expensive shipping when you have to choose air freight over ocean freight.
What is this process? This is typically casting or creating a mold for your product – the first step in creating any product. To do this, the manufacturer requires a form. It may be required if you contacted the manufacturer with a new product and represent a separate expense item.
if you decided to release an already existing product, the factory already has molds used for your project. In this case, you do not need to allocate additional funds for molding.
Terms of payment
The contract between the supplier and the customer determines payment for work as the conditions under which the seller makes the sale. As a rule, the contract specifies the period during which the buyer can repay the amount due.
Payment terms can be as follows: bank transfer, 30% deposit, 70% balance on QC before shipment. This means that before the start of production, the customer needs to make an advance payment of 30% of the total price of the order via bank transfer. During quality control and before shipping, the customer pays the remaining 70%.
After learning about the terms of the contract and the most common terms, you can contact the contractor in China to discuss the details of production with the factory!
The pandemic is making it harder to travel to Chinese factories. Partner Trade can help with this. We arrange agents in China who can check the factory. In addition, we offer delivery of product samples to the USA or Canada, so you can be sure of its quality.
What do I need to know when concluding a contract with a Chinese contractor?
It is important for a businessman to know and understand the meaning of the terms in the contract between the customer of the goods and their manufacturer.
What is the difference between ODM and OEM?
The original equipment manufacturer (OEM) is not responsible for the appearance (design) of its own products, unlike the original design manufacturer (ODM).
What items should be included in a commercial offer?
The name of the product, its quantity, color, size, the composition of the material, details, additional data – product photos, logo image, etc.
What information should be required from the manufacturer?
You need information about the product, the price of the product, its delivery, molding (if you need to create it), information about packaging, time and terms for batch production, a photo report of the manufactured product.
How to check the quality of goods, what standards to focus on?
Products are checked according to the international standard – the AQL table, which reveals what level of quality a particular article belongs to. You can order a sample of the product manufactured by the manufacturer to ensure its proper quality.
Why is it better to order goods in advance?
Chinese factories often delay production. This can increase the cost of transportation since it requires fast air delivery.
How to pay for an order?
Usually, this is a transfer through a bank, you only specify the amount of the initial deposit and the rest of the contribution.