Sourcing new suppliers are one of the most important decisions a business will make, and entrepreneurs must go through a rigorous process to select the right suppliers to serve them in the long term.
The right supplier needs to be reputable, consistent, reliable, and truly able to provide you with a quality product.
If you are sourcing new or researching potential suppliers, consider these key factors, and we also gave some tips to help you find the right supplier for your business.
How to Source New Suppliers in 5 Steps?
Sourcing new suppliers for your business is critical.
If your suppliers are unreliable or do not offer quality products, your company will struggle to provide reasonably priced goods and services that meet your customers’ expectations.
Here are 5 key steps to ensure you source the right suppliers for your products, components, or raw materials:
Step 1. Set Your Standards
Create a list of standards your supplier needs to meet to provide what you need.
Here are a few points to consider:
- Ideal delivery time: how long you want to wait between placing an order and receiving the goods
- Maximum and minimum order quantity: parameters for how much you can order at a time
- Dropshipping capability: the supplier’s ability to deliver quality products directly to consumers
- Quality assurance process: the steps your supplier takes to ensure product quality
- Payment terms and conditions: how and what you pay for items
- Return policy: the conditions under which you or your consumers are allowed to return items
- Communication standards: your supplier’s responsiveness and ability to communicate language barriers (especially important when working with overseas suppliers)
Setting standards in advance will allow you to evaluate potential suppliers for each listed item and ensure that you do not overlook any important requirements.
Step 2. Browse Your Options
If you know the types of products you want to sell, you may want to visit a supplier directory (such as Alibaba) to see which suppliers offer the products you need.
Use this period to evaluate your potential suppliers based on the following standards:
- Credibility: What do other business owners say about this supplier? Is it a reputable supplier, or will it steal your product ideas and sabotage your business?
- Type of business: Depending on your business model, you may need to choose a wholesale supplier, a dropshipping supplier, or a private label manufacturer. Make sure you know which suppliers are which.
- Security: A good supplier offers insurance and fraud protection. Avoid working with suppliers who don’t protect your business.
When sourcing new suppliers, it’s important to check reviews of other businesses. This may give you a better idea of how the supplier will meet your expectations.
Here you may learn more about Alibaba Reviews for details below:
Alibaba Reviews ( 2022 Updated): All You Must Know Before You Buy
Step 3. Bidding
Once you have a shortlist of legitimate wholesalers, dropshipping suppliers, or suppliers you are interested in working with, you can initiate a bid.
You may need to complete a Request for Proposal (RFP) form or a Request for Quotation (RFQ) form.
In this case, you should include all the details you need about the product or service, quantity, delivery date, and quality of the standards.
You can also communicate with the supplier about their processes and policies during this process.
We strongly recommend asking potential suppliers about their raw material planning and sourcing.
Try to be suspicious if the supplier uses risky reordering practices or obtains materials from unreliable suppliers.
Step 4. Evaluate the Bid Documents
Once you have received your quotes, evaluate your options. Compare each supplier to see which ones best meet your budgetary needs and quality standards.
You should also pay strict attention to pricing, as you don’t want to choose a supplier who charges too much for their goods and reduces your profit margin.
At this stage, you should also do another check to ensure the validity of your supplier bids.
If you work with a dropshipping supplier or wholesaler, you can ensure their legitimacy by requesting product samples and ISO compliance documentation.
Once you have chosen to bid, communicate with your supplier to negotiate the terms of your contract. Make sure your contract guarantees favorable pricing, thus protecting your profit margin.
You can also enter into a short-term contract as a form of trial run. That way, if your supplier can’t fix the problem, you can cut ties before it does too much damage to your business.
Step 5. Monitor Supplier Performance
No one wants to work with an unreliable supplier. Keep a close eye on your suppliers to ensure they deliver on their promises.
If they are frequently late in shipping, sending incomplete orders, or providing poor-quality merchandise, you can use this data to negotiate with your supplier to mutually improve the process.
If that fails, you may have grounds to terminate the contract and sever ties with that supplier. This allows you to start from scratch with a new (and hopefully better) supplier.
Here you may learn more about Finding Reliable Suppliers for details below:
6 Tips for Finding Reliable Suppliers in China
5 Key Factors in Sourcing New Suppliers
If you are sourcing new suppliers, or are currently researching potential suppliers, make sure you consider these 5 factors to help find the right supplier for your business.
Factor 1. Supplier Cost
Cost is probably the most obvious but equally important factor when sourcing new suppliers.
Of course, you will have a number in mind because you will know which products you are looking for and how much you are willing to pay.
Even so, prices may vary between suppliers, so it’s important to shop around and see who offers the best price.
You should weigh all your options before deciding which supplier is best.
Factor 2. Quality
There is usually a correlation between cost and quality: the more expensive the product, the better the quality.
Regardless of the price, there is still a predetermined, agreed-upon level of quality that you want to ensure meets your expectations.
After all, when your supplier is sending you something completely different, the last thing you want to do is market your product as high-end.
Quality refers not only to the physical product itself but also to its related aspects.
For example: Are the products adequately packaged, and how are they protected during shipping? Are they labeled correctly?
Talk to potential suppliers to ensure you fully understand what they will provide you with, because you don’t want to sign a contract and then be disappointed.
Here you may learn more about Sourcing Products for details below:
5 Tips on Sourcing Products from China
Factor 3. Reliability and Previous Experience
It is important to remember that when sourcing new suppliers, you are actually building a long-term relationship with them. It’s similar to hiring a new employee because you will want to see references.
Don’t be afraid to ask them; it makes sense that you would want to hear from companies that have previously worked with a particular supplier.
Because they can honestly present the relationship to you and list any good or bad points.
If you are deciding between two suppliers, references can significantly impact who to choose.
Factor 4. Shared Culture
Expectations will only be met when both parties are clear. Good supplier relationships are built on shared cultural goals and attitudes.
Talk directly to suppliers to find out how they like to work with other companies. If you want ongoing communication, but they prefer to “move on”, then it won’t work.
When you talk to suppliers, you will have questions for them; they will likely ask you just as many.
Use this time to gauge whether your culture and expectations are similar, as you should have a good idea of whether the relationship will work.
Factor 5. Location
Location is an important consideration when sourcing new suppliers.
If you are a local business that has built a brand on expertise in your area, then you will want to focus on finding suppliers that are located nearby and share your values.
On the other hand, if you want to expand internationally, you may want to recruit suppliers further afield.
For example, if you are a UK business looking to do business in China, then it makes sense to work with suppliers in China.
Because they will understand the rules and regulations of the business and can ship products more easily.
10 Useful Tips for Sourcing New Suppliers
When sourcing new suppliers, you can’t expect them to think the same way as you do.
Western thinking is very different from Eastern thinking, and you can’t impose own thinking on your suppliers. It’s easy to get frustrated with poor communication.
To help you prepare, here is a list of the top 10 tips for sourcing new suppliers:
Tip 1. Don’t assume that factories, trading companies, sourcing agents, manufacturers, and suppliers are all the same thing
There are a lot of terminologies to master in this industry, and many of the terms overlap, but knowing what to expect can cause you a lot of frustration.
Factories are where products are made, whether they are people or machines.
Trading companies are the middlemen. They find suppliers for you and ship the product to you, but before doing so, they raise the price slightly to make their own profit.
Sourcing agents are similar to trading companies but not the same. They are more like a contact person.
A sourcing agent may put you in direct contact with different factories or review multiple suppliers to find the best price.
They also usually provide factory and product inspections and shipping and logistics opportunities.
The terms manufacturer and supplier are used very loosely. They can overlap with any of the first three terms.
As a general rule of thumb, they can be any of the first three. Usually, the manufacturer is synonymous with the factory, while the supplier is defined more broadly.
Here you may learn more about Sourcing Vs. Trading Company for details below:
Sourcing Company vs. Trading Company: What is the Difference?
Tip 2. Don’t just evaluate the price
Once you have all the quotes, it’s time to choose a supplier.
While price can affect the profitability of your business, it is important to consider that the cheapest supplier is not always the right one.
On the other hand, the most expensive supplier does not guarantee the best service.
Instead, solving problems related to quality, flexibility, and delivery experience in that area is best.
This will give you a complete picture of the services offered and prevent you from receiving something cheap but unsatisfactory.
Also, watch out for deals that are not to be missed. If the product proves the good quality and the supplier is a large company, then prices well below the market price may indicate a problem.
Tip 3. Don’t try to negotiate the shipping
There is a big difference between comparing shipping rates and trying to negotiate shipping rates. Only some suppliers will negotiate shipping with you because they have to charge the lowest price.
Sometimes they will charge you the exact shipping cost, and sometimes they will charge you extra because they have to make money too.
Trying to negotiate on shipping may make the supplier think you don’t know what you’re talking about, and they’re less likely to want to continue working with you.
So don’t negotiate shipping rates; just compare shipping rates between several suppliers to find the best deal.
Here you may learn more about Alibaba Shipping Costs for details below:
Complete Guide: 10 Ways to Save Alibaba Shipping Costs
Tip 4. Don’t assume that most suppliers on Alibaba are factories
Many suppliers on Alibaba will tell you they are factories, even if they are not, and that’s normal. To them, it’s just good business.
But most of them are probably just trading companies that buy products directly from factories and raise the price slightly to make a profit when they resell them.
Here you may learn more about Alibaba Scams for details below:
Ultimate Guide 2022: How to Avoid Alibaba Scams?
Tip 5. Don’t assume that the supplier must be a factory because they call themselves a factory
Just because a supplier shows you a picture of a factory doesn’t mean they really are a factory. Today, you can build a website and put anything you want on it, and so can the supplier.
But that doesn’t mean they are trying to trick you or deceive you. They just know that the western brain thinks that going directly to the factory will get you the best price. However, this is not always the case.
Tip 6. Don’t think that working directly with a factory means you will pay less
Often, a trading company can offer you a better price than the factory. Why? Because they have a good relationship with the factory, so the factory gives them a better deal.
If you are unfamiliar with working with a particular factory, you need time to earn their trust and build a good relationship with them. The factory will not offer you a better product deal until they trust you.
However, the factory has already established a good relationship with the trading company, so the trading company gets a better deal. Then, those trading companies pass those deals on to you.
Tip 7. Don’t assume that it will only take a month to source and ship your products to Amazon’s warehouse
If you are building a highly customized product, then obviously, it will take time to build.
Expect a custom product to take up to six months from starting product research until the day you ship the product to Amazon FBA.
In this case, I highly recommend using a sourcing agent to help you through the process.
Even if you are not building a completely new product, research, differentiation, production, and shipping still take time. Budget at least two to three months to source and ship your product.
Tip 8. Work with a sourcing agent
Especially when you are starting an Amazon sales business, it is important to get guidance and support from the right experts.
Failure to do so can expose your business to serious risks, including fraud, product quality issues, and legal risks.
China Sourcing Agents are skilled in all aspects of sourcing products from China for Amazon sellers and are available to help throughout the process.
Starting with sourcing the right supplier, negotiating the best price, and then shipping; even experienced sellers can benefit from working with a reputable sourcing agent.
Since sourcing agents have offices in China, they can conduct visual inspections of manufacturers’ facilities and ensure a fair deal while building strong relationships with local suppliers.
Sourcing agents also conduct factory audits and objectively assess employees, equipment, processes, automation, management structures, and other factors such as socially responsible or sustainable sourcing.
Here you may learn more about China Sourcing Agents for details below:
Complete List 2022: Top 100 Best Sourcing Agent in China
Tip 9. Don’t assume that your suppliers won’t share your ideas simply because you have a contract with them
What if you launch your latest product a month after you see your supplier advertising with 20 other suppliers on Alibaba?
Never assume a supplier will honor your contract. Instead, find ways to reduce your risk.
One way to stop your product from being hijacked is to have one supplier build all the parts separately. Then, ship those parts to you and assemble the product yourself.
This way, your supplier has no idea what the product will actually look like. The final product is yours alone.
Of course, another simple way to reduce risk is to differentiate. Add accessories and additional features to your product, which will be much harder to duplicate.
Tip 10. Don’t assume the supplier has a problem and won’t lower the price until you reach a certain starting quantity
Imagine you are buying coffee. You go to Walmart and buy a bag of coffee beans. Then, you go to Sam’s Club to buy a large tub of coffee beans.
When you break down the price, the cost per bean at Sam’s Club will be much lower than that at Walmart.
Why? Because you have to buy more beans. It’s cheaper to buy things in bulk.
Suppliers want to know if the time and labor spent building your product will generate enough sales to be worth it. Suppliers won’t lower their minimum starting order if it’s not worth their time.
Here you may learn more about Buy in Bulk Online for details below:
Complete Guide 2022: How to Buy in Bulk Online?
Sourcing New Suppliers FAQ
1. What is sourcing new suppliers?
Sourcing new suppliers are when a retail brand looks for the best suppliers to work with in sourcing products, delivering products, creating packaging, etc.
2. How do you source new suppliers?
First, search for the suppliers you need. You can do this by searching online, networking, or asking other store owners who they recommend.
Then vet them by contacting their sales team and asking how they will work with you. Choose your top suppliers and sign a contract to start working together.
3. What does supplier management mean?
Supplier management is finding and maintaining relationships with suppliers for your store. It involves keeping costs down, managing communication, and mitigating risk.
Sourcing New Suppliers Conclusion
Sourcing new suppliers will make an upfront investment, but it is the key to creating an efficient supply chain.
This is just the beginning of the supply chain as you lock in suppliers who can deliver the quality of goods you need at a price point that suits your business.
If you are sourcing an innovative, intuitive, and powerful sourcing solution, then Yansourcing is the right choice for you.
We are a leading sourcing company in China, dedicated to helping our clients source products from China at the most competitive prices. If you are interested in importing from China, please contact us.