Myths about Sourcing in China

8 Myths about Sourcing in China

Although sourcing products in Asia has become a very common practice for companies all over the globe, the reality is that still a lot of myths exist about sourcing in China.  We refer to a number of statements that are either partially or completely false, present on the internet where they have gone viral, becoming almost plain truths.

At S3 Group, being sourcing consultants specialized in products made in China, India and South East Asia, our job is not merely about managing import operations on behalf of our customers, but also to give advice about international acquisitions and training our customers and followers about our activities.  Therefore, we regularly update our sourcing blog with posts about the industry and, as in this article, analyse the 8 most common myths about sourcing in China.

Sourcing in China = Buying very cheap

We will start with focusing on one of those myths that is partially incorrect, whereby it is important to understand the facts in order to avoid false expectations.

It is obvious that one of the main reasons to start importing products made in Asia is price; nevertheless, although the production cost might be much lower, it is crucial to remember that, when producing certain specific items, following the corresponding quality standards adapted to the specifications of our customers, the price may eventually go up.  In other words: sourcing in China might be cheap, but it should never be the only factor to take into consideration when deciding on outsourcing our purchases.

Sourcing in Asia is only adequate for large corporations

This myth is directly linked to the required investments. It is often thought (incorrectly), that to source in Asia one has to make large orders, hence, managing large amounts of money. This is not true: companies need to adjust their purchases to their financial capacity, although it is worthwhile to remember that in many occasions, when making a larger investment by means of a larger order, we may have more negotiating power and we may achieve a higher overall profitability.

If you want your sourcing operation to go well, you need to go to China

Whatever is linked to communications when considering a sourcing operation often generates lots of doubts. In many businesses a common mistake is to believe that, if no one from the company actually travels to China in order to negotiate and/or control the production, the operation will be a disaster.

This is clearly a myth: a variety of tools exist nowadays to follow-up on any sourcing operations from a long distance.  But that doesn’t mean that, as sourcing professionals, we realize how important it might be to have at all times someone in the production area to guarantee the correct execution of the process, as well as to be able to intervene, should something go wrong.

When sourcing in China, quality loss is inevitable

Unfortunately, this is one of the most widely spread myths.  In our blog we have already very often published posts highlighting that production in China, just like in many other Asian countries, is not necessarily a synonym for poor quality.

We should not forget, though, that, logically, both the chosen supplier as the agreed price we are willing to pay for the products, are key factors that will influence directly on the quality of the sourced items.

Bigger quantity = Better price

This is another of the partially false myths, although from the entire list we have already highlighted, most likely it is the one with the highest degree of truth in it.

Just like in any purchase a company makes, indeed, increasing the buying volume of our order will most likely allow us to achieve a better unit price.  But it is definitely false to believe that there is a direct correlation between discounts and order increases, i.e., multiplying the order by four will not lead to a price divided by four.

For large orders, the manufacturer will pay the shipment cost

This turns out to be another of the most spread myths in the internet. Chinese manufacturers will not necessarily pay the freight cost, regardless of how large our order is.

In fact, the considerable cost increase as far as shipping goes, during the last year and a half, has become a major headache for many importers.  In this context, it is worthwhile to ignore the myths and to focus on an adequate planning of our sourcing operations at this point.

It is only feasible to import simple or barely personalized products

After more than 18 years of sourcing operations managed in Asia, we are in a position to confirm that it is possible to purchase pretty much anything in these markets. It does not matter if we need special functionalities, if we need a specific customisation or if we have developed a unique design: it can all be manufactured. The key is to find an adequate supplier and define in utmost detail the product we wish to source.

Sourcing in Asia is always complicated

We have left the most controversial myth till the end of this post: is it really always complicated to source in Asia?

Sourcing in China or, for that matter, from any Asian country, is a process that consist in a number of steps (which we need to know in detail) and timings.  Yet, both the cultural differences and the frequent issues related to communication often create a series of difficulties that were not foreseen in the very beginning.

Does this mean that my company cannot source in Asia?  No, it does not mean that.  In fact, many companies with internal sourcing departments manage sourcing operations all the time without major difficulties.  But it is a reality that things go well… until they no longer go well.  And when problems arise, it is often critical to be able to have or find a high degree of specialization in sourcing in order to solve the issues we have come across.

In this context, at S3 Group we have accumulated the experience in order to both offer specific support to internal purchasing departments, as well as offering overall sourcing services, managing each and every of the steps required in sourcing operations, showing that, day after day, sourcing services are much more than simply maintaining communications with suppliers.