Clients who engage PassageMaker for the virtual office service often assign to the China team various tasks related to sourcing and supplier identification.
Proper supplier research exposes true pricing points, identifies qualified partners and results in significant savings for the client when sourcing from China and the rest of Asia.
Supplier Selection Overview
- As part of PassageMaker’s virtual office service, a Sourcing Feasibility Study (SFS) can be conducted to identify vendors in Asia that can meet buyer targets for price, quality & lead time. This is the first, and perhaps most important, step of the strategic sourcing process.
- The SFS can be used to find suppliers at the factory direct, wholesale and even retail level.
- The SFS can also be used as tool for supporting negotiations with existing suppliers.
A Sourcing Feasibility Study report offers:
- Easy to understand “apples-to-apples” comparison of suppliers’ pricing
- Security assessment (how to avoid suppliers turning into competitors)
- Door-to-door cost modeling. This includes shipping estimates, duties and Value Added Tax (VAT) analysis
- Analysis and ranking of actual suppliers based on your price, quality, and lead time criteria
- Contact details (phone, fax, email, and web site)
- Business size, scope and production capabilities
- Assessment of factory’s English language capability
- Comparison of samples and production methods
Supplier Selection Methods of Research
With an emphasis on in-the-field research and physical inspection of production facilities, manufacturers are identified via industry contacts, government officials, trade associations, trade directories and publications, industry experts, internal databases and our existing network of reputable and trusted manufacturers.
Most SFS projects unfold as follows:
- Initial desk research
- Short-listing of high potential candidates
- Draft SFS report submission to Client
- Conference call to review report with Client
- Factory audits organized to verify the legitimacy of the seller in terms of quality, production capability, experience, size…
- Due diligence to verify the legitimacy of the seller in terms of reputation, legal standing, ownership, licensing and financial strength
- Final negotiations are conducted before arranging custom samples/ test order/ formal PO
What makes PassageMaker’s SFS special?
One: Direct to the source
Extreme variation in price, quality, and production ability exists among suppliers in Asia. The proliferation of trading companies limits transparency and further adds to the complexity of vetting suppliers in China. Our research division was founded with the expressed goal of helping clients avoid middlemen and find the right manufacturers based on the client’s particular requirements for price, quality, and lead times.
Two: Face-to-face verification
Only through physical inspection of production facilities can one gain a true understanding of a supplier’s ability to produce the desired product. PassageMaker’s SFS is an affordable option for clients who do not have the time, energy, language skills or business experience required to visit and evaluate potential suppliers in Asia.
Three: Total transparency & aligned interests
The SFS a transparent process where the client is given full disclosure of the research findings and seller’s information such as contact details and pricing. There are no commissions in any form given by suppliers to PassageMaker. Our interest is aligned solely with the client.
The time frame to complete a SFS is highly dependent on the following factors:
- The number of product classifications
- Complexity of the project
- Order size
What does “production classification” mean?
Production classification is defined as a product or set of products which can be manufactured or sourced from same type of vendor.
For example, if you are interested in sourcing a custom made fruit basket (plastic fruit in a wicker basket), then there are 2 production classes involved. One class is “vacuum formed plastics” and the other is “wooden handicrafts”. Ensuring that the best overall price & quality is achieved requires that both industries (plastics & wood working) are explored.
But if you were looking for plastic bananas and plastic apples, most likely they can be made at the same type of factory. So only one production classification is involved and the time frame to complete the project reduced.
What is meant by “complexity of project”?
Generally speaking, “off the shelf” or low-tech items require less up front research than new-to-market, technically advanced products.
The complexity of a project can increase significantly in cases where the client wishes to find a very specific factory rather than a very specific type of factory. For example, a client may wish to obtain a quote from the supplier currently being used by the client’s competitor. This type of project can be very easy if the client can provide us with the contact details of that supplier. But the project can be very difficult if there are hundreds of potential suppliers and client has little information on the target factory.
How does order size (standard, small or large) factor into amount of man-hours needed to complete the SFS?
“Standard order size” varies from industry to industry. But as a rule of thumb, it can be difficult to interest suppliers in small order sizes. There certainly are suppliers willing to work on smaller orders, but finding them is more difficult. Large order sizes often require greater due diligence into potential partners to ensure suppliers do not become future competitors. Issues of logistics, lead times and duty rates should be explored in great detail for large orders.
PassageMaker has completed Feasibility Studies for hundreds of different product classifications. A partial list is available here for review.