How to properly place an order with factories in China

So while I am waiting for my newest item to be in stock I thought I’d lay out a very important part of the order process to a Chinese factory to you.
(I you haven’t followed my case study check out my last webinar: https://www.youtube.com/watch?v=4tO5y-EHEwM)

So why is it so important to lay out terms and sign contracts with your supplier? Quite simple actually. You want to have safety nets and agreements in place if something goes wrong.
And trust me there can always be something that can go wrong. It could be a failed inspection, it could be that the item produced is severly damaged during transport, it could be that the material used is completely different from what you wanted and so much more.

You might ask yourself for what kind of order value should I have agreements in place? Because maybe you only have an order value of 1000US$, do I still need all this?
Yes! At least you should have agreements in place that bind the supplier to pay for a re-inspection. However to be honest not many suppliers sign agreements or terms if your order is very small.
But you should at least give it a try.

Just recently I heard from a student of mine that the inspection was fail and 25% of the products had faults, were damaged or not properly manufactured.
In this case the supplier wanted to ship out what was OK and wanted to re-work the other 25% later and ship it later. He even didn’t agree on paying for a re-inspection but simply said “ don’t worry, it will be ok”.
Well I wouldn’t worry if the original 100% would have been a pass results but how does he even have the nerve to tell me not to worry and blindy trust him when 25% of the order is screwed up? Not only did the customer have to pay for re-inspection (the supplier wouldn’t budge) but he had higher shipping costs because he now had 2 shipments!

You need to have agreements in pace that state clearly how each situation is to be resolved – to your benefit.

Sometimes it might be a minor issue such as that he forgot to put the labels on the carton. In that case it doesn’t make sense to send an entire re-inspection but you could rather have him issue you an LG (Letter of guarantee) stating that all items have been re-worked and if you find that what was promised was not kept he has to pay for any costs. E.g. he promises that he will label all cartons and then send it out and once you got the order you find out he hasn’t done it. You could charge him the label costs (as agreed on the LG).

So how do you make sure that your supplier follows each of the steps you want him to do? You clearly state things in your order email and in your purchase contracts and agreements.
Due to popular demand and because I was asked for it many times here is an example-email of how I place an order to the supplier (bear in mind to fill in the details of your own product here – please see my comments in red):

Hi xxxx,

As discussed I would like to place a trial order of xxxx pieces of product X to you.
If my calculations are correct I will re-order 2,000 pieces every 2-3 months.

Details as discussed and herewith laid down:

– Product requirement for particular item (FDA approved)
– accessory for this particular item (FDA approved)
– 1 accessory (in acrylic)
– Material; Stainless Steel and Copper
– extra screw on the handle in copper plating as discussed (little detail that you agreed on could be here)
– Color box packaging. To be provided by me in a short time. (You dont need to have the packaging design ready when placing the order. If you have a white box then there is no need anyway)
– Insert card to be provided by me in a short time.

Price: In order to support this first order and in view of all future potential business that we discussed please confirm price of xxx as agreed on during our last phone call. Again please confirm and I will make payment right away. (It is dificult for the supplier to say no here. You are ready to place the order and he smells the money :)

Sample costs: Please deduct the sample cost of Sample Invoice No.12345 of 150$. This was agreed on when I sent you the sample order on xxx.2016.

Please send PI based on above details with your bank acccount details so that I can make 30% T/T deposit to you.

1) I am also looking at an exclusivity deal. Since this model is more or less OEM in nature (modification and custom packaging). I would like you to sign the attached Exclusivity Agreement.
It means that anyone wanting the exact same specifications and is selling on Amazon United States is not allowed to buy from you.
You can still sell this model to other Amazon countries and customers but not with the same specifications like mine. (custom made file that he has to sign)

2) Please sign attached Purchase Order (a custom made file with all details again in a Word document.)

3) Please sign attached Purchase Order contract (a custom made document he needs to sign in Word file)

4) Please advise shipment date. Again, please check if you can ship out before xxxx.2015. I could send you the giftbox and all other order details within Monday next week so you would still have 30 days for production.

5) PLEASE ADD “FRAGILE-HANDLE WITH CARE” STICKERS TO ALL EXPORT CARTONS (my product had glas in it so I wanted this warning on the shipping/export carton)

6) Please advise inspection date (when 70% is finished). Inspection to be conducted trough: Asiainspection (I will pay for the inspection). If there is a fail inspection you have to re-work the goods and pay for re-inspection (this is also mentioned in the Purchase Order contract)

Please provide address, contact details and telephone number and contact person in both English and Chinese for the Inspection company.
I will also need these details so that I can give you the shipment labels from Amazon Seller Central with the actual factory who delivers.

7) Shipment to be conducted trough:
Please contact my freight forwarder to arrange pick up of both AIR and SEA shipment
John Doe
Made up name logistics (SHENZHEN)
TEL:+86-12345678
Fax:+86-12345678
E-MAIL: john doe@madeupnamelogistics.com

8) 100% shipment by AIR to following address. Please add the address in the commercial invoice and packing list.
FBA: Mandarin-Gear Limited
Amazon.com.dedc LLC
560 Merrimac Ave
Middletown, DE 19709
United States

The following is for the documents:

Importer of Record:
Mandarin-Gear Ltd.
xxxxx adress, Hong Kong
Tel: +852 12345678
mail: xxx
EIN: 123455678

Ultimate Consignee:
FBA: Mandarin-Gear Limited
Amazon.com
4255 Anson Blvd
Whitestown, IN 46075
United States

Notify Party for customs:
Mandarin-Gear Ltd.
xxxxx adress, Hong Kong
Tel: +852 12345678
mail: xxx
EIN: 123455678

9) Labels for for export carton as attached.

10) Please send full certificate of FDA and Borosilicate glass for this item.

11) Please find attached logo to be printed by Silk-Screen on the item. Logo to be put at the bottom of the product.

12) If there is a polybag included it needs to have the attached suffocation warning printed on the polybag.

13) Products need to be packed very very well especially around the glass as you know the glass can easily break.

If you have any questions please do not hesitate to contact me.

I am looking forward to building a long term business-relationship!
All the best,
Manuel

So you see there is quite a few things you have to consider when placing an order. Usually I sit 2-3 hours when writing the order email and terms up to each supplier. Since I want to take my time and think of everything that I want the supplier to do. Make sure you attach all files and documents you want him to sign.

Since I am a supplier and manufacturer myself I am sometimes surprised at how I receive orders from customers.
Sometimes I get an email just stating the order quantity, delivery place and not much else. If anything goes wrong I could blame the buyer “well you haven’t specified anything” and there is nothing he can do.
Obviously I am not that kind of supplier but many Chinese suppliers work that way… You as the customer have the right to demand certain terms and if the supplier doesn’t agree to them well then you should move on.

I hope the above gives you a bit of an idea on what you can and should do when placing an order.

If you like this post please share on social media
All the best and happy sourcing,
Manuel

https://importdojo.com/importdojo-masterclass/

Ps.: I am expecting my newest product to be in stock in the coming days and will update you soon in form of another webinar, so stay tuned

Leave a comment



Eberhard

1 year ago

Manuel, wieder einmal hast Du gekonnt und zur rechten Zeit Deinen Finger genau in diejenige Wunde gelegt die mich trotz meiner enormen Motivation dennoch abhält viel effizienter mein erstes FBA Produkt bei einem chinesischen Hersteller zu bestellen. Dein Post kommt gerade Recht und ist mir ungemein hilfreich. Ein dickes Danke an dieser Stelle. Ich freue mich schon was ich noch alles von Dir lernen darf! Eberhard

Manuel

1 year ago

Super! Freut mich Eberhard 🙂

Andrew B

1 year ago

Hi Manuel,

Thanks for the great posts and videos. I’m looking at some food-related products and wondering where you found any relevant regulations or testing information? I haven’t been able to find laws or guidelines related to food container safety.

Thanks!
Andrew

Manuel

1 year ago

Hey Andrew,
Lots of research. Unfortunately I am not a food related product expert so all I can advise for now is ask Third Party Testing Institutes – they know!
Best,
Manuel

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