If you’re looking for information on how to source international suppliers and partners, this page is the right place. We’ll provide you with a step-by-step guide to finding the right supplier for your business, ranging from research and selection to negotiating the best price and reviewing your relationship.
#1 Researching and Finding Suppliers
When researching a supplier for your business, you first need to know what you’re looking for. Are you looking for:
- a manufacturer to physically build the final product that you want to sell?
- a wholesaler to purchase products and brands that already exist?
- a ‘dropshipper’ to supply products that already exist?
There are many benefits of choosing either one so you’ll need to assess which type of supplier is right for you.
Furthermore, you should think about whether you require a domestic or overseas supplier – i.e. whether your business should source its products from Australia or from a different country. Domestic sourcing can be highly beneficial due to:
- faster shipping time;
- the marketing appeal of ‘Made in Australia’ labels;
- no language barriers; and
- higher quality of manufacturing and working conditions.
At the same time, the advantages of sourcing goods from overseas include:
- lower costs of manufacturing;
- many suppliers to choose from; and
- the presence of “one-stop” services like Alibaba.
A useful way to source a supplier is to engage an agent, if you choose against directly buying from a supplier. Sourcing agents often have a great deal of experience dealing with different suppliers and may work on a commission. They can help you verify suppliers and organise the communication between you and them. Agents not only identify suppliers for you, but can also negotiate price, run supply management, organise logistics and also shipment management.
If however, you wish to deal with your supplier direct, there are numerous easy ways to find the right one. You can search online (Google, social media, online directories, etc.) or alternatively go to an industry event, trade show or join a professional network. You can also talk to your current network to receive a personal recommendation.
#2 Request quotes
Once you’ve found a collection of suppliers, you will need to approach them and request quotes, i.e. ask them “how much do I have to pay you for your services?”
Plan your inquiry rather than rushing to ask them a question. Ask them for specific information so they can provide you with the best possible quote. This includes requesting the supplier for:
- Their minimum order quantity (MOQ). You do not want to engage a supplier who has a requirement to purchase an amount that is too much for you.
Note that you will very likely be able to bargain on this, as MOQs are negotiable around ninety per cent of the time. For instance, you might make a compromise by providing an immediate deposit.
- Sample price ranges. You can get an idea of how much the supplier will charge by requesting samples to inspect prior to making a complete order. Samples might be offered to you for free or at a discount.
- Production pricing. This is simple – ask how much the suppliers’ products cost to purchase. We’d recommend asking the pricing for multiple products to see if they offer discounts on large orders.
- Turnaround time. It’s crucial to know how long it will take for the supplier to actually deliver your products, especially if your business peaks in particular seasons.
- Payment terms. Make sure you check what the suppliers’ payment terms are, as many will require you to pay upfront for the entire order. You can also ask if they offer payment terms on orders you may make in the future. If a supplier appears to be unreasonably pushing you to order on certain terms, this should raise alarm bells.
- Incoterms. It’s also important to determine what shipping terms you will be operating under with your supplier to determine the risk you will take (see our blog on the Incoterms to understand what they mean).
Once you’ve sourced a number of suppliers, it’s then time to compare and make your selection. Compare your suppliers and select the most appropriate one based on:
- Proximity – a supplier further away may mean longer delivery times and also higher freight costs. But also, are you able to visit your supplier? This should be a consideration based on how much is at risk.
- Reliability – look at the track record of the supplier. Can they deliver on time and have they done so before? Can you also trust them to deliver the correct goods and services? An unreliable supplier can cause your business to suffer if your goods don’t show up on time (or if the wrong goods show up on your doorstep).
- Stability – is the business about to go insolvent? Research how long the supplier has been operating and if they are going to be operating for much longer. This is particularly important to show how experienced the supplier is and if you are looking for a long-term supplier. At the same time, newer suppliers in the market will also be trying to make their mark and may offer you flexible pricing for a better service.
- Price – price is important but it is not necessarily decisive. A cheap supplier doesn’t always mean a bad one, but it might mean the production of lower quality products which then you’ll have to sell to customers. If you sell poor quality products to customers, the short-term gain with an affordable supplier might injure your long-term business goals through a poor reputation.
- Service – are they willing to negotiate? Have you received a sample product form them? Are they responsive to your emails? Have they gone the extra mile to ensure your needs are met? These are basic traits that you should consider when engaging in a relationship with a supplier, especially a long-term one.
After weighing up the pros and cons, you’ll be well on your way to selecting the right supplier for your business.
Once you’ve selected your supplier, it’s time to negotiate a contract. The devil is in the detail, so make sure you understand what you want compared with what you get, as well as how much you’ll be required to pay and when you will need to pay it.
Get creative. You can negotiate any factor ranging from payment terms and incoterms to delivery times. Make sure your supplier partner also gets a good deal, especially if you are going to commence a long-term trading relationship. Contracts should include a variety of critical terms including:
- The goods and/or services that will be provided;
- The price and terms of payment;
- The incoterms used;
- Dispute resolution;
- Termination/exclusion clauses;
- Warranty periods; and
- Time frames.
After receiving your first order from your supplier, you should reflect on how the process went.
Did the process go as expected? Perhaps there is something that your supplier could improve upon next time. If there is, be honest and let them know. They won’t improve unless you tell them.
How flexible was your supplier in reacting to your requirements? Were they willing to negotiate? Did they compromise? Flexible suppliers are important in a dynamic economic environment that impacts on your business.
Will the relationship actually be profitable? It will be critical to review how much your expenditure on the supplier looks in the big picture and how it will fit into your projected costs. Consider if larger orders will offer economies of scale going forward. Your supplier might provide a great service but, at the end of the day, it might not be something you can afford just yet.
One Last Tip
Building a successful business with a supplier fundamentally relies on developing a strong relationship. This means regularly communicating, providing feedback, actively listening, being flexible, paying on time and staying organised.
As an importer, you may also feel it’s just easier to let your supplier arrange the transport and insurance and in some cases clearance and delivery, as it is just one less hassle. However, when given the opportunity, a freight forwarder can potentially save you money and offer you local real-time support in case anything goes wrong. Also, consider your forwarder’s ability to provide advice based on the Australian market.
If you have any further questions about engaging a supplier, please leave a comment below or contact an experienced specialist at International Cargo Express. We’re always here to help.