Purchasing and Procurement in China and Asia
China and Asia have always been hot-spots for businesses with a smart purchasing and procurement strategy. The advantages of purchasing products and equipment from established and emerging Asian economies are plentiful. Australian companies are attracted to the benefits of direct access to manufacturers with larger margins and increased profits.
If you’re new to importing from Asia, take time to do your groundwork. It is common for first-time importers to think that it will be ‘business as usual’ – find a supplier, negotiate a price, send the order, the order is filled and onto the next!
However, you will find that it takes time to build trust, and many Asian business people expect quality relationships.
Here’s a breakdown of what you need to know to get started in purchasing in Asia:
Even before setting foot in an Asian airport, spend time getting to know the culture. Do your research and don’t assume all Asian countries operate the same way.
A reliable book will tell you how much of a country’s history will impact how their business people do business with foreigners – and in this case, you are the foreigner. Key areas to study are traditions and rituals. For example, the greeting ritual in China where the businessperson will offer you their business card with both hands, a slight bow, eye contact and a smile. You then receive the card, in the same way, saying ‘Thank you’. You must then offer your card.
TIP: Take a lot of business cards!
Online webinars and blogs are useful sources, and a Google search can be very revealing.
Attend seminars and workshops. The Victorian Chamber of Commerce is an excellent resource, look for similar events in your state.
- Chambers of Commerce
Join a Chinese Business Chamber of Commerce. The members are generous with their support and can be a great source of contacts in their home country.
Start with a holiday to Asia. Visas can be relatively easy to obtain, and you’ll gain a degree of familiarity in a stress-free situation.
- Trade Fairs
Go to Trade Fairs in Australia and Asia. The Canton Trade Fair held in Guangzhou twice a year is the biggest in the world and an excellent education in doing business with the Chinese.
- Learn to Negotiate
The Victorian Chamber of Commerce holds negotiation skills programs especially for business in Asia.
English is recognised globally as the language of business and is taught as a second language in many countries, especially in China, so it’s unlikely you will need a translator. Always check before you leave Australia as it can depend on the parts of China or Asia you will be doing business. Learn simple words and phrases as an act of politeness, your attempts will always be graciously accepted.
Research the entry policies of your destination country. Japan does not require visas from Australian citizens. China, on the other hand, has strict entry visa requirements. Every embassy has checklists and applications forms online.
Useful Resources for Information:
- Ali Baba
- Trade Fairs
- Asian Sourcing Services
- Chambers of Commerce
The main factors that will influence the location of your manufacturer/supplier are:
These can change with product, country of origin, place of manufacture, among many. Always check with Austrade who have extensive online advice and services.
- Order size
Be very clear about the size of your order. Economies of scale can have a significant impact on the landed price per unit and many manufacturers only deal in supplying multi-millions of units. Seeking out suppliers that welcome smaller orders is an option.
- Quality specifications/compliance with Australian Safety Standards
Always provide detailed specifications and ask for samples. Avoid going ahead with your first order until you and your supplier are completely satisfied that all aspects of production and quality are to compliance.
- Exchange rate fluctuations
All trade in Asia is currently carried out in US dollars, so be aware that currency fluctuations can have a significant impact on profit margins.
- Production turnarounds
Know all your lead times for production, freight, AUS customs, etc, and place your orders accordingly. Avoid urgent orders.
- Return on investment
Beginners can overestimate profits. Landing costs must also include freight, tariffs, quarantine, customs duties, concessions and currency fluctuations.
Sourcing products from Asia can be rewarding and profitable. Your purchasing and procurement success will be governed by the quality preparations you make and the effort you put into understanding the country you wish to do business with. It is important to think long-term and seek to build quality business relationships.