Fair & Organic Trade: A Prosperous Perspective

While the fair and organic trade movement has not quite grasped China yet, it is an area that has a large amount of potential. Considering people importing from China–or Chinese consumers themselves–they see the main benefit in the low price, and pushing fair trade in China products would hurt the bottom line. For that reason the market size for fair trade China products are currently small. However, there are various indicators that appear to show that this fair trade China market will grow and expand in the near future.

Fair trade in China usually refers to when exporters of a developing nation is paid a higher price for the product (for example, fair trade coffee) taking into consideration that the workers who harvest the beans will be paid a higher wage than the bare minimum. Organic trade in contrast is different, since it refers to goods that are produced without any chemical fertilizers, pesticides or other artificial chemicals, which might be interpreted as higher quality.

The decision to purchase fair trade goods from China is often due to philanthropy beliefs, and the attitude that a fair price should be paid to all workers and cheap labour should not be exploited. Whereas organic products are usually purchased due to a mix of egotistical reasons, and a belief of environmental protection and the debated higher quality of food.

The awareness for ecological problems is continuously rising in China.

Fair Trade in China

An early sign of slowly starting to appreciate fair trade in China goods is that fair trade tea has started to be produced and sold in select locations. What is interesting to note, is that in Western countries like the UK, around 90% of consumers recognize and know about fair trade products, whereas fair trade in China is a much smaller niche.

In Western countries, consumers purchase fair trade products as they feel they are contribution to social and economic growth in underdeveloped countries, and people (who in their own countries’ standards) may be considered poor, would still purchase these products to help others.

In China the “Journal of Sustainable Development” saw that the demand for fair and organic products was coming from well-educated and relatively high income sectors of the population. Conclusions could be drawn that low income Chinese residents do not have the level of education needed to understand and appreciate the global issues that fair trade products try to address.

It seems to be straightforward to apply the famous fair trade coffee concept to tea in China.

Additionally, fair trade in China and organic food products tend to have price premiums unaffordable to many Chinese residents – even if they wished to purchase such goods. As the country grows and evolves, there should be a direct correlation with the demand for fair trade products.

The agricultural market stands to substantially benefit from the fair trade in China and organic trade movements. As the largest agricultural producer globally, China has had a series of recent scandals concerning the safety of food products within China, the supply chain is there to meet the potential rising demand.

This is also true for organic produce, as there is increased demand for higher quality food due to the scandals. With organics sales being driven by the need for higher quality food then the raised awareness in China should see an increase in consumer demand for organic products.

Conclusion

Perhaps there is more room for growth in the organic movement than there is for fair trade within China. The lower standard of living suggests that Chinese consumers would not be too concerned about fair prices on goods they are buying, but the increased awareness of food quality should see organic demand increase. Currently, a lot of this demand is directed to the import of foreign food products that are assumed to be safer and have higher quality.

If you are looking to source fair trade from China or organic items from China, it is possible to do so. However, suppliers will generally be unwilling to provide the items unless there is a long term commitment in place. As they generally do not often deal with such items, they want significant quantities or a long term promise in place to ensure they see a return. A certification according to the numerous Western certification standards in this field is possible. Rigorous monitoring and inspection of potential suppliers is necessary to find suitable candidates.

Exports from China: Figures, Trends & Customs Summary

China is most well-known for its exports. Most people think of China as a leading textile and electronics exporter, but a little-known fact is that it also dominates some other industries. Export can be seen as the driving force behind China’s strong growth and dominance. The corresponding article for imports can be found here.

The size of China’s export market has been growing substantially over the last decade. In 2010, it overtook Germany to become the world’s largest exporter. The overall Chinese exports amounted to $2.119 trillion in 2016, down 7% from the last year. This has mostly been caused by the poor economic conditions throughout the world for this period. This is still $1,533 for each of the 1.382 billion inhabitants which is significantly more than the sum of the imports.

This phenomenon in the Chinese export market also creates a scenario which is referred to as a trade surplus. Although high exports are good, an unbalanced economy can create problems. Please refer to the balance of trade article to read about the development and problems of China’s trade surplus.

Top 10 Exports from China

When people think Chinese export goods, they are often quick to assume it is only electronic products. Estimated at $557.3 billion a year, it is easily China’s major export. However, electronics only take up approximately a quarter of China’s export market. This shows how big the China’s export market is, while also underlining how much more variety there is than just electronics.

Other popular China export products include industrial machinery and equipment, which comes in at an estimated $344 billion a year. As this product category is not consumer-focused it often gets overlooked when people consider the popular Chinese exports. However, when it represents 16.3% of Chinas overall exports in 2016, it shows how significant it is to Chinas economy.

China’s notorious export orientation is an important contributor to world trade.

Living accessories like furniture, lighting and prefab buildings totals $89.5bn. Although this is a significant amount, it only totals about 4.2% of total Chinese exports.

At a combined fourth and fifth place is clothing. This category covers both knit and woven textiles and amount to a total of $177bn, converting into 6.9% of all exports. China has historically been the textile leader, but a world hungry for technology has seen China using its resources to supply this demand, shifting the textile industry to other upcoming exporting giants, India and Bangladesh.

Next Chinese export products are medical supplies, a market covering 3.2% of all Chinese exports. Although China does produce a lot more, its growing population also factors into this equation, causing higher inward consumption of these supplies

The 7th most exported article is plastic ware. Often labor intensive, these products require a market geared towards labor, something China excels in. The need for plastic products globally is high, but is often seasonal. Therefore it only amounts to $64 bn or 3% of Chinese exports.

Cars are also a big export, although the success of China as a whole does seem to have caused a shift to a consumption-based economy leading to cars factoring as only 2.9%, or $60bn, of the total Chinese export market. With many first world countries producing their own, this figure is understandable.

With China often embarking on massive civil projects, only a small amount of ores and associated products gets exported, earning this category a 9th place. This category has also lead to many trade disputes, especially with the US, as China is regularly being accused of dumping cheap ores on the market, negatively affecting the global economy. Even so, this category only amounts to $53.1bn (2.5%) of all China’s export market.

Lastly, a massive market in which China excels at supplying is shoes. Globally, most shoes are either wholly produced in China directly, or at the very least, assembled there. Although this may be the case, this category only accounts for $47.8bn (2.3%) of all exports.

The top 10 exports from China and their percentage of total exports with respect to all trade partners (2016):

1. Electrical machinery, equipment: US$557.1 billion (26.3% of total exports)
2. Machinery including computers: $344.8 billion (16.3%)
3. Furniture, bedding, lighting, signs, prefab buildings: $89.5 billion (4.2%)
4. Knit or crochet clothing, accessories: $75 billion (3.5%)
5. Clothing, accessories (not knit or crochet): $72.8 billion (3.4%)
6. Optical, technical, medical apparatus: $67.9 billion (3.2%)
7. Plastics, plastic articles: $64 billion (3%)
8. Vehicles: $60.4 billion (2.9%)
9. Articles of iron or steel: $53.1 billion (2.5%)
10. Footwear: $47.8 billion (2.3%)

Trend in China’s Exports Overview

China has started to see the growth rate of the economy slow down. This trend can also be seen within the export market and in February 2016 saw a 25.4% year on year drop. This has been caused partly by the business shutdown occurring during the Lunar New Year holiday but many economists predict the problem goes further. Global demand for Chinese export products has decreased as well, which has ultimately worsened the problem.

Chinese exports have traditionally been deemed of poor quality with low pricing, however, this aspect of exports is slowly changing. China has started to focus on higher quality goods and specialized products to stay competitive and if Apple can trust a Chinese firm to manufacture their I-Phones, the change in strategy seems to be working.

In fact, companies in China have become experts at producing electronics of all varieties. An often overlooked aspect is that China has the largest Information and Communications Technology (ICT) market in the world. As this equipment is often extremely specialized it shows that China has so much more to offer than their reputation leads us to believe.

The quality of products with this sign are improving.

What will likely affect my price for getting exports from China?

Subsidies

To maintain the position of being the world’s largest exporter, China offers large subsidies to exporting firms in the form of tax rebates. This policy has resulted in over a third of Chinese exports companies selling over 90% of their product abroad. These tax incentives create a difficult situation where Chinese consumers often pay more for similar goods than foreign consumers. Such subsidies also cause trade disputes with other nations—particularly the US and the EU.

The United States in particular, has brought many cases to the WTO as the two countries have been unable to come to an agreement on many issues surrounding international trade.

Export Duties

A select group of goods (resource based and semi-manufactured products) have export duties levied that have to be paid at customs. China currently levies the following items with tariffs: coal, crude oil, iron alloy and chemical fertilizers. These tariffs have been made to protect domestic resources.

Combining the modern trends and the export subsidies China offers leaves a lot for an importer to benefit from. To learn more about benefiting from Chinese import read trade fair tips

Special Economic Zones

As discussed in this article, special economic zones offer preferential treatment to companies willing to invest in that specific geographical area. Reduced income tax is but one of the many incentives China utilizes to seek investment in these areas.

Conclusion

Looking at the total value of the Chinese export categories, one can easily see why China is the world’s leading exporter in many fields. Although these trends clearly show the massive marketing potential of these items, many smaller underdeveloped fields can also be exported from China, many of which will also not have such fierce competition. Finding an export category can be hard at first, but with proper research about the various sectors in the industry, it becomes easier to enter the Chinese market.

Economic Liberalization: The Chinese Economic Reform

As countries develop over time and grow economically, they change with the challenges that come with this. China’s liberalization comes into play in the scenario of relaxation of government restrictions in many different areas such as social, political and economic policy.

China has been no different in this regard, significant Chinese economic reforms regarding government restrictions has been seen in the form of an obvious liberalization process that has been implemented. The liberalization that has taken place in China has almost exclusively been a result of the Chinese economic reform. It is still ruled by a centralized “communist” government, which has been in place since 1949 and there is little reason to expect a relaxation regarding political control anytime in the near future.

It is occasionally misunderstood that liberalization is exclusively about political aspects, when this process is referred to as democratization. However, liberalization and democratization can occur independently of each other—with China being the best example.

Only a few decades ago it was virtually impossible to buy anything with money in China
– this has changed fundamentally.

Chinas Economic Reforms

China’s liberalization process also has its beginning with the Chinese economic reforms which started in the late 70’s. Given its state of development, the country had a strong focus on the primary sector and the first reforms were related to agriculture. To avoid a repeat of the 1959 famine disaster, Chinese farmers were allowed to keep a share of their output and not having to give everything to the state. This policy increased production.

This decade also saw changes to freer pricing policies, as well as the country being opened up to foreign investment for the first time. The mid 80’s to the mid 90’s saw further Chinese economic reforms, controls and government invention on private businesses started to decrease. A significant change was that more governmental control was given to local province leaders allowing experimentation in ways to boost economic growth. Many industries were opened to private businesses and the private sector increasingly contributed a larger percentage of the GDP.

The mid 90’s onward brought vast Chinese economic reforms, since many conservative leaders entered retirement or were overruled. The government continued the privatization but too a much larger extent with many state owned enterprises (SOEs) being privatized or liquidated. This era also saw the reductions in tariffs, barriers to trade and regulations, with further Chinese economic reforms in banking, social welfare as well as the introduction of China to the WTO. This had a positive effect particularly on the service sector, as restrictions on retail, wholesale and distribution ended as well as banking, financial services, insurance and telecommunications now being partially open to foreign investment.

The rapid relaxation was slowed down around 2005, halting the privatization process but is still on-going to this day. The Chinese government even started increasing subsidies again and continues exercising control in important industries such as the banking or the health-care sector.

Despite that growth has slowed down, most economic indicators
are still increasing continuously.

The Future of the Chinese Economic Reform

As China continues to grow, liberalization is expected to continue. Foreign direct investment is expected to be increasingly welcomed, as China continues to reduce the regulations. Furthermore, China relaxes restrictions on their own currency being traded freely on the international markets, as well as slowly stopping the artificially pegging of the RMB exchange rate. To strengthen China’s hold and position as a global force, the country will need to seek opening up their currency.

While China is slowly moving from an export-based economy to one based on consumption, further China trade liberalization (particularly in the financial sector) must be implemented to encourage this transition. Interest rates and bank lending (traditionally determined by the state) are now increasingly opening up to market forces.

Chinese economic reform is being seen in the agricultural market, as farmers land is currently owned by the government, but changes are expected to be made so farmers can cash in on the value of the land. This is helping further fuel the economy to turn into a more efficient consumption based growth model.

However, the liberalization isn’t always strictly limited to economic policy. Recently social changes have been seen with the removal of the one child policy, which addresses the problem of China’s aging population that will need supporting in the near future. Elsewhere, the welfare system has undergone reforms which will relax the rules on restricting public services to those who move to urban areas. This will help to stabilize the labor market with a decreasing worker population by allowing for free movement and urbanization.

Overall for the future seems to appear that the focus regarding the economic liberalization in China will remain concentrated on changes regarding economic policies, while also seeing some other reforms to address social issues arising. The government appears to be aware of many challenges that China has to face with many implementations ongoing or pending. A further slow-down of the growth of the Chinese economy may defer the realization of the existing liberalization plans.

E-Commerce: China’s Online Market Places

One of the main questions asked by importers is where to find and procure cost-effective products in China. This article answers that, while also giving a broad introduction of China’s online marketplace.

China’s online marketplace is much more developed than the retail market. Many Westerners are familiar with some of the current most top Chinese e-commerce sites (Aliexpress and Alibaba are some of China’s largest online marketplaces). However, there are other Chinese e-commerce sites used for a variety of different purposes.

China’s online market can be broken into several different categories. The first is B2C (business to consumer), where companies sell directly to buyers, forgoing a middleman. Alternatively, there is B2B, which refers to businesses selling directly to other businesses. Lastly, there is also C2C, which refers to customers selling to customers, as seen on marketplaces such as EBay.

China E-Commerce: Market Outlook

Despite China having a rather turbulent year in 2017 economically, and a fiscal policy rife with wastage, the China’s online marketplace continued to grow. To put its growth in perspective, one only needs to look at sales figures and see that China accounted for the largest e-commerce companies, which is over 40% of the world’s retail e-commerce sales during the year.

The total market for e-commerce worldwide is being estimated at $1,9tn. This amounts to over 8% of all world commerce. It is thus easy to see why so many businesses are entering this market. Something interesting to note is that in developed Western countries (like France and the USA), m-commerce (mobile commerce) accounts for around 20% of total e-commerce sales, whereas for e-commerce in China, the figure is almost 50% and expected to rise to 70% by 2019. This growth suggests that China is ahead of the curve in this aspect, and while the overall economy is showing signs of slowing, but China’s online shopping dominance is not.

Compared to the overall market of China, side-commerce in China has really exceeded expectations. In 2016, the China’s e-commerce market was estimated to be $700bn representing 15.9% of total retail sales and an overall $4.23tn market. It is expected that it will reach almost $800bn in 2017.

Mobile commerce – already a very common thing in China.

Current China E-Commerce Websites

Many people have heard of two of the largest Chinese e-commerce websites Alibaba and Aliexpress; but most do not realize these companies are part of a larger conglomerate called Alibaba Group, is affiliated with many different websites.

By having a wide range of dominant sites focused on different niches, they are able to capture the majority of China’s e-commerce market size. For example, Alibaba is useful for those looking to source Chinese online retailers for products, whereas Aliexpress is suited for ordering personal quantities (often the same products).

The Alibaba (and 1688.com) model introduces a new dynamic and allows for a more personalized manner of negotiations—effectively reversing the sourcing process through an auction process where suppliers bid to meet buyers’ requests.

Another member of the Alibaba Group is one of China’s largest e-commerce companies, Tmall.com, which focuses on the B2C sector. It provides branded goods to citizens of China, Hong Kong, Macau, and Taiwan. It is similar to Amazon, and has a wide range of quality brands. According to China’s e-commerce statistics, it dominates the B2C market in China with a 51.3% market share. The Alibaba Group also owns Taobao—the largest consumer to consumer shopping platform in China.

Alibaba’s listing at New York stock exchange.

However, the E-commerce market in China has many key players beyond the Alibaba Group; firstly JD.com is one of China’s largest e-commerce companies, which retail B2C websites in China in terms of transaction volume. Additionally, Amazon.cn, which dominates many Western E-commerce markets, is also very popular. Another popular e-commerce site is Dangdang, which originally started out similar to how Amazon did in the USA, by selling books.

Some other popular platforms in China are 360buy.com, banggood.com, and DHgate.com. These are more focused on B2C sales, but small-scale importers can find some valuable information and sometimes suppliers here.

What can be seen is there are a variety of effective websites concentrating on e-commerce, with Alibaba clearly dominating this field in respect to services provided for large-scale importers. As e-commerce to continue to grow in popularity, other websites may claim a larger market share depending on their focus areas. As can be seen, the significance of e-commerce in China is a crucial factor for anyone interested in entering the market.

Dealing with Factories in E-Commerce

It should be mentioned that the entities dealt with are still mostly Chinese factories, often through trading companies. As stated in previous articles, specifications and negotiations should be clear and to the point, leaving no room for ambiguity. Heading this advice should ensure a smooth transition into the e-commerce realm.

One also needs to remember that to factories, their online sales are mostly a newly acquired outlet. This does not, however, mean that they will not be giving it their attention. Factories have teams managing their sales channels. These teams are not always subject matter experts though, but they can get you a foot in the door for building a great relationship between you, the importer, and the factory. It will require that you take these first conversations seriously and clearly indicate that you are serious about business.

Know exactly what you are looking for by researching it beforehand. Sales staff does have access to catalogues, but not exact product knowledge. In many cases they will give the impression that they do, and playing along will soon gets you labeled as an inquisitive person with no real commercial intentions. Communicate, get a small order placed, or get referred to a knowledgeable person. With these channels, acting larger than you are, will also get you the needed attention just be sure to follow through.

Conclusion

Online commerce is growing at a rapid pace as are the marketplaces facilitating this. Excellent opportunities can surface and long-lasting relationships can be built through these platforms.  By having the correct background knowledge such as Incoterms and entering with the right attitude, you can succeed.   

Different Types of Sourcing: Methods, Pros & Cons

It is hard to run a business in the globalized world without hearing of the advantages of sourcing to China. Without a doubt, China (as well many other Asian countries) can help giving your company a competitive advantage in today’s dynamic business environment by taking their individual capabilities into consideration. However, the first step to achieving this objective is to thoroughly understand the process and sourcing methods that are connected to this broad subject.

The underlying process of sourcing and all the different sourcing methods is called procurement. Sourcing is the stage of evaluating new relations with suppliers in the act of buying goods or services from an external source. Other equally important steps in the procurement process include communications, negotiations, logistics and other administrative tasks.

Sourcing does not strictly mean only looking to purchase cheap products but the emphasis is on acquiring newly formed business partnerships. While many companies only look to benefit from cheaper manufacturing, others look for specialized skills or the creation of leaner operations. Furthering efficiency and ultimately achieving business objectives are common goals of sourcing.

The term sourcing is usually used as a synonym for outsourcing in everyday language. This is roughly correct as long one is not concerned with insourcing. As the term suggests intuitively, it means that a company integrates a process that was formerly conducted by a partner outside of the core company. Since this is relatively uncommon, the focus here is on outsourcing to China, Asia in general or elsewhere.

The basic principle how tasks in a company can be handled: Do them yourself or
find someone who is more efficient.

Outsourcing Front and Back Office

Efficiency gains can be accomplished through moving business operations abroad, which is notoriously referred to as “outsourcing”. However, outsourcing takes many different forms, from moving your own business departments abroad to teaming up with a domestic supplier for the provision of certain goods or services.

Generally, there are two different areas to outsource: front and back office functions. For example, back office functions are generally centrally focused and are usually not revenue generating services themselves but are still integral to the running of the company. Examples include human resources, accounting and manufacturing. All of these departments have become increasingly popular to outsource, especially with smaller companies who may not need dedicated departments for these functions. They often prefer the inherently more flexible and scalable payment model available with outsourcing when contrasted with full time employees.

On the other hand, front office departments have directly revenue generating roles and are in personal contact with clients, such as sales departments and customer service. Despite that front office roles are also popular to be outsourced, it is less common than for back office functions since its functions are usually seen as more intimate. A common example is that particularly large companies are moving customer service call centres to English speaking low cost countries such as India.

While both areas are becoming increasingly common to be outsourced, one should be aware of the advantages and disadvantages of outsourcing, especially from the viewpoint of the customer. While the company’s expenses may decrease, other non-financial factors can affect customers purchasing decisions and hence profits. If they notice a decrease in quality (be it with the response times for orders or the product itself) the overall effect may be negative. Therefore, easier control and the possibility to hide process changes in the case of outsourcing of back office function are usually seen as the main reasons for its larger popularity compared to front office functions.

Advantages & Disadvantages of Outsourcing

While traditional sourcing with a partner company you should be first learn about the strengths and weaknesses of other nations. Initially, people only think of China for their outsourcing of manufacturing services. As China’s economy shifts into a service based economy, their potential for other, non-manufacturing services is increasing.

China, being a developing country, has an ever maturing services sector with increasingly adequate professional services for various tasks. China’s manufacturing capabilities offer a good compromise between professionalism and price. However, China lags behind other Southeast Asian countries in services.

Thanks to advances in information technology and logistics, many of the normal business processes that need to be conducted no longer have to be centralized within your company. Other companies will allow you to make use of the expertise and skills required for certain jobs by being specialized in certain back office or front office functions. Therefore, you can spend more time focusing on the core revenue generating roles, while knowing the outsourced tasks will still be completed by handing over responsibility to other companies (abroad).

With issues regarding the set-up, quality concerns, lead times and miscommunications being discouraging to potential purchasers, these can all be addressed by using the help of a 3rd party sourcing services provider. Accessing premium suppliers through using procurement and sourcing companies can minimize risks not only for the initial identification process, but also by other procurement services such as, for instance, 3rd party quality testing and factory inspections.

Sourcing might seem easy with the availability of numerous online portals;
however, they do not solve all problems.

Different Types of Sourcing Methods

There is a wide range of sourcing methods and one should bear in mind three key points:  1) sourcing options are often not mutually exclusive  2) sourcing methods can be applied to both front and back office functions and 3) strategic sourcing as a procurement process can be seen as finding the appropriate solution for your short and long-term goals.

A few strategic sourcing methods can be applied:

• Low-cost Country Sourcing

A method of sourcing which focuses on benefiting from the competitive advantage of other countries which are able to offer lower labor and production costs. The method focuses on cutting overall operating expenses for a firm, and is in itself a procurement strategy. Most companies which look towards China are following this sourcing method.

• Global Sourcing

A similar sourcing method as to the previously mentioned low-cost country sourcing; however, this type of sourcing is not strictly about benefiting from cheap production. The aim may be to get a taste of the international market and the way to carry out business there. Alternatively, the focus could be on tapping into a new range of skills or resources which would otherwise be unavailable domestically.

• Prime/Sub Arrangements

An outsourcing method in which a client works direct with an established outsourcing provider to arrange procurement; the outsourcing provider contracts out the work to a smaller company. All contracts are dealt under offshore law, as the agreements are between 2 offshore entities. This can reduce the burden of dealing with import and export restrictions upon the company, and make the process itself smoother.

• Captive Service Operations

This occurs when the outsourced services being provided are performed by a company the customer owns or are from within the same group. This creates a greater level of control, as well as addresses questions that may arise about confidentially, security and infringement rights. However, the same level of economies of scale may not be achieved as well as the opportunity to take advantage of supplier’s expertise.

• Conventional Agreements

The traditional way to outsource parts of a company’s operations. Two companies create a simplified agreement to allow for maximum cost reduction through utilizing economies of scale and expertise. However, there is a significant loss of control and there needs to be a high degree of trust as sensitive data may be at risk.

Commonly Outsourced Services

Besides of the rough difference between front and back office departments, it is also common to differentiate concrete types of services that can be outsourced. The distinction of the four following types of services is the most common one to differentiate sourcing methods. These can also be seen in the context of strategic sourcing, where a firm continuously leverages its procurement process to benefit its purchasing activities by reassessing the sourcing potential of each service.

• Operational

Operational services are most frequently outsourced by the manufacturing industry than when compared to other industries due to the nature of the work. This creates specific tasks that are suitable to be given control to by external providers. Machine maintenance and repair is commonly outsourced, as there is not necessarily the need to have a full time employee who possesses these skills if the work is infrequent. Other operational roles may include general facility management and maintenance, including cleaning or landscaping.

• Professional Services

These services are the most commonly thought of when people think of outsourcing. Departments like legal, accounting, human resources and so forth all come under this category. The need for professional expertise in these areas may only be needed at certain times, and by contacting an external provider you can scale the cost along with the growth of your company. This usually means overhead costs are significantly reduced.

• Manufacturing

Many companies also seek to outsource the manufacturing process. This can be done by small companies who do not have the resources to manufacturer themselves, or even large corporations like Apple who prefer to use the strengths of external companies. Generally, this arrangement is with a supplier who can create a tangible good based off a provided design (see Original Equipment Manufacturer/OEM article) or with a supplier who already has a range of pre-existing product lines (see Original Design Manufacturer/ODM article).

• Process Specific

Process specific outsourcing refers to a unique process or specific internal procedure. It is commonly found in the service industry, for example, a newspaper may outsource the actual delivery to professional courier companies. This creates a situation where the original company can focus on their core operations, while handing over the responsibility of an important task to another company that specializes in it.

Sourcing from Asian Countries

While you may have identified that your company would benefit from the advantages other companies in other countries offer, actually knowing the way to proceed can be difficult. Sourcing is mostly about having contacts and knowing where to find new contacts. When it comes to complex sourcing processes, there is no way around a 3rd party procurement and sourcing company.

You may just want to find suppliers for either pre-existing goods, or find suitable manufacturers to contact to determine whether they are able to meet your needs. A good initial starting point would to use the website Alibaba. The Alibaba Group itself is a Chinese E-commerce business that focuses on sales relating to business to business sales by linking suppliers in China/Asia with international buyers seeking products.

While the Alibaba may suit the needs of some companies, the usefulness is limited. If your company is looking further than generic products, using Alibaba to find a supplier versatile enough to meet your needs becomes difficult.

Certain barriers can prevent sourcing from being effective. Issues such as language barriers and disreputable manufacturers can cause a hindrance. Fortunately, there are 3rd party companies which can be used to ensure the overall process runs smoothly. Companies offer services such as, 3rd product sourcing, supplier analysis, quality control and factory inspections allow to effectively and efficiently link companies together and create long lasting working relationships.