Collaborative Knowledge Development Project

Sourcing Product from China

Did you know…?

How do you find and select a Chinese manufacturer?

Warehouse Retail

Domestic CustomsFOB

Manufacture New

Source existing

Wal-Mart Approach

Logistics

Sourcing Options

• Shenzhen• Shanghai

• Agent• Manufacture

r

Shipping Distribution

Think of Sourcing a Chinese manufacturer as a three-stage process.

Asses Cost-Benefit: China or Domestic?

Identify & Select Manufacturers

Manage Shipping

1 2 3Assess

Identify & Select

Manage

Which product do you want to source?

Key questions:• Do you have adequate knowledge of the product

specifications?• What kind of volume do you anticipate?

Step 1: Assess cost-benefit of manufacturing in China vs. domestically.

For example: Smashpong –A fun variation on ping-pong

1 2 3Assess Identify & Select Manage

Key Considerations:• Use a Sourcing Agent (ask :

5% of shipments)• Websites – Alibaba.com (agent

or factory)• Fairs (e.g., Canton, Vegas)• Relationships “Guanxi”• Domestic-only Chinese

manufacturers (+ courier)

Step 2: Identify and select manufacturers.

Identify

1 2 3Assess Identify & Select Manage

Step 2: Identify and select manufacturers.

Select

Key Criteria:• Specs (leather, durability,

materials); domain knowledge required

• Price (per unit, FOB); payment terms:• 30% upfront• 70% release factory• Per unit $

• Time to FOB

1 2 3Assess Identify & Select Manage

Step 3: Manage shipping.• Pricing - % of container

• $1,500 - $3,000; 20’ container• $3,000 - $5,000; 40’ container (Hi-Q); less restrictive

• Logistics companies (i.e., Alibaba)• Criteria: quality of service, time, price

FOB:• Shenzhen• Shanghai

Domestic Customs:• Physical/self• AgentNote: Manufacturer must produce Manifest

Logistics• Agents• Transport• Manifest• Tax forms• Retail• DC

Warehouse / Retail

1 2 3Assess Identify & Select Manage

The Harmonized Tariff Schedule of the United States (HTSUS) is the primary resource for determining tariff classifications for goods imported into the United States.[1]

 The Harmonized Tariff Schedule is based on the international Harmonized Commodity Coding and Classification System (Harmonized System), which has been established by the World Customs Organization. Virtually all countries base their tariff schedules on the Harmonized System, making it easier to conduct international trade.The U.S. Harmonized Tariff Schedule, like Harmonized System tariff schedules generally, classifies a good (assigns it a ten-digit tariff classification number) based on such things as its name, use, and/or the material used in its construction…There are over 17,000 unique ten-digit HTS classification code numbers. Source: http://en.wikipedia.org/wiki/Harmonized_Tariff_Schedule_for_the_United_States

Step 3: Manage Shipping.

1 2 3Assess Identify & Select Manage

What did you learn that you didn’t know before?

Key Take-Aways