Blog Posts https://thesourcing.co en Wed, 11 Feb 2026 14:29:11 +0300 About Us - The Sourcing Co https://thesourcing.co/tpost/2kbxcbyo71-about-us-the-sourcing-co https://thesourcing.co/tpost/2kbxcbyo71-about-us-the-sourcing-co?amp=true Thu, 25 Feb 2021 22:34:00 +0300 The Sourcing Co. has offered a unique combination of expertise as both a supplier and a manufacturer, providing an end-to-end service for businesses across the world, from entrepreneurial startups to global corporations.

About Us - The Sourcing Co

The Sourcing Co.

About Us


Product sourcing, development, marketing, and logistics

Your one-stop sourcing company in the Asia-Pacific


Since 2014, The Sourcing Co. has offered a unique combination of expertise as both a supplier and a manufacturer, providing an end-to-end service for businesses across the world, from entrepreneurial startups to global corporations.

We offer a one-stop-shop for all commercial product sourcing. While most supply companies use the services of a retailer, distributor, stock product supplier, overseas trading firms, and factories, we combine all of that into one.

The result is a more simplified and cost-effective ‘factory-direct’ service – with more value to you.


A global presence

Based in Guangzhou, the manufacturing heart of China, with sales offices in Brisbane, Australia, and Port Moresby, Papua New Guinea, we’re able to use our global supply chain and shipping infrastructure to streamline significant product sourcing at an unrivaled speed.

Our diverse and experienced team has a thorough understanding of the Asia-Pacific business environment – its founders born and bred in Papua New Guinea, educated in Australia, and based in China. Combined with offices across multiple countries, we’re well-positioned to use our resources to deliver a high-quality product.

Our services include:



Product Development, Sourcing, and Design

Great products start with a great concept. We'll start with the brainstorming – formulating the initial design of the product, all the way through to manufacturing as many quantities as required.



Supply Chain, Warehousing, and Distribution

In warehousing, an organization is everything. Our supply chain specialists will ensure the final products are meticulously managed, with the team having unmatched experience in dealing with high volumes of goods for our larger corporate clients.



Marketing and Graphic Design

The Sourcing Co. employs a modern and tech-savvy marketing and graphic team, specializing in targeted creativity to ensure our corporate client’s customer base sees the best in their products. We’ll follow all style guides provided and study your briefs to ensure the brand reflects the company’s goals and values.


Shipping, Transportation, and Logistics

The team is an expert in freight forwarding and can arrange for the final product to be shipped to its port of destination. We’ll take care of customs clearance and all import/export documentation to ensure the goods are delivered safely – whether by road, rail, sea, or air.

We’re also firm believers in ethical sourcing. We'll only work with selected ethically-accredited partners in China, Vietnam, and Indonesia, ensuring that our supply chain is compliant with international laws and holds up to our corporate values.

Our Ethical Sourcing Policy forms the backbone of our company, and we strive to implement best practices across our global network.

Also read: How To Source An Ethical Manufacturer

Removing the guesswork

The Sourcing Co.’s agile model provides our clients with a significant competitive advantage – increased efficiency, flexibility, and supply chain cost savings.

With our in-house production, warehousing, and marketing teams, we reduce business risk through increased control and oversight. Quality assurance happens at every stage of the process, so you can be confident we get it right the first time.

Let us remove some of the complexity, guesswork, and risk so that you can focus on the core of your business.  

But don’t take our word for it

We’ve helped a wide range of corporate clients achieve their product sourcing and development goals, offering tailored solutions to suit their requirements.

The Sourcing Co. is proud to service a range of excellent corporates globally including:


We continue to work internationally and develop long-term relationships with companies of all sizes. We’re looking forward to working with you as your one-stop sourcing company in the Asia-Pacific.

Contact our product sourcing specialists today at info@thesourcing.co or reach out to one of our global offices.]]> Why Shipping Costs are so High https://thesourcing.co/tpost/o972pbfo31-why-shipping-costs-are-so-high https://thesourcing.co/tpost/o972pbfo31-why-shipping-costs-are-so-high?amp=true Thu, 25 Feb 2021 22:56:00 +0300 Shipping and Freight Since the onset of COVID-19 early last year, shipping costs have skyrocketed. Constrained cargo capacity and increased port charges have led to shippers navigating the Asian continent experiencing price shocks as we’ve never seen before.

Why Shipping Costs are so High

Why Shipping Costs are so High: Air and Sea Freight [2021 Update]

Since the onset of COVID-19 early last year, shipping costs have skyrocketed. Constrained cargo capacity and increased port charges have led to shippers navigating the Asian continent experiencing price shocks as we’ve never seen before.

Prices in the busiest routes from China to the United States, for instance, were 208 percent higher than the previous year.

As we move into 2021, shipping costs are still considerably high. Ocean rates soared in January, hitting as high as $5,340.30 per 40-foot container. Airfreight rates fared no better, with the World Health Organisation claiming races to be ‘outrageous’ as they prepare to ship new vaccines.

Below, we’ll consider why this is the case and how your company can adapt.

1.     Constrained capacity and increased shipping demand

Rising costs reflect an increased demand for shipping services (both air freight and sea freight), despite constrained carrier capacity. This means that there is just not enough space on container vessels and aircraft to meet everybody’s orders. Global air cargo capacity reportedly declined by 16% in January 2021 alone.

The shocking impact of the pandemic led many carriers to cancel their journeys in order to reduce costs (what are called blank sailings in the shipping industry). But a huge surge in demand caught shipping lines and airlines off guard, now lacking the space and containers to meet the demand, with many carriers completely booked out for about a month.


There is a particularly strong international demand for Chinese goods, causing a global container shortage. Rising purchases of pandemic-related goods and extra equipment to work from home (imported clothing, furniture, computers) simply faces not enough space to meet the orders.
Across Asia, we are seeing skyrocketing rates and simply not enough containers across the Southeast and in India. Shipping company HHM Co. has also stated their container shortage will last throughout the first half of 2021.

We are indeed facing a ‘bottleneck’ scenario, with containers and space being the prime limited resource. In 2021, it is vital for shippers to book their loads well in advance in order to secure a spot on a vessel or an aircraft (especially before shipping peak season beginning around August).

Also read: FCL vs LCL Shipping: Which Should I Use?

2. Port congestion

Another critical factor behind rising shipping costs is congestion at both airport and ocean ports. The sharp demand outlined above has meant shipping ports have become more and more congested (especially in Asia) and a so-called ‘handling hell’ in some airports. Cargo flows throughout many of the world’s airports have been so chaotic, with one airport reporting a 113% increase in ramp activity.

For ocean vessels, this means that when ships arrive at a port, they cannot load or unload their goods because port capacity has already exceeded. They have to queue up and wait for their turn, creating pressure on shipping lines, port management, and cargo owners. For airports, it’s resulted in ground handlers overwhelmed with the amount of cargo that needs to be stored into a limited amount of aircraft (with many passenger aircraft only operating cargo flights).

Carriers, therefore, suffer increased operational costs and resort to passing that cost onto consumers. It has led to some shipping lines charging a controversial ‘congestion fee’, including a $4342.11 “port congestion surcharge” in Australia. This was on top of the already mounting costs of customs clearance, freight charges, and access to ports.


There are also added costs with demurrage (when a cargo owner fails to load or unload their goods from a ship within an agreed time frame), which is strongly interwoven with port congestion. If you are shipping cargo, you have a certain number of ‘free’ days to return the container back to the carrier (usually 3-5 days). You may not make it due to port congestion and are charged demurrage for every late day that your container is at the port.  We are seeing this happen more and more, especially amongst the presence of rising empty containers being stacked up in ports.

Is therefore vital to be creative when planning your shipment to ensure costs are minimalized as much as possible.

3. Port charges

Ports across the world charge a raft of different fees, which are often passed onto shippers. These fees all add up, leading the overall shipping experience to be an expensive one.



Some of the charges you may need to pay to include:

  • Dues on goods – these are charged on goods that are loaded on or unloaded on a vessel and vary from port to port, terminal to terminal. They are typically charged depending on the size, quantity, and weight of your cargo.

  • Port storage charges – These are charges levied for storing containers that have not yet been cleared for import by customs authorities. Unfortunately, you will often find yourself paying for demurrage (discussed above) and these port storage charges at the same time.

  • Terminal handling charge (THC) – the charge for loading and unloading containers off ships. Sometimes you will have to pay multiple sets of these if you are transhipping your goods.

  • Early and later arrival charges – these are self-explanatory, and charges may be levied on the early and late arrivals of containers to ports.

  • Detention – You are charged detention when a container is outside of the port (such as, for example, your warehouse), and you hold onto the container for longer than you are permitted by the shipping line.

It’s important to factor in these costs in advance, so you aren’t hit with unexpected shocks blowing out your margins.

4. Fuel surcharges

Shipping is also expensive because of fuel surcharges (FSCs), and this hasn’t changed with the pandemic.

A fuel surcharge is an additional fee charged by carriers to cover costs associated with fuel. The rates change along with the ongoing fluctuation of global fuel prices and can apply to both domestic and international shipping. Both airlines and ocean carriers charge this rate, and it has not gone without controversy.


Calculating a fuel surcharge differs depending on which carrier you use, and where you are in the world. They are typically calculated on a percentage of the base rate of your cargo, adjusted according to the average monthly change in fuel prices over a given year.

It is now more important than ever to keep an eye on your fuel surcharge amidst the pandemic and a global recession, but also due to a recent oil price war between Russia and Saudi Arabia in early 2020 – a shock that caused oil prices to fall to the lowest they had ever fallen in 17 years.

Your main goal is to provide the best price for your customers, so it’s important to negotiate surcharges with your carrier. We’ve found that corporate clients can sometimes negotiate a flat rate for international shipments if they are constantly shipping large volumes of goods.

Contact The Sourcing Co. to assist with your shipment

The world of international shipping can be complicated and expensive if mistakes are made. Our sourcing specialists have unmatched expertise in shipping, customs clearance, and freight forwarding across the Asia-Pacific to help you navigate the process.

We understand that shipping costs are high for both air and sea freight, and will continue to be in 2021. We’ll streamline your supply chain so that you only have to pay what is absolutely necessary to transport your cargo. We regularly handle shipments for global corporate clients in consignments to and from Australia, New Zealand, USA, UK, PNG and more, so we’re accustomed to handling high volumes of goods.

Please get in touch with us today to discuss your next shipment – we’re based in Guangzhou, China’s manufacturing heartland, as well as Vietnam, Papua New Guinea, and Australia.]]> China, India or Vietnam: Where Should You Source & Manufacture? https://thesourcing.co/product-sourcing-and-manufacturing/tpost/kuueslj9n1-china-india-or-vietnam-where-should-you https://thesourcing.co/product-sourcing-and-manufacturing/tpost/kuueslj9n1-china-india-or-vietnam-where-should-you?amp=true Thu, 04 Mar 2021 16:28:00 +0300 Sourcing and Importing China, India or Vietnam: Where Should You Source and Manufacture? China is regarded as the world’s manufacturing heartland, but there are also benefits to sourcing and manufacturing in other countries such as India and Vietnam.

China, India or Vietnam: Where Should You Source & Manufacture?

China, India or Vietnam: Where Should You Source and Manufacture?

There are many places around the world to source and manufacture goods for your business. Where you should so depend on a range of factors. China is regarded as the world’s manufacturing heartland (it’s why our sourcing company is based out of Guangzhou), but there are also benefits to sourcing and manufacturing in other countries such as India and Vietnam.

Below, we’ve outlined a list of considerations you’ll need to take into account when choosing to source and manufacture your product in either China, India, or Vietnam. By understanding the dynamics that arise out of these three countries, you’ll be in a better position to decide the most cost-effective sourcing operation for your business.

1.    Location of available manufacturers

There is no point in choosing China as your go-to source for product creation if no factory in China manufactures that product. The same goes for India and Vietnam.

If this is your sole consideration, the easy choice is China. China is well-known for its diversity of product manufacturing: they’ll make anything. It’s very easy to find a manufacturer in China for just about any type of good, which explains why the country is known as the global manufacturing centre. You won’t just find one manufacturer– you’ll more than likely find dozens or possibly hundreds of manufacturers who can make the good you’re after.


A quick search on Alibaba, for instance, will reveal that Chinese suppliers dominate the market. If you type “shirt fabric” into Alibaba’s search engine, you’ll find over 9,000,000 potential suppliers in China but only a small 233 for Vietnam. None appear in India. Similarly, if you type in “lunch box”, you’ll come across 39,200 Chinese suppliers but only 175 in India and 97 in Vietnam. Neither India nor Vietnam can offer the sheer amount of diversity that China can offer.

However, this doesn’t mean you should pass off Vietnam or India. Vietnam is the manufacturing hub for some of the world’s largest companies. In 2010, for instance, Vietnam became the main supplier of Nike footwear, accounting for about 37% of production (behind China, a close 34%). In 2018, this figure grew to 47% (whilst China was left to manufacture only 26%). Vietnam’s primary exports include broadcasting equipment, textiles and mobile phones.

India is also a central manufacturing point for many countries. They boast exports in refined petroleum, diamonds, packaged medicaments, jewelry and rice. Indeed, India’s exports are largely dominated by minerals and chemical products (such as fertilizers, soaps and pharmaceuticals). The Indian pharmaceutical sector is booming, supplying over half of the global demand for a range of vaccines and a quarter of all medicines for the United Kingdom.

2.    Requirement for skilled and experienced labour

Another factor to take into account is whether you can find the skilled and experienced labour needed to manufacture your goods.

China, with its 780 million+ strong workforces, has a wealth of experience and technical know-how when it comes to manufacturing particular goods. If looking at Vietnam or India, by contrast, you’ll need to be careful when selecting a manufacturer if the product you’re sourcing requires some degree of specialised ability. This is especially the case if the manufacturer is only new, as they may lack the requisite experience required for the task. Global manufacturing has indeed surged towards Vietnam – with not enough skilled workers to meet the demand.


Statistics reveal that China is again a more attractive option. According to the 2017 Global Human Capital Report developed by the World Economic Forum, Vietnam ranked only #120 out of 130 when it came to “know-how”. India ranked #79, whilst China took the lead at #44. New statistics released in 2020 in the Human Development Report (HDR) by the United Nations showed that only one in five Indians in the labour force are “skilled”, is ranked #129 among 162 countries.

Of course, you’ll need to assess each manufacturer as you find them on a case-by-case basis.

3.    Quality of infrastructure and logistics

China is an appealing choice when looking at the quality of its infrastructure and its sophisticated logistics. China boasts seven of the 10 most busiest shipping ports (including the Port of Tianjin, the Port of Guangzhou and of course the Port of Shanghai). It also has a sophisticated rail network and is scheduled to build 10,000 km of railway lines connecting major city checkpoints over the next five years.


Vietnam and India, by contrast, lag behind when it comes to infrastructure, transport and logistics. Vietnam has quite an underdeveloped infrastructure landscape, whilst a large portion of India’s road network is unpaved. China’s high-speed rails can travel as fast as 250 kilometres per hour, whilst freight trains in India can really only travel up to 25 kilometres per hour (although this is planned to change). Indeed, despite India’s growth, S&P Global report that its weak infrastructure has meant it has been incapable of meeting the economy’s needs.

According to the 2018 Logistical Performance Index published by the World Bank (which ranks countries according to the quality of their trade logistics), China ranks #26 while Vietnam is down at #39 and India is further down at #44.

But again, this does not mean Vietnam and India are automatic write-offs. Vietnam is one of the fastest developing countries in Asia and is one of the only countries in South East Asia that remained economically strong during COVID-19. Its growth is robust, and the country invests much more than the global average in its infrastructure. India also plans to spend US$1.4 trillion on infrastructure across 2019-2023.

4.    Labour costs

You’ll also need to consider labour costs when choosing between the three countries. In this department, Vietnam and India are more competitive than China.

Minimum wages differ across China depending on the province, so you’ll need to know the specific hourly pay requirements for labourers. In 2020, the minimum wage in Beijing was 24 RMB per hour (approximately US$3.70 per hour) whilst it ranged between 14-16.4 RMB in Guangdong and 16-18 RMB in Shaanxi.

Minimum wages in Vietnam and India, however, tend to be cheaper. The cost on average of employing a factory worker in Vietnam is about a third cheaper than in China.

Questions?

At The Sourcing Co, we specialise in all things sourcing and manufacturing. With headquarters in China, we’ve established sales offices in Vietnam and Australia and partnered with ethically accredited manufacturing partners in Indonesia, China and Vietnam.

As a one-stop sourcing company in the Asia-Pacific, we’ve acquired the unrivalled ability to choose the right locations to source and manufacture your goods in the most cost-effective way for your business.

Get in touch with us today to start discussing whether China, India or Vietnam or even another country altogether, is right for you.]]> 5 Risks of Buying From Alibaba https://thesourcing.co/product-sourcing-and-manufacturing/tpost/ieuye5a311-5-risks-of-buying-from-alibaba https://thesourcing.co/product-sourcing-and-manufacturing/tpost/ieuye5a311-5-risks-of-buying-from-alibaba?amp=true Sat, 27 Mar 2021 11:58:00 +0300 Lucas M Sourcing and Importing A common fear amongst new importers is being swindled by a supplier, either on Alibaba or directly, and potentially losing hundreds of thousands of dollars.

5 Risks of Buying From Alibaba

A common fear amongst new importers is being swindled by a supplier, either on Alibaba or directly, and potentially losing hundreds of thousands of dollars. It’s unsettling to send an enormous amount of your hard-earned money to some strange bank account in Vietnam or China – with the thought of never seeing that money again.

Without using a professional sourcing company, it can be difficult navigating the various risks of international imports. Below, we’ve outlined 5 risks of using Alibaba and importing directly from suppliers that you should consider when importing in 2023.

1. Payment fraudsters

Being the victim of a ‘payment fraud’ can be a nightmare for importers. It’s unlikely you’ll see your money again. This is where a scammer somehow gains access to a supplier’s email address and discovers which orders are about to receive payment from an importer. All this requires is waiting for a purchase order to arrive in the supplier’s inbox.

Once they receive a purchase order from you, the scam artist will then typically download the previous month’s ‘proforma invoice’, make a new invoice look extremely similar – the only real difference being the bank account numbers – and then issue the invoice to you.

Your finance personnel (if they don’t double-check the bank account details) will then wire the money to the fraudster’s account.

These fraudsters could be anybody – low-level employees who have an ax to grind, or someone looking for a big payday. The money could be sent to China, Hong Kong, India, the Philippines, Eastern Europe – anywhere.

2.  Getting the wrong (or poor quality) goods

Sometimes a supplier makes a mistake. But others will simply accept your money with full intentions of delivering you a poor-quality product.

When you start asking for a replacement or a refund, the supplier will typically stop responding to your messages. There might be a slim chance you could get your money back if they’re a genuine company, but only if you’re willing to go the extra mile and put in the time.
You’ll probably have to write off the loss.

But what if you’ve lost too much money to forget? You could pursue your case through the courts or through arbitration, but this process is costly, time-consuming with no guarantees of success.

Just take a look at this January 2021 report of swathes of adulterated honey coming out of China, including from Alibaba, placing honey importers and beekeepers at financial risk.  There is also the case of one man in around September 2020 who purchased an electric supercar off Alibaba for $31,000. What turned up at his doorstep was some type of pink and white microcar. He reportedly received a partial refund, but only after a war of words.

Also read: How To Manage Risks In Your Supply Chain


3. Bait-and-switch

This is a sub-set of the risk we explained above.

We’ve seen this technique being used on Alibaba recently. A scam artist will lure in an importer by advertising a high-quality or popular product, only to “switch” the good with another good entirely, a shoddy version of the original or simply being told that the goods are no longer available.

Observe the recent case of the Route Werks Handlebar Bag. This was a debut cycling handlebar bag launched in October 2020 which hit its Kickstarter funding goal in a matter of six hours.

Unfortunately, somebody on Alibaba stole the image from the campaign and set up an AliExpress e-commerce page, claiming they had the handlebar bag for sale at a lower price. This was before production had even started on the real product.

Of course, that supplier ‘switched’ his product advertised, and provided customers with substandard handlebar bags that were nothing like the Route Werks bag. Other “suppliers” emerged across the internet with new ads and pages too.

The owners of the design tried to fight the scammers as they came up – but their lawyer told them ‘you’re just going to play whack-a-mole forever’.

4. Employee sub-contracting

As we said above, some employees are disgruntled - working long hours every week with poor pay, with a commission if they get lucky. They may hate their boss and want to divert the payments made for their own benefit.

Typically, you would pay your supplier directly, and the salesperson who is in charge of taking payments would either pocket the money or divert the payment to a different, cheaper factory (and pocket the difference). The salesperson may even receive a higher commission from their friends at the other manufacturer.

5.  Raising costs after quoting

An importer may go onto Alibaba, create an order – only to have the price of their order unexpectedly double. The supplier might apologize and say there was a mistake in the initial price listing or say that the price advertised did not include shipping costs. It’s a type of ‘clickbait’ trap that importers may fall into.

Due to Alibaba’s nature as a retail website, you will receive a specific price for the order you request. A supplier will give you a favorable quote, encouraging you to increase your order.
But after you choose your specific packaging and sampling requirements, and you pay a deposit, the supplier may then ask you for a higher price. Importers may feel like they have no choice but to pay it, as they don’t want to go through the time and effort to source yet another supplier and repeat the whole process again.

How to avoid being scammed by a supplier?

The best way to mitigate the risks of importing directly from suppliers, or by using Alibaba, is to engage a professional sourcing company who specializes in finding the right suppliers and manufacturers for your products.

The best sourcing companies use their connections across the world and highly developed business acumen to ensure importers receive reliable, timely and high-quality service that helps their business operate efficiently and cost-effectively.

As a leading sourcing company across the Asia-Pacific, we’ve built strong partnerships with suppliers in China, Vietnam and Indonesia and now serves some of the world’s largest corporations. We’ve fine-tuned our business model at The Sourcing Co to ensure we carefully choose ethically-accredited, reliable suppliers who don’t cheat their customers and are compliant with modern slavery laws.

Please get in contact with us today to discuss how your business can avoid the risks of engaging with suppliers directly.]]> Shipping Delays: The Container Vessel Blocking the Suez Canal https://thesourcing.co/tpost/an1t74hdf1-shipping-delays-the-container-vessel-blo https://thesourcing.co/tpost/an1t74hdf1-shipping-delays-the-container-vessel-blo?amp=true Sun, 28 Mar 2021 14:55:00 +0300 Shipping and Freight The Ever Given, a 400-metre-long container vessel, has run aground in the Suez Canal and become stuck across the central global waterway.

Shipping Delays: The Container Vessel Blocking the Suez Canal

The Ever Given, a 400-metre-long container vessel, has run aground in the Suez Canal and become stuck across the central global waterway. It’s blocking around 150 vessels from getting through the canal, with shipping delays across the world being an inevitable ‘domino’ effect.
Despite significant dredging and tugging to free the vessel, the blockage is still there. We expect this to cause huge disruptions to global trade and increased shipping rates, so be prepared for delays in your shipments.

How did the Suez Canal blockage happen?
We don’t know the precise cause yet. The Japanese-owned Ever Given, holding about 20,000 containers,entered the canal from the Red Sea and only ran aground approximately 45 minutes later.
Over 50 ships pass through the canal every day, so it’s important the exact cause is determined. We expect investigations to take their course and shed light on how this could happen to the vessel nearly the size of the Empire State Building.


The Taiwan-based operator, Evergreen, blamed strong winds. They reported a sandstorm overtaking the area with winds travelling speeds of up to 50 kilometres per hour.
But a range of factors could have played a role. There may have been unexpected exposure to natural elements, but also a potential loss of power or problems with steering. Basic human error may also be at play, given that many large ships have passed through the canal without incident.
The sheer size of the vessel itself – the Ever Given being one the of the largest container vessels in the world – means it faced an inherent increased risk of running aground.

When will the blockage be fixed?
Very hard to say.
The vessel cannot simply reverse out like a truck. It’s firmly wedged into the Suez Canal’s banks, so it needs to be refloated before it can go anywhere. Nor can you simply ‘unpack’ the ship (being full of extremely heavy cargo).
Digging the vessel out of the ground could take a few days. Authorities need to remove the sand and mud wedging the ship into the banks. Once it’s finally out, it will likely reverse out the way it came.


Will the blockage cause shipping delays?
Yes.
According to Lloyd’s List, the blockage is causing delays worth $400 million an hour. There are also reports of ships in the canal stuck in ‘traffic jams’ just waiting for the blockage to clear.
Many vessels are now even considering travelling around Africa via the Cape of Good Hope (adding around two weeks to their journey).

Photo by Kees Torn. Used under a Creative Commons licence.

The Ever Given is one of the largest container ships in the world
But whether you, as an importer, feel the delay will depend on where you’re based.
The canal, being 190 kilometres long and a passageway for around 12% of the world’s ocean trade, is one of the most important shipping routes from Europe into the Indian and Pacific Oceans. Nearly $9.6 billion worth of goods enter through the canal each day, and about a quarter of the traffic is on container vessels.

Most of the ships that pass through the canal are container ships, but there are also tankers, bulk carriers, general cargo vessels, car carriers, RORO and LNG ships.
The global supply chain is already facing an unprecedented amount of pressure. A rapid pandemic-driven increase in demand for cargo and port congestion has already caused delays with vessels unable to dock and unload their goods.

Countries like the United States and Australia, who receive most of their goods from Asia, will be less directly impacted in the short-term compared to those importers in Europe. But the blockage will also halt empty containers returning to Asia which will only exacerbate the global container shortage.

Consumers will likely feel an impact if the blockage goes on for much longer. This is especially the case for goods that are assembled in Europe before being shipped to other countries such as the United States. European economies who import car parts will also experience the brunt of these delays.

We expect delays in oil shipments, as just under 2 million barrels of oil flows through the Suez each day (approximately 7% of all ocean-borne oil). We also expect delays in refined petroleum products on their way to Europe, like jet fuel and gasoline.
Delays through the canal will likely also increase the risk of congestion at ports, especially in Europe. This is because delayed cargo will arrive at the same time as the cargo scheduled to arrive on time – congestion means more delays, as ships will have to wait to unload their containers.

If the blockage is resolved soon, delays will be minimal. But the longer this drags on, the increased risk of delays in more parts of the world (including Australia and the United States) will materialise.

Will shipping rates increase because of this?
We expect so.
This will be troublesome news for importers, with shipping costs already being very high.
Shipping rates for oil have already doubled. This is not surprising, given vessels need to reroute their cargo and burn more fuel – accounting for 60% of a ship’s operating costs.


The index for Large Range 2 tanker vessels from the Middle East to Japan has also already escalated to 137.5 worldscale points on Friday 26 March, compared with 100 worldscale points the previous week.

We’re expecting an increase in spot freight rates, and so are some of the banks. Both JP Morgan and the Bank of America predict increased bunker costs due to the requirement to reroute. The Freightos Baltic Index (FBX) has already recorded a 13% increase in spot rates from Asia to the west coast of the United States.

The blockage is already having an impact on the price of oil. Oil prices rose by around 3 per cent on Friday 26 March, but the impact will probably be temporary.

Delays to your shipment – how to prepare
Many importers around the world are already experiencing delays to their shipment because of the COVID-19 impact on their supply chains.

Nevertheless, we’ve outlined some tips for your business to deal with setbacks arising from the blockage in the Suez Canal:

1.    Let your customers know – explain why there might be a delay in their shipment.

2.    Offer free shipping – your customers will have lower expectations and won’t mind delays if they haven’t paid for shipping.

3.    Track your shipment – you and your customers can see where your goods are in real-time, easing the uncertainty.

4.    Work with contingency suppliers – use ‘backup’ suppliers (such as domestic suppliers) when international shipments run into problems like this.

Here at The Sourcing Co, our shipping and logistics team can help you prepare for these interruptions.

As a leading sourcing company across the Asia-Pacific, we’ve got the experience and know-how to minimise shipping delays in the event of unforeseen events like the container vessel blocking the Suez Canal.


Please get in touch today to start planning your next shipment.]]> Calculating your Duties & Taxes https://thesourcing.co/tpost/z78tx6ngh1-calculating-your-duties-amp-taxes https://thesourcing.co/tpost/z78tx6ngh1-calculating-your-duties-amp-taxes?amp=true Thu, 03 Jun 2021 14:36:00 +0300 Shipping and Freight Duties and taxes are something you can’t avoid when shipping your goods internationally. They’re a cost of doing business, no matter where you or your supplier are based.

Calculating your Duties & Taxes

Paying Duties and Taxes on Your International Shipment: The Ultimate Guide
Duties and taxes are something you can’t avoid when shipping your goods internationally. They’re a cost of doing business, no matter where you or your supplier are based. It also doesn’t matter if you’re engaging a sourcing company or a freight forwarder to handle your shipment – the costs must be paid.
Depending on the precise product you’re importing, your country’s customs department may determine if you owe a particular duty or tax and charge you accordingly.
Virtually all shipments crossing an international body will be subject to this assessment, and each country assesses the charges differently.
Below, we’ll look at what duties and taxes you’ll have to pay, and the charges levied in a number of countries including Australia, the United Kingdom, the European Union and the United States.

What duties and taxes on my international shipment do I have to pay?
First, let’s start with some basic concepts.
A duty is a type of tax that’s payable to a government, charged on goods and transactions.
A customs duty includes both import and export duties, with import duties known as tariffs. This is what the importer has to pay when bringing foreign goods into their country. Import duties typically vary per category, and so aren’t as standard as a sales duty.
Each country’s customs department maintains its own import duty on specific goods depending on their Harmonised System (HS) Code. A ‘Harmonised Commodity Description and Coding System’ code consists of 6-10 digital figures and is applied to a specific type of good.
For example, there are three different HS Codes for vanilla, including:
·      vanilla (HS Code 0905);
·      vanilla that’s neither crushed nor ground (HS Code 0905.10.00); and
·      vanilla that is crushed or ground (HS Code 0905.20.00).
Different duties will apply according to specific HS Code assigned to an imported good.
A tax, as we all know, is a mandatory financial obligation levied by governments on goods, income, transactions and other activities. There are a variety of taxes levied on goods and services including:

Sales Taxes
A direct consumption tax imposed on the sale of a good, collected directly from a consumer by a vendor once a customer purchases a product.

Value Added Taxes (VAT)
VAT is an indirect consumption tax levied at each stage of a supply chain, charged at the end of a sale. Not to be confused with GST.
The idea is that VAT is taxing the value added to the item at each stage of the production line. Businesses will typically charge VAT and pay it later to the government. If you’re running a business, you’re essentially the middleman between your customer and customs.

Goods and Services Taxes (GST)
Another indirect consumption tax on each stage of the supply chain, also to be charged at the end of a sale. Whilst similar to VAT in that they are treated the same, there are important differences.

Import duties
As discussed above, these are taxes you’ll need to pay when bringing goods into the country.
This tax needs to be paid when your goods are declared at the local customs agency at the port of destination. Failure to pay these duties may lead to your goods not being cleared at customs, adding further costs and delays to your business.
There are various ways of calculating an import duty, but a common way is through CIF (Cost, Insurance, Freight). This means the complete cost of a product right up until it's delivered. Another method is FOB (Free on Board), which means the amount paid for the goods as well as the costs of transport, unloading, loading and other costs ancillary to delivering goods at a particular destination port.
So, what duties and taxes will you need to pay in your country? Below, we’ll take a look at how the differences between customs departments in four different regions across the world.


Australia
Importers based in Australia must pay customs duties to the Australian Border Force, part of the Department of Home Affairs.
All goods are subject to taxes and duties when imported in Australia unless a specific exemption or a concession is applicable. When importing your goods, it’s important to classify your goods in accordance with the correct HS Code to ensure the correct duty is applied. You may be entitled to a refund of a customs duty you’ve paid in some circumstances.
Generally, imports valued over AUD $1000 and specific imported goods (such as alcohol and tobacco) are subject to a customs duty. You must also pay GST in the amount of 10% on your imports.
You may be entitled to take advantage of several of Australia's concession schemes, such as the Tariff Concession System. Here, you can apply for a Tariff Concession Order (TCO) which grants you a concession if there are no Australian manufacturers known to produce goods that can substitute the goods you're importing.

United Kingdom
Importers in the United Kingdom must pay their customs duties to Her Majesty’s Revenue & Customs.
You will be charged customs duty if you are importing excise goods (i.e. tobacco and alcohol), or goods worth more than £135. Customs duty will be payable on both the price paid as well as postage, packaging and insurance.
Customs duty in the UK is assessed on the market value of the goods when they arrive into the country. Prices typically consist of CIF and Duty with a 20% VAT on the aggregate value (this may be lowered to 5% and even to nil for certain goods). You can read more about UK's VAT rates here.
Your freight forwarder (such as our team at The Sourcing Co) can declare your goods and pay the relevant duties and VAT on your behalf. We will then typically include this in our invoice to you.
You can read more about the UK requirements here.


European Union
Like in other parts of the world, when you import goods into the EU, the European Commission’s Taxation and Customs Union will take into account the goods’ value, the applicable customs tariff and where your goods came from.

When importing from a non-EU country, importers in the EU will be liable to pay Customs, Excise and VAT. This will be calculated as a percentage (which will depend on the good).
The value of the customs payable will depend on its classification in the Combined Nomenclature (CN). This is similar to the HS system we’ve described above, but EU-specific. It takes into account the Common Customs Tariff which is payable on non-EU imports.
It is important to check the requirements of each specific EU state, who have their own rules regarding costs such as VAT.
Note that you won’t have to pay customs duty on goods below €150 if the goods are supplied directly to the buyer.

When importing from a country within the EU, customs duties are not payable.

United States
In the United States, your primary customs agency is U.S. Customs and Border Protection, an agency of the Department of Homeland Security.
Once again, the customs duties that are payable will depend on their HS Code. The U.S International Trade Commission have put together a comprehensive database where you can search the estimated applicable duty on what you're importing.
Some countries will have preferential rates if they have a free trade agreement with the USA.
Duties won't be charged if the value of your goods are less than $800.
Customs will collect taxes including the Federal Excise Tax (imposed on alcohol and tobacco) and also a Merchandise Processing Fee on:
·      “informal entries” (goods valued under US $2500) – fees may include a $2.10 per shipment, a $5.77 mail fee and a $3.15 manual entry fee; and

·      “formal entries” (goods worth over US $2500) – set at about 0.3464% of the value of the goods (with charges ranging from $26.22 to $508.70).
You may be eligible for a refund of your duty if you’ve overpaid what you owe.

Also read: Info you need to know on Duties & Taxes When Importing to the U.S.

Questions on your shipment’s duties or taxes?
We understand that your taxation and duty obligations can be overwhelming, especially if you are new to global shipping.

Our team here at The Sourcing Co are not only an experienced sourcing company. We also have a dedicated freight forwarder team that all completely across the duties and taxes payable.
If you’ve got any questions about paying duties and taxes on your international shipment, please don’t hesitate to get in touch with one of our friendly professionals here at The Sourcing Co.


]]> Brexit's Impact on Importing & Exporting https://thesourcing.co/tpost/8puipm6zv1-brexits-impact-on-importing-amp-exportin https://thesourcing.co/tpost/8puipm6zv1-brexits-impact-on-importing-amp-exportin?amp=true Mon, 28 Jun 2021 14:43:00 +0300 Trade and Economic Factors The United Kingdom formally exited the European Union on 31 December 2020, around four years after the ‘No’ vote was cast.

Brexit's Impact on Importing & Exporting


The United Kingdom formally exited the European Union on 31 December 2020, around four years after the ‘No’ vote was cast.

And now today, China has replaced Germany as the UK's largest importer.
Since the beginning of 2018 to 2021's first quarter,imports into the United Kingdom from China skyrocketed by 66 per cent. Meanwhile, imports from Germany fell by a significant 25 per cent.
Why? Well, it’s partly due to UK trade with the EU collapsing because of Brexit. Complex regulations and changed paperwork requirements led to a massive stall in UK-EU trade, fuelling increased trade with the Asia Pacific.
In this blog, we’ll outline how Brexit is impacting UK imports from China, and what you can to adapt.

How has Brexit impacted UK imports from China?
Primarily, Brexit has contributed to a massive boosting of imports from China to the United Kingdom.
“The UK has imported more goods from China than from any other country since Quarter 2 (April to June) 2020.”
-      Office for National Statistics, United Kingdom

Traditionally, the UK traded with the EU because of the advantages it reaped from its position as an EU nation.
But not anymore.
Brexit caused an absolute thunderstorm for UK importers that made trading with the EU much less desirable.
UK is now no longer a part of the EU Single Market or the EU Customs Union.
Instead, the UK landed a Trade and Cooperation Agreement with the EU. This arrangement consists of a Free Trade Agreement which has now put preferential measures in place for the trade of goods and services.
But it was not all rosy. There were very early reports of frustrating shipping delays and falling EU exports since the withdrawal, with changing regulations and customs clearance requirements causing major headaches for businesses on both sides of the transaction.
New rules of origin were introduced, EU trade agreements simply ceased to apply, new customs declarations were required to be made and new licencing obligations also came into effect. The whole system became rife with uncertainty.
At the same time, there’s been a growing demand for Chinese textiles (to be used in items like face masks and personal protective equipment to stop the spread of COVID-19).
There’s also been increased demand for electrical goods in China that the UK population used during lockdown.

Not a short-term impact.
Prime minister Boris Johnson stated that disruption to EU trade was due to short-term “teething problems”.
But some experts disagree.
New high permanent trading costs with the EU has now meant businesses will lose money and face increased costs in the face of a changed trading environment.

After Brexit, UK imports from China set to rise even more in 2021.
Brexit, the Coronavirus and the statistics from 2020 and early 2021 have planted the seeds for continued imports in the UK from China.
  • By the end of 2020, Chinese imports into the UK dramatically increased - largely due to rising demand for electronic machinery like telecommunications equipment.

  • There was also a boost in the UK for demand for Chinese textiles – mainly for COVID-19 safety equipment like PPE and face masks.

  • China was the first major economy in the entire world to recover from the pandemic.

  • China was the only major economy with an actual trade growth in goods in 2020.

  • UK imports from China strengthened in early 2021, fuelled by demand for imports of clothing and footwear.
How can UK importers adapt post-Brexit?
If UK importers want to continue trading with Germany and the rest of the European Union, they’ll need to get across all the new regulations Brexit has introduced.
Failing to do so will certainly lead to delays (and possibly extra costs). But most fundamentally, UK importers are now facing the risk of being hit with tariffs.

We advise UK importers to find new horizons and seek to source their goods from other countries, such as Asia.
Any savvy UK importer would now know why: the new rules of origin. To seize any advantage of zero tariffs under the new Brexit regime, goods imported must contain a high percentage of parts (or ‘value-added’) that “originates” in either the UK or the European Union.
This is especially tricky, because items are very often originally produced in Asia - the result? A tariff.
The better choice for many UK importers will be to cut out the middleman and import directly from the source: an Asian supplier.

Source your next supplier from China
One of the best strategies UK importers can adopt is to take advantage of the increased UK imports from China and expand their horizons.
This means looking for suppliers outside of Europe, such as Asia (and particularly China).
That’s where we can help you.

At The Sourcing Co, we help companies across the USA and the UK find premium, ethical and reliable suppliers throughout the Asia Pacific – in places like China and Vietnam.
We’re a sourcing company with unrivalled expertise in our field, having developed strong relationships with some of the best suppliers throughout the Asian continent.
If you’re a UK importer seeking to expand your horizons, get in touch with us today.
We'll help you conceptualise the product you're seeking to source, all the way through to finding your perfect supplier and shipping your goods in the most cost-effective way possible.]]> Product Development: From Concept to Production. https://thesourcing.co/tpost/ypvxutdgh1-product-development-from-concept-to-prod https://thesourcing.co/tpost/ypvxutdgh1-product-development-from-concept-to-prod?amp=true Mon, 12 Jul 2021 14:08:00 +0300 Manufacturing and Production As a business owner, you’ve landed an amazing idea for a product you think your market will absolutely love.But your main roadblock: bringing it to life and getting it on your shelves. Quickly.

Product Development: From Concept to Production.

Product Development: How to Fast-Track Your Idea (and Goods) Straight to Market [A Complete Guide]
As a business owner, you’ve landed an amazing idea for a product you think your market will absolutely love.
But your main roadblock: bringing it to life and getting it on your shelves. Quickly.
We get it. The whole process of product development can seem like a black hole – it doesn’t seem like a straightforward, linear procedure you can complete in a couple of steps.
If you’re looking for a step-by-step and comprehensive product development guide to fast-tracking your idea and goods straight to market in the 2021 economy, you’ve come to the right place.
Below, we’ll outline everything you need to know about product development, and every step you need to take to bring your goods to your shelves – as quickly as possible.

What is product development?
Product development is the system to get a new or existing product to market. It involves:
  • Assessing the needs of your market
  • Perfecting your idea
  • Constructing your roadmap
  • Introducing your product
  • Gathering feedback data (and then starting the process again).
“New product development” (NPR) refers to this last point – starting the process again once you’ve gathered data analysing how the market has reacted to your product. You then build on that feedback and continue improving.
At the beginning, you may only have an idea or the original blueprints for your product. You may have an existing product that you want to improve. You may even choose to introduce an existing product you’re selling to an entirely new market.
There is no “ideal” place to start. Every single department within a company, no matter where your idea is in the chain, has an integral role to play to making transforming your product idea into a reality.
Read on to learn more.

New Product Development: Fast-Tracking Your Goods to Market.
Below, we’ve outlined how the new product development cycle is designed to bring your goods onto your shelves and available for your customers to purchase.
Every industry is different, but generally we can identify key similarities of product development no matter what sector you’re working in.

#1 Nailing Your Idea
Most business owners can’t get this first step right. They’re either constantly doubting themselves that their idea is any good, or they’re just “waiting for the right time” to execute.
Even worse – they’re waiting for something magical to pop into their heads.
Our advice is not to focus on thinking of the ‘new best thing’. We suggest focusing on your existing products (what you already have) and making them better.


The SCAMPER Model
We like to use the ‘SCAMPER’ model when thinking about product development.
It gives us the best ideas of how to constantly improve upon existing products.
The Model is as follows:
Substitute
Combine
Adapt
Modify
Put to another use
Eliminate
Reverse or rearrange
We’ll outline each stage of the model below in detail.
Substitute (for example, replacing any plastic in your goods with an environmentally friendly alternative) – questions you could ask include:

What can you substitute to make your goods better?
What materials or people could you change in the process?
Should you replace somebody currently involved in the process?
Can you use different materials or ingredients?
Can you re-define the rules?
Can you use this idea for a completely different project?
Can you substitute your market altogether?

Combine (mixing two goods together, like a bag and an umbrella) – some of the questions you may ask yourself include:

What ideas, goods, products, features or materials can you mix together?
Can you combine this product with another product?
Can you combine any of the raw materials used in your products?
What products or materials can you combine to enhance its usage in multiple fields?

Adapt (for example, adapting a keyboard to make it COVID-friendly so that it sanitises itself after each use) – consider the following:

What part of the product could you change?
Can you adapt your product to better suit your target market?
Look into the history of your product. Does that give any guidance?
How do other people adapt their products in different environments?

Modify (e.g. making your range of small dog beds into a range of large dog beds for larger dogs) – think about the following queries:

Is there anything you can make larger (or smaller)?
Is there anything from your product that you can remove?
Is there anything from your product that you can exaggerate?
How can you add extra value yo your product?
Are there any nifty features you could add?

Put to another use (for instance, using a computer as also a television) – you’ll need to think about how to make your idea or your product satisfy another purpose. Some of the questions to think about include:

What else can your product be used for?
How would different people (such as older people, disabled people or children) use the product?
Who else might be able to use your product?
Are their new, improved or alternative ways to use your product in its current form?
If you modified the product, how could people use your goods?

Eliminate (for example, removing the wires of a machine to make it ‘wireless’) – think of what might happen if you trimmed down your idea and consider:

What can you remove from your product without completing changing its function?
Can you cut costs by eliminating anything on your product?
Can you reduce time in your supply chain?
Can you reduce any effort?
How can you simplify your product?

Reverse or re-arrange (for instance, putting larger buttons on the face of a wristwatch and the screen on the sides) – here, your prime question is how you can change the order, plan, scheme or sequence of a product. Some questions you could consider include:

How can you reorder your product, such as its components or its layout?
Can your product work ‘backwards’?
What would happen if you tried?
Does it improve (or worsen) the customer experience?


#2 Doing the Research


Once you’ve come up with a nail-biting idea that you’re sure is going to blow your customers away, don’t just jump to producing it.
You might think your idea is amazing. Your customers might think it’s not.
At this stage, you’ll want to test the waters and ask people around you what they think of your product.
Here, you’ll need to:
Speak with colleagues, family and friends to hear their truthful opinion (and make sure they’re not just ‘being nice’. Get them to be brutally honest if they have to be).

Send out an online survey to your customer base. Offer them something enticing so there’s a greater chance that they will actually complete it (like a free prototype, a holiday or a gift coupon).

Ask for feedback on online forums. Reddit is a great place to go to because there are literally thousands of people probably talking about the kind of product you’re thinking of developing. For example, Trader Joe’s in the USA released a new Organic Spicy Honey Sauce in 2021 and posted it on Reddit. The responses may provide them with some useful market data.

Look at market demands. This could involve anything from a simple search on Google Trends to a full-fledged market analysis.

Release a ‘Coming Soon’ page with an option to pre-order your product. If nobody is making any pre-orders, that’s a pretty good indicator that something with your product isn’t hitting the mark.

Check out your competitors to see if they’ve done anything similar. It could be that your idea has already been tried, tested and failed (or, even worse, succeeded and now trademarked by your top business adversary).
Seek out as many impartial opinions as you can so that, by the time the product hits the shelves, people actually grab their wallets and buy from you.

#3 Draw, Draw, Draw.

Sharpen your pencils, because developing a product is no easy feat. On the contrary, there’s a lot of working parts. It’s critical to plan and that means doing a lot of drawing.
Sketch exactly what your product is going to look like. If you approach a supplier or a manufacturer and aren’t sure exactly how your product will be designed, you’ll get lost. No question about it.


At this stage, you don’t really need to hire a professional drawing expert. You’re not going to submit any of the drawings you make at this stage to your manufacturer.
But, of course, if you aren’t confident, there are plenty of places you can find a professional freelance technical drawer (such as Upwork).

The important thing is to make sure your diagram reflects a list of the things you’re going to need to construct your product. It doesn’t have to include everything. But it should get you hitting the ground running.
For example, observe the picture of the earphones above. This drawing shows that, in order to construct earphones, you’ll need:
  • Wires
  • Buds
  • Buttons
  • Casings
  • Speakers

By having your drawing outlined, you can now also think about how much you need to price your product (as you’ll get a bit of an idea of what you need to pay to create your product). But more on this in step #6.

You may also need to determine what colours you'd like to have on your product. With Pantone Colours as a guide, having different variants with different

You’ll also get an idea about some of the raw materials you’ll need, and the packaging and labels you’ll need from a marketing perspective (but again, more on this in step #7).

#4 Building the prototype.
The next step is where you’ll start seeing your product come to life: creating the prototype. Here, you’re going to want a completely finished product that you can use as your sample.
This sample will be mass produced.
It’s important not to be disheartened on your first attempt. You or your customers might be dissatisfied with the first manufactured prototype.
Y It’s all an experiment at this stage. You’ll get the opportunity to see what works and what doesn’t, as well as the chance to remove any part of your product that might not be connecting with the market as you’d originally expected.

It’s all about fine-tuning your product until you reach that perfect masterpiece.


The process of prototyping is going to differ depending on exactly the kind of prototype you’re developing. Prototyping a pair of tennis shoes, for instance, will differ considerably to prototyping self-driving vehicles. Some products (like a new recipe) you can simply prototype yourself (i.e. in the kitchen).

Many companies will work with third party specialists to develop their prototypes – such as specialist shoemakers (for tennis shoes) or automotive engineers (for self-driving vehicles). There are many places online you can find a specialist, whether it be Google, Fiverr, Upwork or Freelancer.

Landing your Minimum Viable Product (MVP)

The ultimate purpose of prototyping is to test your MVP – this is the baseline version of your product which has the bare minimum amount of usability for your first customers to try.

Your MVP will help you and your superiors get all the relevant feedback you need as soon as possible so that you can consistently continue to improve on your design.

That is – until you’ve finally reached that perfect end product.

#5 Sourcing Your Manufacturer.

The next step in product development is to source all the partners and materials you need to actually build your prototype. This is the step where you’re effectively creating your supply chain.
Most importantly, this step will involve sourcing a manufacturer or a supplier who can create and deliver the goods to you.
You may also like to think about where you’re going to store your goods (like a warehouse or your basement) and how you are going to ship your goods (i.e. by rail, road, air or sea).
There are many ways to source a supplier, such as through trade shows, referrals and even online through platforms like Alibaba. There are also scores of suppliers to choose from in many different countries, such as India, Vietnam, China, Singapore, the Philippines and more.
You may need to get quotes from several types of manufacturers to ensure you get the fairest price (as this will be important when working out your COGS: see step #6 below).
This is where a professional sourcing company can add a huge amount of value, as sourcing the wrong supplier could lead to major problems down the line.
You may, for instance:

  • source a supplier who charges you too much

  • find a supplier who forces you to purchase a certain amount of goods every month, leaving you unable to comply with contractual requirements

  • source a supplier on Alibaba who ends up scamming you or gives you poor quality products (with no practical way of getting a refund or replacements)

  • choose a supplier who does not comply with modern slavery or anti-corruption legislation, leaving your business open to unnecessary risk.

A professional sourcing company can help you pinpoint the most relevant ethical and reliable manufacturer suitable to your commercial goals. This is key to a successful product development strategy.

Also read: Starting a Swimwear Label

#6 Putting on a Price Tag.

After a great deal of prototyping, research and sourcing a manufacturer, you should have a better idea of how much a product is going to cost you to make.
Take all the information you’ve collected so far and work out what your Cost of Goods Sold (COGS) is going to be. This basically means the direct costs of producing your goods. By pinpointing this figure, you’ll be able to put together a retail price and a margin.
You can do this through any method whether it be writing on a piece of paper or preparing a spreadsheet on Microsoft Excel.
When figuring out your COGS, it’s important to break down each cost including:

This list is not exhaustive, so it’s important to think about the costs you’ll need to pay when working out your COGS.
Once you’ve landed that COGS figure, you can also think about the best type of pricing strategy to market your product.

#7 Marketing time.
Congratulations! By this stage, you’ve created your masterpiece. You’ve got a solid, profit-maximizing product to enter into your dedicated marketplace and it’s time to get it out there.
There are literally dozens of ways you can market your product, including:
  • Sending launch emails to your existing customers – let them know the big day has arrived!
  • Affiliate marketing with influencers and bloggers
  • Google, Facebook, Instagram, YouTube and TikTok marketing (free posts or paid ads)
  • Search Engine Optimization (SEO) marketing
  • TV, radio, print and mobile advertising
  • Featuring reviews from customers who used the product in its prototype stage

Ready to nail your next product development strategy?
Product development is an exciting adventure for all business owners, whether you’re a sole trader, an up-and-coming startup or a large-scale multinational corporation.
There is a lot of work involved, and it can get a bit daunting to get your strategy together so as to fast-track your idea (and goods) straight to market.

There is where The Sourcing Co can help. We’re more than just a sourcing company – we specialise in every phase of product development, right from determining the concept of your product, all the way through to manufacturing.
We’ll find the perfect supplier for you, organise all the required shipping and warehousing, and use our marketing expertise to get your product out there to the right people.

Ready to get your product development strategy up and running? Get in touch with us today.

]]> How to Source an Ethical Manufacturer https://thesourcing.co/product-sourcing-and-manufacturing/tpost/a2m91nmzb1-how-to-source-an-ethical-manufacturer https://thesourcing.co/product-sourcing-and-manufacturing/tpost/a2m91nmzb1-how-to-source-an-ethical-manufacturer?amp=true Thu, 22 Jul 2021 08:58:00 +0300 Sourcing and Importing If you’re in the business of selling products, you’ll obviously need a manufacturer in your supply chain.But you’ve heard the stories – there are countless manufacturers overseas who engage in unethical practices.

How to Source an Ethical Manufacturer

How to Source an Ethical Manufacturer for Your Supply Chain: What You Need to Know
If you’re in the business of selling products, you’ll obviously need a manufacturer in your supply chain.
But you’ve heard the stories – there are countless manufacturers overseas who engage in unethical practices. This can range from unsafe work practices and child labour to slavery to human trafficking.
You’re committed to creating an ethical brand for your business – and don’t want any part of that in your supply chain.
If you’re looking to find an ethical manufacturer, this is the right article to read. Below, we’ve outlined the meaning of ethical sourcing, the ethical issues you’ll find in manufacturing, and everything you need to know about finding an ethical manufacturer to source your products.
That way, you can put your mind at ease when sourcing all your goods.

What does ‘ethically sourced’ mean?
Ethical sourcing refers to sourcing products in a responsible way, ensuring the people in your supply chain are treated with decency and the natural environment is not adversely affected.
Fundamental to ethical sourcing is that workers are paid fairly, placed in safe working conditions and that - ultimately – their human rights are respected and protected.
Integral to this is finding an ethical manufacturer (or an ethical supplier) so that your goods are sustainably produced from the very beginning.
Below, we’ll outline some of the ethical issues you may come across in manufacturing.

Ethical manufacturing: What are the issues?
The term ‘ethical manufacturing’ is broad, but we’ve identified several of the key issues you’ll come across when trying to source a manufacturer for your supply chain.
With the passing of modern slavery legislation across the Western World, it’s vital to know precisely how your products are put together – all the way down to the last stitch.

Forced labour
Forced (or compulsory) labour in supply chains does not simply mean working for no money.
It’s defined by the International Labour Organization as "all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily."
It is estimated that around 25 million people around the world are engaged in forced labour. Sixteen million of them are working in the private sector, connected to global supply chains responsible for supplying goods and services to you and me.
Even more concerning, about 4.8 million people are estimated to be involved in forced sexual exploitation.
It is critical that businesses across the world do not source manufacturers responsible for engaging in forced labour.

Environmental footprint
Consumers are becoming more and more environmentally aware. They will often place importance on the environmental footprint of the business they choose to buy from.
To minimise your business’ environmental footprint, it’s critical to engage an eco-friendly manufacturer – one that has robust policies in place to minimise its carbon footprint.
This may include a supplier who has made efforts to switch to renewable or alternative forms of power, sourcing sustainable raw materials (whether it be cotton, timber or wool) and practising sustainable waste management.

Child labour
It’s tempting to source your products quickly and efficiently, so it’s dangerous to overlook the potential for child labour in your supply chain.
The International Labor Organization reports that around 170 million children are engaging in child labour, defined by the United Nations as:
·     work for which the child is too young (or below the required minimum age
·     work which, because of its detrimental nature or conditions, is altogether considered unacceptable for children.
The fashion industry is reported as a primary culprit for child labour – so finding an ethical manufacturer that does not engage in child labour can be a challenge.

Work Health and Safety
If workers in your supply chain are manufacturing your goods in dangerous working conditions, that’s a sure tell sign that your manufacturer isn’t very ethical at all.
According to the World Bank, there are approximately 317 million non-fatal workplace injuries every year, as well as about 321,000 workplace fatalities.
It is critical to source a manufacturer that provides safe systems of work, and educates its workers on what is best practice when it comes to safety.
Engaging an unsafe manufacturer will tarnish your brand, and possibly lead to the creation of unsafe products that are dangerous to your customers.


How do you find ethical manufacturers? Follow these 4 steps.
If you’re looking for an ethical manufacturer for your supply chain, we recommended following the below 4 steps.
While easier said than done, these steps can put you on the right path to sourcing a sustainable manufacturer that respects human rights, the environment and lives up to the values of your business – no matter how large your operations are.

1. Find suppliers
First things first – you’re going to actually need to find a number of suppliers to choose from.
There are a whole range of ways you can do this, whether it be:
·     Attending trade shows and exhibitions in your area

·     Looking on the Internet (and websites like Alibaba – although you’ll need to know the risks when doing this)

·     Word of mouth

·     Networking within your community

Also read: The Canton Fair 2023: What Importers & Exporters Need to Know


2. Assess their ethics and sustainability
The next step is the hard part – assessing how ethical and sustainable your manufacturer is.
You’ll need to look very closely into how they conduct operations in order to determine if this supplier is the right fit for you. This may involve visiting their factories, observing their standard operating procedures, looking at their safety policies and interviewing members of management.
You’ll need to determine:
·     How the supplier conducts environmental management

·     How they ensure they’re promoting good working conditions for their staff, including paying them correctly and providing them with a safe working environment

·     Whether child or forced labour is actually being practised, or if there is potential for this practice to emerge

·     Whether other customers of theirs have conducted audits on them, and what their findings were.
A thorough review of a manufacturers’ operations will be critical to ensuring they live up to the ethical and sustainable brand you’re trying to promote.

3. Make the final call
Once you’ve analysed the ethics and sustainability practices of a number of manufacturers, you’ll be in a position to make the final call.
You should have – at the every least – narrowed down your list to determine which manufacturers are the most ethical.
Of course, finding an ethical manufacturer might not be your last step.
You may have a whole range of considerations you’ll need to think about before landing your perfect supplier – their terms and conditions, MOQs, price, and other vital commercial factors.
Because of the sheer number of matters that go into picking the right manufacturer, we always recommend step #4.

4. Engage a professional sourcing company
A professional sourcing company that specialises in finding the right suppliers and manufacturers for your business will be able to do all the above for you.
They’re able to closely assess candidates from across the world, and make a tailored assessment to determine what you need to conduct your operations sustainably, ethically and properly.
As a leading sourcing company in the Asia Pacific region, our team in the Sourcing Co has sourced ethical manufacturers for companies in the USA, UK, PNG, New Zealand and Australia.  
If you’re looking to source an ethical manufacturer for your supply chain, look no further than the Sourcing Co.
All our suppliers are ethically accredited. We’ve mastered the formula and have made sure that your goods come from well-renowned, reputable and – most of all - ethical manufacturers.
Giving you piece of mind that you can keep doing business that’s good for the world. Get in touch with us today.]]> Drop Shipping vs Importing https://thesourcing.co/product-sourcing-and-manufacturing/tpost/loi5pstik1-drop-shipping-vs-importing https://thesourcing.co/product-sourcing-and-manufacturing/tpost/loi5pstik1-drop-shipping-vs-importing?amp=true Fri, 06 Aug 2021 16:00:00 +0300 Sourcing and Importing Businesses across the world are enhancing their revenue by buying goods affordably from global manufacturing hubs like China and selling them in their own domestic market for a significantly higher price.

Drop Shipping vs Importing

Drop Shipping vs Importing: What Works Better?

Businesses across the world are enhancing their revenue by buying goods affordably from global manufacturing hubs like China and selling them in their own domestic market for a significantly higher price. The result: considerable profit.
There are two main ways sellers can achieve this: drop shipping or importing.
Both of these methods are very popular, and each bring with them their own benefits. So what works better for your business? Below, we’ll look at each of these sale techniques in detail and analyse their differences.
By the end of this article, we hope you have a better understanding of which approach is best for your operations.
What is drop shipping?
Drop shipping refers to creating an online store, where you sell products that other people manufacture and which you don’t yourself keep in stock.
Somebody buys your product online, and you then pay a supplier who offers drop shipping to ship the goods to your customer.
In a nutshell, all you have to do is:
  • Locate a supplier that offers drop-shipping;
  • Create a website to sell products;
  • Choose the products your supplier is offering and place them on your site;
  • Charge higher for the goods so you make a profit;
  • Pay your supplier once somebody buys your product; and
  • Your supplier will ship directly to your customer.


What is importing?
Most businesses are importers – in the United States alone, 85.6% of all imported goods in 2018 were imported by U.S. businesses.
Put simply, you buy a lot of goods in bulk at a ‘wholesale’ price (i.e. a very cheap price), and then sell them in your domestic market at whatever the market rate is.
It’s hugely profitable, and very popular on online retailers such as eBay and Amazon.
In a nutshell, importing works as follows:
  • Find a great supplier for a product;
  • Buy large amounts from them;
  • Your suppler will ship those products to you; and
  • You sell them to your customers at the market price.
Let’s look at the main differences
There are obvious differences in the processes of both drop shipping and importing. But let’s take a closer look at the whole picture, so you can decide which option is best for you.

Ease
When it comes to comparing the two, drop shipping wins when it comes to ease. It is far less time consuming as you don’t handle any of the logistics (meaning you can spend more time on marketing and business development). You could even run a drop shipping business from home.
You also have very little start-up costs (just paying for a website) or overhead costs.
With importing, by contrast, you’ll need to worry about:
·      Maintaining (and paying for) a warehouse;
·      Packing and shipping;
·      Tracking your inventory;
·      Handling any returns; and
·      Managing your stock/inventory level.
You don’t have to worry about any of this with drop shipping.
Also, generally, you can add on as much profit as you like when drop shipping your products through your website (although, as we’ll see below, those margins are thin).

Control
Drop shippers have zero control over when their goods will ship (if they’re shipped at all). There’s always a risk of a supplier simply taking your money and running away.
You won’t actually know your goods haven’t shipped until your customer starts filling out the ‘complaint’ form on your website.
Further, as a drop shipper, you will be completely subject to your supplier’s ups and downs. If their service is disrupted (such as during the Chinese New Year period), you will be blamed – not your supplier. Take a look at the United Kingdom, where Brexit is reportedly having a significant negative effect on the domestic drop shipping industry.
You’ll also have absolutely no idea when an item is out of stock or not. This is especially important if you’re sourcing from different warehouses, whose inventory can change almost daily. Just take a look at the Australian case of Ozdirect, whose drop shipping business was successfully sued for misleading and deceptive conduct after displaying outdated inventory lists on their website.

Quality of goods
As a drop shipper, you may never actually see the product you’re selling in real life. Your customers may receive faulty, damaged or defective products and you’d have no idea.
That’s because you have no control over the quality of the goods you’re selling. You’ll have no opportunity to check the product for yourself and verify if it’s up to an appropriate standard.

Delivery speed
Drop shipping from places like China will normally take anywhere between 2 and 6 weeks from the date of purchase to your customer’s receipt. Your buyers may get worried and – worse – they may come to you demanding to know what’s going on. They may even ask for their money back.
When you’re importing, you will have more control over your goods including complete control of when your goods will actually ship out to your customer.

Operating costs
Drop shipping has very minimal operating costs but importing does unfortunately come with those unavoidable operating costs.
These costs include things like packing and shipping (whereas with drop shipping, a supplier will often ship for nothing) and storage fees (you need a place to store all your goods!)

Profit margins
Despite the very limited operating costs of drop shipping, it does have fewer profit margins compared with importing.
The logic for this is very simple – when you buy a product via drop shipping, you pay either the market price or just below for that good because you are buying products one at a time.
Suppliers will be unwilling to give you a ‘drop shipping discount’ as opposed to your traditional wholesale discounts when buying in bulk.
But when you’re importing, you’re buying a bulk of goods at a wholesale price. This means when you sell your goods at a retail price, the profits are actually much higher.

Branding
When importing goods, you can build a personal and unique brand by adding your own logo to your products.
This option is not typically available with drop shipping, where suppliers will have most of the control over the product.

Also read: China, India or Vietnam: Where Should You Source & Manufacture?

Can I sell to drop shippers?
Despite the risks of drop shipping, there are opportunities to work with other people who have decided to adopt the drop shipping model.
We’ve recently seen a growth in businesses making their own stock and selling that stock on to drop shippers.
This is an excellent opportunity for a growing business because:
·      You deal with one central and regular drop shipping ‘customer’, as opposed to numerous ‘regular’ customers which may be all over the world;
·      You maintain higher profit margins than you would through adopting a drop shipping model yourself; and
·      You keep in control of your own inventory.

Need help with handling your shipment?
We’re the experts in drop shipping and importing here at The Sourcing Co. As a leading sourcing company across the Asia Pacific, we can help businesses all around the world navigate the complex world of international trade.
With offices in China, Vietnam and Australia, and with key partnerships with suppliers in Indonesia, China and Vietnam, we cover a broad geographical area from which we’ve acquired a wealth of experience.
Please get in contact with our friendly staff today to start discussing your shipping options.





]]> Incoterms 2020 : The Entire Guide. https://thesourcing.co/tpost/p3kg3umgf1-incoterms-2020-the-entire-guide https://thesourcing.co/tpost/p3kg3umgf1-incoterms-2020-the-entire-guide?amp=true Mon, 30 Aug 2021 16:19:00 +0300 If you’re looking to import goods from overseas (including goods you’ve sourced from a supplier), it’s critical to understand the impact of the Incoterms on your shipment.

Incoterms 2020 : The Entire Guide.

Incoterms 2020 : The Entire Guide.
If you’re looking to import goods from overseas (including goods you’ve sourced from a supplier), it’s critical to understand the impact of the Incoterms on your shipment.
Below, we’ve put together the entire guide to the Incoterms 2020, so you can fully understand each of the different types of terms and how they impact your consignment.

What are Incoterms?
Incoterms stands for ‘international commercial terms’. They are the commercial terms of trade that allocate the different costs and risks between the buyer and seller of goods when shipping worldwide.
Precisely what incoterm agreed upon will depend on the outcome of each commercial negotiation, and it’s important you’re aware which term governs you.

Who created the Incoterms?
‘Incoterms’ were created by the International Chamber of Commerce (ICC). “Incoterms®” is also registered trademark of the ICC.
The terms are updated every ten years by the ICC, the most recent being Incoterms® 2020.
The ICC Academy have put together an online course to learn more about the latest changes to the Incoterms.

Why are the Incoterms used?
Incoterms are used in international trade because they provide a uniform, common and predictable set of terms harmonising business around the world.

What are the different Incoterms?
There are 11 types of Incoterms® in the new 2020 edition, which was recently updated in 2019. These are:
  • EXW (Ex Works)
  • FCA (Free Carrier)
  • CPT (Carriage Paid To)
  • CIP (Carriage and Insurance Paid To)
  • DPU (Delivered at Place Unloaded)
  • DAP (Delivered at Place)
  • DDP (Delivered Duty Paid)
  • FAS (Free Alongside Ship)
  • FOB (Free on Board)
  • CFR (Cost and Freight)
  • CIF (Cost, Insurance, and Freight)
Seven of the 11 Incoterms can be used no matter if you are transporting goods via air, land or sea.
Four of them (FAS, FOB, CFR and CIF) can only be used when transporting via the ocean or inland waterways.

What do the different Incoterms mean?
Below, we’ve outlined the different types of Incoterms, what they mean and how they’ll impact your international shipment as a seller or buyer.

EXW | Ex Works
Ex Words provides the buyer with most responsibilities out of all the Incoterms, as they are responsible for virtually the entire shipment from origin to destination.
Under EXW, the seller is responsible for making the goods available for collection at their premises and the buyer is responsible for everything from that point onwards. The buyer also must pay all costs to get their goods to the final destination.

FCA | Free Carrier
Under FCA, the seller must make the goods available to the buyer at a particular location that is operated by the carrier (i.e. the party who will actually ship the goods).
The seller is responsible for arranging customs clearance for export, but also responsible for paying any charges at the port of shipment such as terminal charges or loading fees.
From that point onwards, all costs and responsibilities shift to the buyer.

FAS | Free Alongside Ship
Under the FAS Incoterm, the seller is obligated to make the goods available to the buyer ‘alongside’ the ship at the port. The seller is also responsible for customs clearance.
Once the seller has done everything they have to do to get the goods at this point, that’s their job done. The buyer is then responsible for terminal handling at the port of shipment (including paying the costs of loading goods onto the carrier’s ship).
FAS only applies to maritime shipments.

FOB | Free on Board
FOB is one of the most common Incoterms used across the world, as it effectively distributes the risks in a shipment equally between the seller and buyer.
The seller is responsible for ensuring the goods are loaded onto the vessel at the port, and the buyer is then obligated to pay freight costs and every other cost required for the goods to reach the end location.
Recall that FOB only applies to maritime shipments.

CFR | Cost and Freight
Under CFR, the seller is responsible for almost all costs including paying for the freight until the port of destination.
The buyer, however, takes the risks at the point that the goods are loaded onto the ship. They must also start paying costs when the goods reach the port of destination.
CFR applies to maritime shipments only.

CPT | Carriage Paid To
CPT is very much like CFR. But when shipping under CPT, the buyer is responsible for duties, taxes and transportation charges.


CIP | Carriage and Insurance Paid To
CIP is then similar to CPT, but it includes marine insurance. The buyer will need to take out marine insurance, hence the name ‘carriage and insurance’ paid to.

CIF | Cost, Insurance and Freight
CIF is virtually the same as shipping under CFR. The buyer is responsible for getting the goods to the destination port and pay all associated costs. They also must pay customs clearance and the costs of delivery in the end country.
CIF applies to maritime shipments only.

DPU | Delivered at Place Unloaded
DPU is a new term introduced in Incoterms® 2020.
When shipping under DPU, the seller is responsible for delivering the goods at the buyer’s disposal after unloading (hence delivered at place ‘unloaded’). The seller is therefore responsible for unloading the goods at the place of the destination.
Note that DAT (Delivered at Terminal) is no longer in use.


DAP | Delivered at Place
When shipping under DAP, the seller must pay and take responsibility for pretty much everything. They have to pay all charges right up until the goods are delivered to the final destination. The buyer just has to pay for regular taxes and import duties.
DAP is considered quite a buyer-friendly term.

DDP | Delivered Duty Paid
Under the DDP Incoterm, the seller is responsible for getting the goods to the final destination (and pay all associated costs, even including duties and taxes in the country of delivery).
All the buyer really has to do is unload the goods from the truck outside of their premises.
DDP is considered the most buyer-friendly term out of all the Incoterms.

Final thought
The Incoterms can get fairly complicated, so we strongly recommend discussing with an expert freight forwarder which Incoterm is the most appropriate for your international shipment.
Here at The Sourcing Co, our specialist shipping & logistics team have one goal: to make your shipment as easy as possible. We’ll handle all the work related to your shipment and discuss which Incoterm is most suitable for your consignment.

Please get in touch with us today to start discussing your next shipment.


]]> Tech Packs : Everything You Need to Know https://thesourcing.co/tpost/34p5nrog31-tech-packs-everything-you-need-to-know https://thesourcing.co/tpost/34p5nrog31-tech-packs-everything-you-need-to-know?amp=true Thu, 16 Sep 2021 16:24:00 +0300 Manufacturing and Production When searching for a manufacturer to produce your goods, it’s vital to provide them with a clear and comprehensive tech pack.

Tech Packs : Everything You Need to Know

Tech Packs

When searching for a manufacturer to produce your goods, it’s vital to provide them with a clear and comprehensive tech pack.
A tech pack is a vital document that designers, production teams and manufacturers use to develop and create a product you intend to sell to your customers.
Far too often, however, we see designers rush through the tech pack creation process – thinking it isn’t a critical part of the product development stage. The result is ultimately misunderstandings, a breakdown in communications, delays and expensive errors which could have been easily avoided.

So if you’re wondering what a tech pack is, read on.
Below, we’ll outline everything you need to know about a tech pack. We’ll explain what they are, why they’re important, what’s included in a tech pack and – importantly – how to make one.

What is a tech pack?
A tech pack, short for technical packet (and also known as blueprints or a spec sheets) is a ‘pack’ of documents designers put together to outline their design to a manufacturer. The manufacturer will then take the tech pack and produce a final product based on the design.
The tech pack is the very last blueprint – the ‘master document’ – containing every element and instruction a manufacturer needs to transform your design into a complete sample (and, ultimately, a product that you’re then able to sell).
Most (good) manufacturers on the market will not accept your brief unless you provide them with a comprehensive tech pack.

Why is a tech pack important?
A tech pack is essential to creating a product because:
It lessens the number of samples you need, ultimately fast-tracking your idea and your product to market (and saving you both time and money).

It allows the manufacturer to provide you accurate quotes, as they will know exactly what is required to bring your design to life.

It leaves no room for dispute. It forms the benchmark of your product and signals a clear expectation of what is required from the manufacturer.

It lessens the number of mistakes – and that’s ultimately because tech parks are a form of highly effective communication. In an increasingly multicultural business environment, tech packs are universally known as the ultimate blueprint from which to create the product.

It is the final instruction manual. As your product moves through the supply chain and passes different hands, it is easy for revisions to get lost or just misinterpreted. Tech packs reduce the likelihood of this happening as it is known to be the final instruction manual.

It saves time when producing future products. You can refer back to a tech pack at any time you need. They can also be very easily used over and over again.

What’s included in a tech pack?
You’ll need to know what to include in a tech pack when presenting to manufacturer. An effective tech pack will include:


Technical drawings – including things like construction notes, dimensions and computer-aided design (CAD) materials. Drawings which show the front, side and back views – as well as close-ups – of the design are very useful for a manufacturer to rely on. They should include every small detail, such as pleats, pockets, plugs, holes or whatever is relevant to your product.


Sizing and quantities. Your tech pack should come with precisely the sizes you are looking for, as well as the quantities you’re ordering. For your first sample, one clear single size should ideally be provided.

Bill of Materials (BOM). You should also detail the precise raw materials that makes up your product, whether that be steel, cotton or copper. If you’re having clothes produced, your regular BOM table will include your main fabric, lining, thread, labels and trimming. Technical designers will usually be responsible for putting together the BOM.




Basic order details. Your tech pack should specify when you expect the products to be delivered, where and also how you would like your products packaged.

How do I make a tech pack?
There are a variety of ways to make a robust tech pack, whether it be by yourself or engaging a third party to do it.

Traditional methods.
The traditional way to make a tech pack is to use software such as Microsoft Excel, PowerPoint or Adobe Illustrator.
These products may appear easy to use but it can be difficult when edits are made to the tech packs and different versions start to appear through the amendment process.
When different versions are continuously created as read-only attachments, PDF files or even printed files, it becomes very difficult to collaborate.
There is also the risk of tech packs accidentally being emailed to a third party. Sometimes they can be shared via links, and those links expire.

Digital methods.
Other ways to create tech packs are through installing software specifically tailored to build tech packs. This includes programs like Techpacker and SupplyCompass.
These programs are cloud-based and allow users to create and develop tech packs in shorter periods of time rather than through sending emails back and forth. They’re also easy to share and allow for collaboration in real-time.

Engaging a production expert.
The most cost-effective and efficient way to produce a high-quality tech pack is to engage a production expert who knows precisely what is required to create one.
Production experts make hundreds of tech packs as a matter of routine, and are specialists in sourcing the exact manufacturer their clients need in order to bring the ultimate product to life and fast-track it to their client’s shelves.
This is the essence of what we do at The Sourcing Co. We’re a leading sourcing company in the Asia-Pacific that specialises in sourcing suppliers and producing high-quality tech packs for both multinational and small business clients alike.

We take your product from the conceptual and design stage, right through to the production process. We’ll source an ethical and reliable supplier, provide them with a clear and concise tech pack and then arrange for your product to be delivered to you – making us your one-stop shop for your product development needs.

Contact us today and we’ll start the process of transforming your vision into an incredible product.]]> Starting a Swimwear Label https://thesourcing.co/tpost/gnihh4zln1-starting-a-swimwear-label https://thesourcing.co/tpost/gnihh4zln1-starting-a-swimwear-label?amp=true Wed, 06 Oct 2021 14:19:00 +0300 Manufacturing and Production If you’re looking to start a swimwear line for your business, you’ll need to know a few things before you commence the journey.

Starting a Swimwear Label

If you’re looking to start a swimwear line for your business, you’ll need to know a few things before you commence the journey.

Swimwear is highly popular within the fashion and fitness industries, so it presents a wealth of opportunity for creative branding and exciting marketing.

Starting any line of products within a business has its own set of challenges, but a swimwear line requires a significant amount of attention, commitment, effort and – most importantly – desire.

How to Start a Swimwear line (in 5 steps)
Below, we’ve put together an easy 5-step checklist on how you can kickstart a swimwear line – whether you’re selling bikinis, one-pieces, speedos or board shorts.

The 5 steps are essentially:
1.         Pinpointing your market
2.        Working out the costs
3.         Preparing a techpack
4.        Sourcing a swimwear manufacturer
5.         Specifying quantities and delivery times

If you’re eager to create the best swimwear line for your market, then following this list will put you on the right track to successfully incorporating this fashion into your company – ready to sell to your customers.

1.Pinpoint your market
The first thing to do before you even start thinking about a manufacturer is to think carefully about your marketing strategy, and that involves considering your target market.
At the end of the day, you’re not just selling swimwear. You’re selling a result or a benefit that comes with your swimwear. Whether that be feeling comfortable in a swim, looking fantastic, saving the environment (say, with eco-friendly material) or all of the above – it is important to get this forefront of mind.

You’ll need to think clearly about what you’re going to offer, what problems your ideal customers are facing and how an incredible piece of swimwear from your company is going to help them.
Many entrepreneurs dismiss this process at the outset, thinking “I know what my customers want”. And, at the end of the day, they get so focused on selling their product, that they forget about creating value.

That is, they forget who their market is, what their market is looking for and end up selling swimwear that nobody really cares about.
Figuring out what your target market want sis absolutely essential to then crafting your product. Will it be polyester or nylon? Will it be chlorine-resistant? Will it adopt a particular type of trends or will it set a new trend?
Do your market research and get this step solved first and foremost. It may even be worth creating a swimwear business plan to help you.

2.Work out the costs
As with developing any new set of products, start-up costs are critical to determine.
If you do not think about the cost of every single rivet, fastener, flounce, trim and hinge that makes up your swimwear, you will soon discover that costs can balloon far more than you expect.

This requires asking the big question:
How much does it cost to start a swimwear line?
Starting a swimwear line can cost anywhere between $1,500 USD to $35,000 USD, but of course those costs can vary.
A precise figure will depend on a range of factors such as your market size, your swimsuit design, brand, business goals, where you’re going to sell and how much you want to manufacture.
If you have created other pieces of fashion before, you may have a generally good idea of the costs involved generally – so that gives you a headstart right there.
But if you’re new to the game, get in touch with your network, undertake further research and put together a comprehensive financial plan you know you can stick to as the process goes on.

3.Prepare a techpack
The next step in the process is to prepare a technical packet with everything you need to give to a manufacturer (if you’re not sure what a ‘techpack’ is, read more HERE).
The techpack should feature very specific technical swimwear drawings of all the products you’ll be selling when starting your new product line.
It should include the detail of every fabric, colour, effect, seam and the compliance requirements you need (for example, there may be sun protective clothing standards applicable).
Ultimately, the purpose of a tech pack is to prevent breakdowns in communication. It will go a long way to making sure your manufacturer does not create a poor swimsuit design, make your product out of the wrong material or ultimately build something you are not satisfied with.

4.    Source a swimwear manufacturer
The next step on your list is to find the perfect manufacturer with the skills, experience and know-how to build your swimwear exactly to your specifications.
You may want to make your own swimwear in-house, but we’ve found that outsourcing of this job can substantially reduce delays and fast-track your product to market.
There is a whole raft of criteria you’ll need to consider when finding a manufacturer such as:
·      Their minimum order quantity (MOQ) – some suppliers will require you to purchase a minimum number of products, which may or may not be suitable to you depending on your budget and stock limitations.

·      Their sample price ranges – you can get a pretty good idea of how much your manufacturer will charge by first requesting samples.

·      Turnaround time – this is very important to know, as it will inform step #5 (below)

·      Incoterms – these are the international commercial terms governing the allocation of risk in your shipment once the products are ready to be delivered (read more about the Incoterms in our article HERE).

·      Payment terms – do they require a payment up front? Are you able to pay in instalments? How open is the supplier to negotiate?

5.    Specify quantities and delivery times
You’ll need to communicate very clearly your quantities and your delivery time expectations to your manufacturer. The more detailed in what you want, the better outcome you will achieve.
For instance, if you plan for your swimwear to hit your shelves at summer, it’s critical to factor the time it takes for your manufacturer to build and deliver the final product.
That way, your product can hit the shelves by the time people are ready to go out to the beach (and swim)!

Build your professional swimwear line with us
If you’re serious about starting a swimwear line that’s unique and bold, then you’ll need the help a professional sourcing company to manufacture, market and ship your product.
At The Sourcing Company, that’s exactly where our expertise is unmatched. We’re the one-stop shop for product development - we design your product concept, find the perfect supplier and organise all transport and warehousing associated with getting your product to market in the fastest possible timeframe.

We’re specialists in helping businesses of all sizes, from SMEs to large-scale corporations, develop high-quality product lines to promote their band and sell to new and existing customers. You can discover some of our product line projects here.
Contact us today to bring your vision for an incredible swimwear design to life.]]> Pantone Colours : What they are & How they're used https://thesourcing.co/tpost/xhgf9clid1-pantone-colours-what-they-are-amp-how-th https://thesourcing.co/tpost/xhgf9clid1-pantone-colours-what-they-are-amp-how-th?amp=true Thu, 28 Oct 2021 11:41:00 +0300 Manufacturing and Production If you’re putting together a design brief for a new product, Pantone colours are concepts you’ll undoubtedly want to get familiar with.

Pantone Colours : What they are & How they're used

If you’re putting together a design brief for a new product, Pantone colours are concepts you’ll undoubtedly want to get familiar with.

Pantone literally means “all colours”. So if you’re eager to access a vast range of colours and shades to determine the perfect colour for your product design, this specialised matching and print system is an absolute must to understand.

What is Pantone?

Pantone is a company that is best known for creating the ‘Pantone Matching System’, which we discuss below.

The company emerged in the 1950s, as a small commercial printing company, originally with the specialty of creating cardboard sheets of colours for makeup companies. In 1956 they hired a chemistry graduate, Lawrence Herbert, to simplify and consolidate their colouring cosmetics system. 

By the 1960s, Herbert had established an ink and printing service for the company, subsequently expanding this component. He contacted ink producers and offered to manufacture their inks as a licensed operator, guaranteeing consistent colour results with every print.

One early, high-profile customer was Kodak, who needed assistance to create packaging inks that would not fade or stain.

Today, Pantone is one of the leading producers of print resources and tools, including colours, plastics, paints and industrial designs.

What are Pantone colours?

Pantone colours are a set of shades and hues produced and owned by the company, ‘Pantone’.

Pantone have established themselves as a company that provides bold, consistent and desired colours on every print job.

Using the guaranteed Pantone colours for your design or product will give you a reliable and exact colour result with every print, regardless of the material you are using. 

What is the Pantone Matching System?

The Pantone Matching System is a colour matching system created by Pantone allowing designs to, literally, ‘match’ colours during the production process.

Lawrence Herbert developed the Pantone Colour Matching System (PMS) by expanding the colour system used most commonly at that time - the CMYK system.

The Pantone system adds another 15 pigments to the basic CMYK system and enables more accuracy with colour matching and identification. Many printing companies prefer to operate with the PMS system because they can offer greater accuracy to the desired color for their customers. Graphic designers can also work with PMS colours because it enables them to present work that is true to what a printed product or design will look like. 

If you are working on the design of a product and want a specific colour to be used, printers can buy or may already have access to the specific PMS colour you select. 

How do I find a PMS colour code?

Each PMS colour, or hue, has a unique reference or code. PMS colours are differentiated by unique three- or four-digit identification numbers, followed by the letters U(uncoated), C (coated) or M(matte), respectively

 The PMS colour code is the signifier that relates to the exact PMS colour you are after. 

Graphic designers can work with PMS colours in Adobe Illustrator, InDesign or Photoshop. Your designer can set their work to display in PMS, and when a PMS colour is selected, you can identify the relevant PMS colour code.

The Pantone colour finder website also allows you to search and match colours. 

CMYK vs RGB vs PMS: What’s the difference?

The fundamental difference between CMYK, RGB and PMS is that they are all different colour systems, each with its own features and benefits.

Standard printing occurs as CMYK- cyan, magenta, yellow and black. Millions of colours can be created using combinations of these four inks. 

All at-home printers and many commercial printers use this system for their print jobs, with usually satisfactory results. When a job is printed in CMYK, the colour is mixed and created as part of the printing process. For this reason, print jobs done in CMYK may vary a little- the printer calibration results in some inconsistency from the intended colour, or, with some variations across the print job. 

RGB colours are created for digital display. Each colour is made up with a combination of red, blue and green. RGB is best used in the digital environment- for your website pages, details and buttons and your images, videos and social posts. RGB colours can’t be printed, because they use light from your monitor or device as a base.

PMS colours, however, are mixed and prepared before the print process begins. This means more consistent and predictable results with a high degree of accuracy for the intended colour. It doesn’t matter what type of collateral you are printing, or the size or scale of your design, you will ensure the same Pantone colour match across all of your products. 

How to get unique colours with Pantone

Although some PMS colours can be achieved with CMYK, a majority of the range of 1,867 colours cannot be created with this method.

Most PMS colours are unique colours. They are created with specific premixed inks of each colour, rather than the CMYK inks which use combinations of the four individual ink colours.

Pantone allows for variations such as metallic tones and fluorescence changes. Pantone produce iconic colour sheets that are instantly recognisable, as well as an annual colour of the year. 

What Pantone colour tools are there?

Today, more than 10 million designers and producers use Pantone to match and achieve the exact color they want for their creations.

Pantone enables a colour consistency across all materials and finishes, and this accuracy can really help you grow your brand.

Pantone also produce colour charts of the colours they can guarantee to produce. This can help you with colour matching if you have identified a shade or hue from the colour palette that you really want to use.

Conclusion – the importance of using Pantone

Using pantone colours is a fundamental part of your product development. When you’re designing your dream product, you’ll want to have control over every last element - including the colour.

If you don’t use Pantone colours for your product, there is always a risk that the colour you see on-screen during the development phase, is different from the colour that is printed - and which is different again from what was your ideal product was. 

Selecting an exact shade for your product is one element that you can ensure consistency in the long-term as you work with a designer who uses Pantone colours.

It doesn’t matter the material or the shape, or if you’re printing on paper, textile or plastics, with Pantone you can get the exact colour combination you desire every single time. 

Our expert product development team at The Sourcing Co are experts in the entire Pantone Matching System. We can work the system to find the precise colours you’re looking for to match your branding and create the perfect product for your market.

Get in touch with us today to start discussing your product development.]]> The Global Shipping Container Shortage https://thesourcing.co/tpost/sa3bukusp1-the-global-shipping-container-shortage https://thesourcing.co/tpost/sa3bukusp1-the-global-shipping-container-shortage?amp=true Thu, 18 Nov 2021 03:17:00 +0300 Shipping and Freight The worldwide shipping container shortage has led to an unprecedented crisis in international supply chains.

The Global Shipping Container Shortage

The worldwide shipping container shortage has led to an unprecedented crisis in international supply chains.

Driven by the impact of the COVID-19 pandemic, we’ve seen skyrocketing shipping prices and delays at major ports causing frustrations to importers at all corners of the globe. The future of the industry is now uncertain – and nobody knows when things will return to ‘normal’.
But how did it come to this? In an era where demand for international exports is so high, why is there such a container shortage? We explore the complete story below.

Why is there a container shortage?
In short, there is a global container shortage because the shipping and logistics industries were sorely unprepared for the shocks created by the pandemic.

Cancelled voyages causes crisis
In early 2020, when the pandemic spread throughout the world, China and a whole raft of other countries locked themselves down. Economies came to unexpected halts, production of goods ceased, and once busy metropolitan areas became little more than ghost towns. Demand for goods fell dramatically.

As a result, major shipping lines cancelled a raft of scheduled voyages, significantly reducing the number of ships flowing to and from ordinary routes. This not only put a halt to the routine flow of goods. It resulted in empty containers not being collected.
Typically, container ships operated in a cycle - bringing loaded containers to ports, unloading them, and taking empties on backhaul routes. But this flow was suddenly interrupted. At the ports of Los Angeles and Long Beach, for example, empty containers piled up rapidly as 41 vessels cancelled deliveries between mid-February and early April 2020.
These empty containers would have usually ended up in Asia, but instead they remained where they were.

China opened, but the world remained closed
As the world tried to cope with the harsh impacts of the pandemic, China began to recover. The Asian nation was therefore able to get back to its trade routines, but other countries couldn’t.
Lockdowns in critical port cities meant that containers full of cargo simply could not be returned to Asia – where they were desperately needed.
In India, for example, lockdowns led to massive backlogs of containers in places like Chennai and Mundra as dockworkers couldn’t attend work to unload them. Truck drivers also couldn’t collect cargo from these ports. The entire India east coast backlog reportedly escalated to 50,000 boxes.

Massive reductions in shipping capacity also meant empty containers remained in places where they normally wouldn’t. In the Port of Melbourne, for example, empty containers piled up as not enough shipping lines were operating to transport them back to China. Shippers scrambled to deal with oncoming detention and demurrage charges, as their container were left in ports unattended. 


Demand shock intensifies the crisis
Out of nowhere, the international demand for goods skyrocketed as people in lockdown around the world purchased goods in droves. Ocean shipping liner Hapag-Lloyd stated that it was the “strongest increase in (container) demand, following one of the strongest decreases in demand ever”.
A surge in demand for COVID-19-related products, for instance, placed great pressure on global supply chains. In May 2020, the Organisation for Economic Co-operation and Development (OECD) reported that the demand for face masks at the time “might be ten times higher than world production capacity”.
The pandemic fuelled online shopping, and such demand was reflected in the profits enjoyed by the e-commerce industry. In the United States alone, consumers spent $791.7 billion, up from 32.4% in the previous year. Online giant Amazon also enjoyed an annual revenue of $386 billion in 2020 (up from $100 billion in the previous year), resulting in an 84% profit.

Shippers could not (and still cannot) secure containers easily
The result of the ‘demand shock’ was that regular businesses struggled greatly to secure shipping containers to export their products. These struggles remain a major challenge today.
Steel boxes are now harder to find than ever before, as containers are either piled up in terminals or are stranded in the ocean on ships who are waiting to unload at overloaded and congested ports.
·     U.S. based Agriculture Transportation Coalition reported in August 2021 that 22% of their members’ sales were lost simply because they couldn’t access containers to get their cargo overseas.

·     Seaway Intermodal, an Australian exporter of citrus fruits such as oranges and mandarins, reported that it was difficult to secure refrigerated shipping containers (or ‘reefers’) they needed for export. Once they finally did, the trick then became “finding plug space on the vessels where the refrigerated containers can continue their cold treatment right through to market”.

·     Rice exporters in Southeast Asian nations like Vietnam and Thailand reportedly cancelled their shipments altogether. This was due to the “impossibility of securing containers” as empties piled up elsewhere in places like India, Australia and New Zealand.

·     Port congestion has meant containers are literally stuck on vessels, forced to wait waiting months before they are unloaded. For example, delays and congestion increased the time it takes for a container to arrive from Beijing to Chicago from 30 days to over 70 days.


Containers become woefully expensive
Constrained carrier capacity, surging demand and a colossal container shortage have all combined to skyrocket the price of a container.  This is happening everywhere around the world.
·     In February 2021, shippers moving goods from Asia to Europe reportedly paid six times more for a container than what they did in April 2020. According to one index, rates escalated to USD $8,455 per 40-foot container – the highest recorded by that index since its creation in 2016.

·     Rates from Asia to the West Coast of the United States were also four times higher compared to March 2020, landing at an astonishing USD $4,709 per container.

·     From Asia to the East Coast, rates more than doubled to rates of USD $5,658 per container.

·     Sabrini Foods, an Australia food importer, reported that a container that cost $600 before the pandemic “was now worth $2,000 and could reach $4,000 and beyond.”

·     A Full Container Load (FCL) from China to the United States used to cost between USD $3,000 to $5,000. At the time of writing, it now costs between USD $14,000 to $15,000.

The future of shipping containers: when will the crisis end?
Nobody in the industry has a way to accurately predict how the shipping crisis will come to an end.
Some companies have introduced their own container booking service to try and make it easier for exporters to secure containers. Cainiao, owned by Alibaba, is one of those companies – launching a service to expand to over 200 ports in 50 countries.
But here is no doubt that shippers will need to think differently about streamlining their supply chain. This will involve booking their shipments well in advance, and perhaps using a mixture of air freight and ocean freight to facilitate their transactions.
Businesses that ship internationally are strongly encouraged to seek expert guidance in order to navigate this unparalleled global shipping crunch.

If you need help navigating the present container shortage, speak to our freight forwarding experts at The Sourcing Company.]]> Importing to the USA? Info you need to know on Duties & Taxes. https://thesourcing.co/product-sourcing-and-manufacturing/tpost/ttlysuofe1-importing-to-the-usa-info-you-need-to-kn https://thesourcing.co/product-sourcing-and-manufacturing/tpost/ttlysuofe1-importing-to-the-usa-info-you-need-to-kn?amp=true Sat, 11 Dec 2021 16:17:00 +0300 Sourcing and Importing To expand your business, seize expansion opportunities and establish new markets, you’ll likely need to import goods from other countries.

Importing to the USA? Info you need to know on Duties & Taxes.

U.S. Duties and Taxes When Importing Goods

To expand your business, seize expansion opportunities and establish new markets, you’ll likely need to import goods from other countries.

Because penalties can apply if you break the rules or don’t pay the correct import taxes, it’s important to have a thorough understanding of the relevant law and your responsibilities before you start.

Why are duties and taxes charged on imported goods?

A duty is an indirect tax calculated on the value of goods which are imported into the United States.

They may seem unfair, or excessive, but duties and taxes are imposed on goods that come in from overseas for good reason.

These charges help protect local industries and jobs and control the flow of restricted and prohibited goods. Duties and taxes provide revenue to support other domestic industries and trade.

What duties and taxes are charged on imported goods?

Regardless if you are trading as an individual, or for a business, you can expect to pay import duties and taxes. The amount you will need to pay is typically based on the value of the goods you are importing. This is calculated using a method known as the Free on Board (FOB) cost. The value of the goods does not include the shipping of the goods.

In some cases, it is calculated on both the value of the goods and the quantity being imported. You can get an idea about the current rates for duties and taxes from the Department of Homeland Security’s U.S. Customs and Border Protection website. Fees and charges are updated regularly so it pays to do thorough research before you authorise a major import of goods.

Other charges may be applied too, including:
·      Sales taxes, which are not automatically applied but may be payable to the state
·      Federal excise taxes on the import of alcohol and tobacco
·      Processing fees
·      Harbor maintenance fees

You can read more about U.S. customs duties here.

Do I need to pay a Customs bond?

Customs bonds are also required by U.S. Customs and Border Protection for businesses importing goods with a value of over $2,500.

It is a legally binding contact you buy in order to give assurances that your import taxes and fees will be paid.  Customs bonds must be arranged before the goods leave their originating port.

Often, businesses use customs brokers to arrange the bonds because of the frequency and agility they have to complete the bond request. Single entry bonds are useful if you will only need a one-time only import, while continuous entry bonds cover your shipments over the course of the year.

What goods attract duty and tax charges?

Some goods do not attract charges. Again, it is worth doing your research about any specific entry requirements that apply to the particular goods or commodity you wish to import.

In most cases, although it does depend on the nature of the product, duty is not charged if the value is less than $800.
Countries with tariffs or free trade agreements
There are different costs associated with importing from certain countries.
The United States has entered trade agreements with Canada, Mexico, Israel and many Caribbean countries, which means that lower or no import taxes are applied.
There are reduced taxes on certain goods from other countries too, including Israel, Jordan, Chile and Singapore.
To receive your entitlement for tax discounts, ensure you are supplied with a statement known as a ‘Certificate of Origin’ from the country where the goods originated.
Conversely, additional tariffs put on goods from many European countries, including France, The Federal Republic of Germany, Greece, Ireland, Italy, Spain, Sweden and the Ukraine.
What other charges are applied on imported goods?

Duties and taxes are paid on top of the cost of transporting the goods, and that is often not a cheap exercise either. Charges applied on imported goods can usually be defined as either freight costs or landed costs. Freight costs are calculated on three variable factors:
·      The weight of the goods
·      Shipping method
·      Speed of shipping

Goods sent by air typically attract a rate that is measured per kilogram, while sea freight most commonly has a cost per container applied. Many services offer discounts or reductions in costs for importing where there is no urgency on the delivery of the goods. Landed costs can include transportation or warehouse costs.

Questions to consider
To ensure you are handling the process of importing goods to the United States with the adequate consideration, ask yourself these questions:
·      Do you know exactly what you are importing?
·      Do you know what it is made of?
·      Do you know where it was made?
·      Have you properly valued the goods?
·      Have you reported any costs or payments associated with the imported merchandise which could include commissions, rebates or royalties?
·      Are the goods restricted or are there any conditions on the import of the goods?
·      Do any conditional free trade agreements apply to the importation?
·      Does a Customs bond need to be arranged?
·      Do you have all of the documents required to ensure the goods will be granted entry?

Penalties

There are penalties for carrying out misleading or fraudulent activity regarding importing goods into the United States. Because taxes are based on the value of goods being imported, it’s critical that you are truthful and accurate about the value of the goods.

Imports are often audited and there are penalties for providing an inaccurate value estimate.

As this Importing into the United States document says “Reasonable care is an explicit responsibility on the part of the importer.”

There are also penalties for importing illegal material and, for non-payment of duties and taxes.

If one thing remains in your mind from reading this article - it’s that you should fully understand your responsibilities to honestly describe and declare your imported goods and pay any charges that are owed.

Use a professional freight forwarder

For most goods that are imported into America today, there will be multiple duties and taxes.
You may see some products at a price that is too good to refuse but get a rude shock when it comes to paying the fees that are payable for importing goods.
It pays to do your homework before you order goods that may incur import duties and charges, but it’s also worth engaging the experts for help.
Our freight forwarding team at The Sourcing Co has unrivalled expertise when it comes to importing goods from the United States and can help you understand the duties and taxes you are required to pay.
Get in touch with us today to learn more.

All information in this article is general only. It may be outdated or incomplete. Nothing here is intended to be legal or tax advice. Always make sure to consult your accountants and legal professionals before relying on any information.

]]> Why Raw Material Prices are Rising in 2021 https://thesourcing.co/tpost/a4mvmf9dm1-why-raw-material-prices-are-rising-in-20 https://thesourcing.co/tpost/a4mvmf9dm1-why-raw-material-prices-are-rising-in-20?amp=true Wed, 12 Jan 2022 15:55:00 +0300 Trade and Economic Factors Raw material costs are escalating sharply in 2021. Global markets shrouded in the uncertainty of the COVID-19 pandemic has seen steel, cotton, rubber, copper, cruise oil and lumber prices surge to a level we haven’t seen in a long time.

Why Raw Material Prices are Rising in 2021


Raw material costs are escalating sharply in 2021. Global markets shrouded in the uncertainty of the COVID-19 pandemic has seen steel, cotton, rubber, copper, cruise oil and lumber prices surge to a level we haven’t seen in a long time.

We’ve all felt the impact. It’s costing more to produce goods, meaning the price of the products we make are being passed to consumers. Whether it’s cutlery for the kitchen or the newest building in New York, inflation is causing a squeeze for consumers all around the world.

But despite U.S. stimulus, European openness and vaccines spreading to every corner of the globe, there doesn’t seem to be any sign that raw material costs are decreasing.


So why are raw materials rising so steadily in 2021, and how can businesses possibly tackle the impact? Below, we seek to answer those two questions.

Why raw material costs are increasing

There are a range of reasons behind the intense rising costs of raw materials, but it all boils down to the unparalleled impact of the pandemic.

Starting in 2020, and continuing well into 2021, COVID-19 has put nothing but upwards pressure on numerous costs throughout the supply chain.


Strong market demand

Global economic recovery, and a rapid reopening, has contributed to the increase rise in raw materials. The OECD estimates growth to reach 5.7% in 2021, and 4.5% in 2022 (although strength will differ considerably across different countries).

The pandemic has also massively changed the way people shop. People – suddenly facing movement restrictions and lockdowns – flocked to online shopping in droves, turning to eBay, Amazon, UberEats and other ecommerce platforms for their shopping needs.

Sharp global demand has meant more and more raw materials are needed to build the essential products we need, and the packaging it comes in (whether it be cardboard, bubble wrap, tape or air bags).

Chinese economic recovery

The surging recovery of China’s economy plays a massive role behind the skyrocketing of raw material prices.

The world’s most powerful economy is building itself up again after the unexpected calamity it faced in light of COVID-19. Their production was up by about 6.9% year on year in October 2020, much quicker than other places in the world such as Europe.

The result has meant the Chinese economy is starving for raw materials, especially as their manufacturing industries scurry to meet global demand for products.

Green energy revolution

A transition away from fossil fuels to more eco-friendly alternatives has also contributed to these increasing prices.

For example, a surge in demand to build power grids has come with rising prices for copper. In fact, around 1.9 million tonnes of copper were used to construct electricity networks that year, and copper prices rose about 21% earlier in 2021.

Other raw materials needed to build solar panels like PV glass and silver paste have increased, resulting in solar module costs to increase by 35%.

Global container shortage

The rise in raw material costs has also been driven by an international container shortage.
Containers are literally piling up in ports around the world where they are not needed, and businesses are struggling to secure the vital boxes they need to import or export their goods. They’re also stranded at sea, as vessels wait days to unload ever-congested ports. As a result, these steel boxes are more difficult to locate than ever before.

This has contributed to massively increased shipping costs, including a tripling of costs to ship between China and Europe. Indeed, the costs of transporting one single 40-foot container on a route ballooned from USD $2,000 to over USD $9,000 according to some importers.

The container shortage has created pressure on all prices, including the prices of raw materials, as shortages creates struggles for importers trying to get the goods they need.

Brexit trade barriers

After the United Kingdom formally left the European Union, new trade restrictions have contributed to pushing up the costs to purchase taw materials.


Some of these new barriers have included new rules of origin requirements (including for raw materials) and burdensome customs processes. Around 65% of manufacturers in the UK alone reported higher costs.

Timber shortages

Softwood materials are very difficult to come by nowadays. This has only been made worse by poor weather, licencing issues and timber infestation in some of parts of the world.

The strain has been particularly felt with the increase in demand for home improvement, DIY and construction materials in the face of lockdown.


It explains why the prices of lumber have increased to over 75% of pre-COVID levels.

How to address the impact of rising raw material costs

The best thing that shippers across the world can do in the face of ever surmounting raw material prices is adapt.

Below, we’ve outlined some tips on how you can keep within your profit margins in the face of rising production costs throughout your supply chain.

Reduce the scrap

One of the most effective places to start doing right away is to streamline the use of the raw materials you’re currently using.

You would be surprised how much raw material wastage (in other words, ‘scrap’) eats into your production costs. For example, the value of scrap waste from food and food products manufacturing in Australia alone was valued at $158 million in 2017.

A simple alteration of a product design or change some of the ways you make your products, taking into account units of raw material, could potentially lower any excessive scrap you may be creating.

Leverage suppliers

Another way to potentially reduce costs is to leverage your suppliers and get the most affordable partner you can find without sacrificing the quality of your product.


Searching for suppliers with faster delivery times, more affordable shipping costs and reduced costs for services is certainly can pay dividends – especially if it means an improved bottom line.

Use a professional sourcing company to reduce costs

As prices rise exponentially through supply chains across the world, it is prudent to have a reliable sourcing company and freight forwarder by your side.

If you’re in the business of manufacturing products from raw materials, our team at The Sourcing Co is dedicated to finding the right suppliers for you and negotiating the best possible deal.
We’re also experts in all things shipping, and our freight forwarding team can help streamline your shipping processes and improve your company’s profitability.

So get in touch with our team to discuss your supply chain, and we can help you adapt to the ongoing unpredictable rise of raw material costs.


]]> China's electricity shortage and its impact on manufacturing. https://thesourcing.co/tpost/2z4pax9oo1-chinas-electricity-shortage-and-its-impa https://thesourcing.co/tpost/2z4pax9oo1-chinas-electricity-shortage-and-its-impa?amp=true Wed, 12 Jan 2022 16:07:00 +0300 Manufacturing and Production Chinese power cuts are having ripple effects on the entire global economy. The country’s severe electricity shortage is leaving millions of homes, businesses and industrial areas suffering from rolling blackouts.

China's electricity shortage and its impact on manufacturing.


Chinese power cuts are having ripple effects on the entire global economy. The country’s severe electricity shortage is leaving millions of homes, businesses and industrial areas suffering from rolling blackouts.

It’s nothing short of an energy crisis, forcing people to power their homes with candles, experience failing traffic lights and even getting trapped in the lifts between floors.

So why is China facing scores of blackouts? How exactly is it impacting manufacturing and global supply chains? Below, we seek to answer these questions.


Why is China in a power shortage?

China is undergoing a power shortage mainly because of a conflict between supply and demand. As the country quickly recovers from the pandemic, there is a strong demand for electricity that China’s coal-fired power plants are not willing or able to meet.


Electricity crises are nothing new to China. In the past, the nation has battled with trying to balance electricity supply and market demand. The result has often been many of the country’s provinces undergoing power outages. This is especially during the times of peak consumption in winter and summer seasons.

In 2021, however, multiple factors have combined to make this particular power outage especially significant.


Increased demand for goods

Global demand for goods manufactured in China is skyrocketing. As both China and the world are recovering from the harsh economic impact of the COVID-19 pandemic, consumers and businesses are eager for the affordable products China is known for crafting. In June 2021, exports out of China were at approximately USD $281 billion – a 32% increase from the previous year.

China is itself improves its own economy, demanding a colossal number of raw materials as its manufacturing surges. Production was up around 6.9% YOY in October 2021, a lot quicker than other countries (especially Europe). Profits in industrial companies also boosted by about 92.3% over the period of a year to USD $109.66 billion in March 2021.

This massive demand for goods has meant a surging demand for electricity. In comparison to 2020, demand for electricity has about double its typical annual level. This isn’t surprising. As people demand iPhones, kitchen appliances and fitness equipment, China needs electricity to make that magic happen.

China’s carbon neutral policy

The problem is that coal generates around 66% of China’s electricity, and the Chinese Government has adopted a carbon neutral policy with the aim of addressing the harsh impacts of climate change.


As demand for electricity soars, so does the demand for coal (and, therefore, the price of coal). China extracted 3.9 billion tonnes of coal in 2020, and expects to extract more in 2021. Data released in October 2021 revealed that the price of coal hit record highs as the country continued to struggle with its energy crisis. Some thermal coal futures rose to as high as USD $254.44 a tonne.


But this isn’t good news for China’s green ambitions. The country aims to reach peak emissions by 2030 and full carbon neutrality by 2060 – these are their ‘Double Carbon’ goals. Every municipality across its provinces have even established neutrality as a local objective.

Controlled electricity pricing

Because of these policies, the Chinese government had deliberately kept electricity prices artificially low. The aim being to reduce the rate of energy consumption across the country. A policy known as ‘dual control’ was introduced, forcing factories to cut back operations in order to meet energy consumption and energy intensity targets.

Coal-fired power plants and generators weren’t allowed to pass the increased costs of production onto their consumers. The result was they either had to operate at a loss or reduce the output they generated. Many chose the latter.

In September 2021, the Chinese provinces of Liaoning, Jilin and Heilongjiang were reportedly the worst affected by these outages. Factories closed down (as we discuss below) and millions of homes are experiencing life without electricity.

Note that, in mid-October 2021, the Chinese Government allowed electricity prices generated by coal-produced power plants to rise. In an effort to curb the power outages, restrictions were loosened and market forces are now permitted to influence coal-fired electricity pricing.

How blackouts are impacting Chinese manufacturing

The Chinese electricity crisis is primarily causing factories to shut down and key suppliers of products to suspend their operations. The result has been a major impact on manufacturing capacity.

Factories shutting down

Skyrocketing energy prices have unfortunately meant a lot of factories that manufacture goods are closed. Blackouts across a great deal of eastern China, where most of the country’s population lives and works, unfortunately meant the production houses that manufacture goods are no longer operational.

Statistics released demonstrated that, for the first time since February 2020 (when the pandemic took its toll on the Chinese economy), factory activity contracted. This included factories that produced metal and oil products, which are high energy-consuming sectors.

To make matters worse, the energy supply crisis hit only days before ‘Golden Week’ a national holiday beginning on 1 October.

Suspended operations

Major Chinese suppliers announced they had to suspend operations in light of the crisis.

·     The company Eson, which is an important supplier to major U.S. giants Tesla and Apple, announced the suspension of its operations in Kunshan city

·     Concraft Holding, another Apple supplier, also announced it would suspend operations of its plants near Shanghai.

·     Chip packaging providers supplying large well-known brands like Intel and Nvidia also announced to those companies that their production facilities in the Jiangsu province would be suspended for a certain period.

It is therefore not surprising that the entire global supply chain has been greatly affected by the energy crisis ongoing in China.

Will market-priced electricity resolve China’s energy crunch?

We think it will have positive effects on the power crisis. A key factor behind China’s energy outage was the strict controls over electricity pricing inconsistent with market supply and demand forces. Producers were losing money every additional tonne of coal burned, so it made much more economical sense to simply close down.

In the meantime, we await to see the impact of the changing government policy. All importers of Chinese manufactured goods, for now, should still expect interruptions and delays especially in light of the ongoing container shortage and shipping crisis.

]]> What is the Impact of the Omicron variant on Global Supply Chains? https://thesourcing.co/tpost/dphhckzda1-what-is-the-impact-of-the-omicron-varian https://thesourcing.co/tpost/dphhckzda1-what-is-the-impact-of-the-omicron-varian?amp=true Fri, 04 Feb 2022 03:28:00 +0300 Trade and Economic Factors As the Omicron variant of COVID-19 spreads across the world, global supply chains are bracing for yet another wave of impact.

What is the Impact of the Omicron variant on Global Supply Chains?

What is the Impact of the Omicron variant on Global Supply Chains?

As the Omicron variant of COVID-19 spreads across the world, global supply chains are bracing for yet another wave of impact. While the virus has already caused unprecedented port congestion and a global container shortage, the new strain is now undeniably the next challenge we must face.

The world first became aware of the omicron strain in November 2020, and since then it has spread much more quickly than its predecessors and has been detected in over 100 countries. The World Health Organisation said it poses a ‘very high’ global risk. Experts are calling it a “test of resilience”. Some are saying that the strain presents evidence that the crisis is “not yet over”.
Indeed, supply chains continue to be vulnerable to disruptions related to the pandemic. So below, we’ll look at the potential impact of the Omicron variant (and the responses to it) on international supply chains.


Knock-off impacts of restrictions and lockdowns

In response to the new Omicron strain, new movement and social restrictions have been reinstated across the world.
A lockdown was imposed in China, while European nations imposed restrictions on gatherings and curfews on venue opening times. A lockdown was also re-introduced in the Netherlands.

Impact on China

China is expected to continue executing its ‘zero COVID’ policy goals – destroying the presence of the virus no matter where it is, and no matter the cost. Residents living in the city of Xi’an aren’t allowed to leave their homes, except if they’re going to get tested. Some have said they don’t have enough to eat while some were evacuated and forced to enter quarantine facilities.
China’s strict protocols have already led to staff shortages, delays when loading ships and further congestion. Omicron may continue to worsen this, and the timing does not assist given that Lunar New Year is celebrated in early 2022.

We expect the lockdowns and restrictions imposed in China, and across the world, will continue to present frustrating knock-on effects across shipping. Air and ocean transport will undoubtedly be constrained even further, while we continue to experience manufacturing shortages for important products like electronic and automotive goods. This is not surprising given that some of the world’s most crucial ports are located in China, such as the Port of Shanghai and Shenzhen. 

Impacts on Asian regional exports

All around the world, supply chains are being hit by the impacts of COVID restrictions but, in Asia, workers were able to get back to it in September 2021. Omicron, however, presents new challenges which now may possibly hinder their road to revery.

Vietnamese exports are a case in point. The third wave of COVID experienced by that nation was extremely severe. A colossal range of factories shut down, with the manufacture of products like sportswear, shoes, toys and coffee significant affected. The country began to enter into recovery in late 2021, but the new Omicron variant has thrown this into uncertainty.

The potential impact of Omicron on the recovery of the South East Asian countries in the region is yet to be seen. Governments are likely to do as much as they can to prevent imposing harsh restrictions, but there is only so much they would be prepared to resist. Vietnam re-opened to international visitors, but Malaysia announced new rules such as banning mass gatherings.

If Omicron impacts supply chains in the South East Asian region, we will likely see a reduction in Asia’s Gross Domestic Product. We will also see more delays with shipments, prolonged difficulty with securing a container for your goods and ever-increasing shipping costs.    

Chaos at ports

We also expect further chaos to ensure at important ports across the world. This would not only include in China, but also in the United States.
One of the most important problems faced by U.S. ports today include staff shortages. The International Road Transport Union said that around 20% of professional truck driving positions aren’t filled. This is even despite employers offering to pay higher wages.

Also read: Shipping Delays: The Container Vessel Blocking the Suez Canal


Increased Omicron infections in the United States has resulted in transport and logistics companies struggling to find the right number of staff to address the massive demand for shipping. It does not assist that a great deal of workers who are employed in critical positions will need to enter quarantine if infected by Omicron, adding to the labour shortage (as we’ve seen before with other strains of COVID).

The result has been a massive backlog of containers in U.S. ports, and ships waiting weeks on the water outside the port just so they can unload their cargo. The Korea Ocean Business Corporation in mid-December 2021 reported that 80 vessels were waiting outside Los Angeles and Long Beach ports, and they are taking about a fortnight to berth.

Increased shipping rates

As Omicron contributes to the global slowdown in transport & logistics, rates for shipping and air freight have unsurprisingly surged.

As the volumes of exports increased in late 2021, it is becoming more and more difficult to secure space on a vessel. It is now also becoming harder to secure a profit in light of the freight rate spikes.

The numbers paint a grim picture. The Shanghai Containerized Freight Index (SCFI) increased by 125.09 points to 4727.06 points in early December. This figure has tripled in only a period of a year and is the first time that the index has exceeded 4,700 since related statistics were put together in 2009.


In the air, the TAC Index (an index for global air freight rates) also reported high numbers. Average air fares to carry freight from Hong Kong to North America increased to USD 11.54 per kilogram in November and we expect this to increase as Omicron continues to spread.

If you or your business need assistance to navigate the impact of the Omicron variant, get in touch with the freight forwarding experts at The Sourcing Co. We can help your organisation prepare for the uncertainties the new strain of COVID-19 may bring.


]]> How to Use Artificial Intelligence In Your Supply Chain https://thesourcing.co/tpost/l967par9c1-how-to-use-artificial-intelligence-in-yo https://thesourcing.co/tpost/l967par9c1-how-to-use-artificial-intelligence-in-yo?amp=true Thu, 24 Feb 2022 14:20:00 +0300 Supply Chain Management Artificial intelligence (AI) now has a major role to play in the management of global supply chains. It has the potential to streamline the transport of our goods...

How to Use Artificial Intelligence In Your Supply Chain

Artificial intelligence (AI) now has a major role to play in the management of global supply chains. It has the potential to streamline the transport of our goods, positively impact our bottom line and make the lives of all our staff just a little bit easier (something we could all use right now).
Business leaders are beginning to understand the importance of this. According to the Hackett Group's 2021 Key Issues Study, supplier risk management is a top priority – just behind the reduction of costs. More are beginning to realise that AI can greatly assist, from predicting bottlenecks and streamlining production to providing complete visibility and inventory management.

Below, we’ll outline how you can use AI throughout your supply chain, and what benefits AI can present for you.

How AI is used in supply chains
Artificial intelligence has the potential to make a significant contribution to your supply chain. It can greatly improve transparency across a great amount of your business, especially when shipping goods from one port to another.

It can also help you optimize various stages of your supply chain and result in your workforce being more productive to create high-quality output. It can foster a safe culture, thereby a safer working environment, and boost the improvement of your data’s accuracy. We’ll explain all this in more detail below.

Warehouse Supply and Inventory Management
AI is used to identify influential factors and patterns throughout the data in your supply chain data using what’s come to be known as “constraint-based modeling” and algorithms (a math-based modeling technique where decisions are quite literally ‘constrained’ by a minimum and maximum range of limits). Such data-centric modeling allows managers to make better decisions with regard to warehouse management and inventory stocking.

This big data predictive analysis transforms the methods that warehouse managers can use to deal with the inventory they have in their possession. It provides them with deeper levels of insight that simply cannot be unraveled with human-driven and manual processes.

AI also allows warehouse managers to optimize their inventory processes. They can now input and extract data in real time. Therefore, each time they need to find a particular set of data such as components, finished products, and parts, they will no longer spend hours upon hours searching for it.

Moreover, AI can also provide you with more appropriate recommendations for stocking you inventory. This is done through analysing the data received from purchase and production orders as well as deliveries made by suppliers.

Delivery Logistics and Routing Efficiency
Today, customers expect accurate and fast shipping. In fact, the COVID-19 pandemic has made people use delivery services much more frequently.

With artificial intelligence, routes can become more efficient. GPS tools and platforms that are powered by AI can greatly help improve delivery logistics and routing efficiency.

Profitability and Efficiency of Your Loading Processes
Both art and science are necessary to identify the most efficient and quickest ways to obtain goods from planes, trucks, and ships.

A lot of companies use software, hardware, and data analytic combinations to produce real-time visibility into their loading practices. Such insights may be used to reduce the amount of air (i.e. empty space) that’s shipped, as well as optimize the space inside their trucks, trailers and other road vehicles.

Likewise, AI can be used to design more efficient, less risky, and faster processing protocols for managing parcels.

Uncover New Methods that Save Money and Increase Revenue
One of the greatest things about AI is that it’s a fast-changing form of technology. You will always uncover new ways of doing things, that can save you money and improve your bottom line.
AI can even be used to negotiate much better procurement and shipping rates. It can also be used to determine where the changes in the supply chains may deliver higher profits as well as manage carrier contracts.


Benefits of AI in supply chain management
Using AI in your supply chain allows people to reap plenty of benefits that can have a great impact on your bottom line. Some these advantages are as follows.  

More Accurate Inventory Management
Using AI, your inventory management can greatly improve its accuracy. Tasks like processing orders, packing goods into vehicles and picking off shelves are typically dull, mindless and time-consuming. It’s therefore incredibly easy to make mistakes.

This is a problem because it is absolutely critical that the management of your inventory is accurate. You may be handling hundreds or even thousands of different products, and you need to know exactly what you have in stock so you can ensure you’re keeping within budget and creating a healthy bottom line. 

Thanks to AI, inventory management can become faster and more efficient. With intelligent technology overseeing your stock, you can greatly minimise the risk of overstocking products or not stocking enough. This is because AI systems are specifically designed to analyze massive datasets rapidly.


Make Your Warehouse Much More Efficient
We cannot underestimate the importance of having efficient warehouses in your supply chain. As you well know, they’re responsible for handling and centralizing your entire stock. Their operations need to work like clockwork.

At the end of the day, the reality is that AI systems can move much faster than humans. That means they’re more efficient and can solve the most complex of problems a lot faster than we can.
The whole system of technology can make complex processes simpler as well as get the jobs done a lot faster. Moreover, it can reduce the need for manpower, which in turn reduces staff costs.

Makes Your Supply Chain Safer
A safe workplace is a pre-requisite for a productive workplace. Because AI can result in better warehouse management and planning, it can also improve material and worker safety.
In addition, AI can analyze the safety data in the workplace and inform the manufacturers regarding possible risks. It can update operations and record stocking with the use of so-called  ‘feedback loops’. This allows manufacturers to react accordingly, and quickly, to keep their own process and warehouses in the safest condition possible.

Learn more about AI from a freight forwarder
AI has indeed greatly modified the ways businesses operate and get their goods from point A to point B. But thanks to artificial intelligence, data extraction has become faster and easier. AI systems has allowed businesses to save time, generate more value, and reduce costs.
But AI isn’t the solution for everything and integrating it into your supply chain is not always as simple as you may think. Here at the Sourcing Co, our expert freight forwarders can help you work out which kind of AI is most appropriate for your supply chain and where you can go about implanting it.

At the end of the day, we want to help you make the best decisions you possibly can for your business, so that your brand remains reputable and your customers happy.
Get in touch to find out how AI can help.]]> How to Manage Risks in your Supply Chain https://thesourcing.co/tpost/orf3dzral1-how-to-manage-risks-in-your-supply-chain https://thesourcing.co/tpost/orf3dzral1-how-to-manage-risks-in-your-supply-chain?amp=true Thu, 12 May 2022 07:14:00 +0300 Supply Chain Management Today, around fifteen thousand parts comprise an average car - five thousand of them moving. If just a couple of these parts get damaged, your car won't be able to run.

How to Manage Risks in your Supply Chain

Today, around fifteen thousand parts comprise an average car -- five thousand of them moving. If just a couple of these parts get damaged, your car won't be able to run. That right there underpins the fundamental concept of supply chain risk management – it only takes a few disruptions to destabilize your whole supply chain network and give rise to heavy consequences.
Supply chain risk management plays a vital role in the continuity of every business. Keeping an eye on these risks promotes inventory availability, reduces process bottlenecks, and increases profitability. Numerous risks come into play in the supply chain and this article will guide you on how you can manage these risks and prevent them from disrupting your business to keep it up and running.

What is supply chain risk management?

Supply chain risk management is a process that businesses adopt to create strategies for anticipating, preventing, and mitigating risks within the supply chain network. The goal of supply chain risk management is to make the whole supply chain resilient to possible disruptions in the flow, thereby preserving value and revenues.


Steps in managing risks in your supply chain

To properly manage supply chains, you’ll need a methodology that allows you to deal with risk systematically and effectively. You can follow the steps below and apply them to your business or organisation.

1.    Identify Risks

You cannot solve a non-existent problem. That being said, the first step you need to take is to determine all possible risks that could adversely affect your supply chain. While this could be a tedious process, breaking down every step in the supply chain will give you a clear view of these factors.
Examine carefully all nodes in the supply chain, including suppliers, production, warehousing, and transport. Identify also the risks that affect the product in terms of quality, price, and delivery efficiency.
There are many types of supply chain risks, but the most common are the following:
·      Market risk
·      Strategy risk
·      Implementation risk
·      Performance risk
·      Demand risk
·      Financial Risk
·      Legal risk
When you have listed all the risks in your supply chain, it’s time to prioritise them based on impact and probability of occurrence. To determine how likely they are likely to occur, you can look at previous historical data or records that you can get your hands on. If you’re looking into a supplier, for example, dig deep and see if you can find any history of insurance claims or accidents to determine how risky they are to do business with. You can then devise strategies to mitigate the identified risks according to prioritization.

2.    Promote Risk Awareness

A study in 2018 showed that risks are better averted when employees themselves are aware of possible risks in the supply chain.


Managing risks in the whole supply chain cannot be accomplished by one or a few individuals; it requires a collective effort. Therefore, you have to conduct proper rigorous training programs to increase your employees' knowledge of supply chain risks.
Aside from the common concepts on supply chain risks, you can also train them with best practices in managing risks, as well as using software for assessing risks. This is a more convenient approach because you’ll not just empower your people but also increase your company’s capability to identify and mitigate risks. As they say, two heads are better than one.

3.    Increase cybersecurity protection

Going digital streamlines the whole supply chain but there are possible threats if your cybersecurity defences are weak. Possible cybersecurity threats include malware, ransomware, and hacking – all of which can disrupt your operations, resulting in significant losses.
To bolster your cybersecurity, you have to involve all workers in the organisation, not just in the IT department.


4.    Get insurance

Insurance policies are critical to keeping the whole supply chain impervious to interruptions. They do not just cover financial and legal liabilities but also safeguard you from losses, consequently preserving revenues. Having robust marine insurance policies in place to cover risks throughout your supply chain is always an absolute must.

For example, cargo insurance and marine insurance are essentially. They cover risks associated with the transit of goods transferred inland or across waters. In the event of accidents leading to damaged products, you may able to claim compensation for the losses you suffered.
Consider also having a product liability insurance policy in place. Your manufacturer may have not crafted your product properly, with the result that it causes harm or loss to one of your customers. Product liability can cover your legal fees and any damages you may have to pay as a result.

5.    Proper selection of suppliers

When talking about a supply chain, you’re not just considering a single chunk of it - but as a whole. With this in mind, it’s important to know your suppliers well before contracting them. This lets you anticipate the type of working relationship you have with them and the level of risk your business gets exposed to.

A great way to cross-examine your suppliers is to check their financial stability. Don't just rely on the financial statements they are presenting to you. You may be able to obtain information from independent agencies that provide credit assessment and evaluation.

Aside from financial viability, examine also the quality of their products. Generally, the higher the quality of their products, the lesser the risk you’ll be exposed to. Also, check their compliance with government or statutory regulations and how they treat the workers in their company. The last thing you want is a supplier engaged in practices of modern slavery.

The last thing to note in supplier selection is the diversification of sources. The more suppliers you select to source from, the greater opportunity to spread that risk.

6.    Monitor and review your strategies

There is no overnight solution to address all supply chain risks. Every risk management strategy needs testing, evaluation, and improvements along the way. To effectively monitor the strategies you put in place, you should consider instituting a governing body that will spearhead this task. Create a board of individuals who convene regularly and review the top risks within the supply chain.


Devise a system that allows you to easily monitor the whole supply chain and notifies you of any deviations. A great way to do this is to employ digital tools like Artificial Intelligence. Not only do these modern systems streamline the supply chain, but they also automatically notify you of any disruptions.
A review of the different supply chain risk management approaches from 2005 to 2018 showed that researchers used quantitative methods of simulation or modeling. While the study found that there is no "superior approach" to a risk management strategy, it is still evident that having a robust one in place is necessary for a healthy and profitable supply chain.

Let us help you manage your supply chain risk

Risks in the supply chain are inevitable but they are always manageable with a proper framework and the right people for the job. It is a continuous endeavour to strengthen not just your business, but the whole supply chain network.

Our professional team here at The Sourcing Co are experts at sourcing high-quality suppliers across the Asia-Pacific for your product development and business goals. Get in touch with us for a discussion about your supply chain, and what we can do to help.

]]> Air Freight vs. Sea Freight: Which Is Best? https://thesourcing.co/tpost/c96t83t9u1-air-freight-vs-sea-freight-which-is-best https://thesourcing.co/tpost/c96t83t9u1-air-freight-vs-sea-freight-which-is-best?amp=true Tue, 19 Jul 2022 13:44:00 +0300 Shipping and Freight Logistics plays a crucial role in people's lives and businesses. One of the most basic decisions to make is choosing the method of transportation you’ll use to transport your cargo from.

Air Freight vs. Sea Freight: Which Is Best?

Logistics plays a crucial role in people's lives and businesses. One of the most basic decisions to make is choosing the method of transportation you’ll use to transport your cargo from. If you’re talking about international shipments, there are two types: air freight and sea freight.
When crossing different continents, you’ll need to look at the bigger picture and consider your ultimate goal– which, at the end of the day, will be the satisfaction of your customers.
Below, we'll investigate which method of shipment is better for a particular situation while considering the factors of speed, cost, reliability, and others.

What Is Air Freight?

Air freight is the transport of goods from one location to another through an air carrier such as charter or commercial planes. It’s easily known as the fastest mode to ship goods internationally.
Over the years, the worldwide volume of air freight has increased exponentially, reaching 66.2 million MT in 2021.

What Is Sea Freight?

Sea freight is the mode of transporting large cargo through cargo vessels. The shipment could be either bulk cargo or general cargo (also known as break-bulk).
It cannot be denied that sea freight is the backbone of supply chain industries. Between 1990 and 2020, the annual volume of global sea freight has doubled, reaching an estimated 11 billion tonnes in 2020.

Choosing Between Air Freight & Sea Freight

Determining the proper method of shipment is not a one-time thing; it requires constant freight analysis to achieve customer satisfaction and logistics cost optimization. Shown below are the different factors to consider when choosing between air freight and sea freight.

1.    Time

Without a doubt, air freight is the king of speed. Sea freight can reach the destination port in several days to weeks while air freight only needs one to two days. Even if ocean shipping routes have been optimised through the years, it's still hard to beat the unmatchable speed of air freight.
When you consider that different cargo aircraft can cruise at speeds of 900 kilometres per hour, it is not surprisingly to learn that sometimes you could even receive your goods in a matter of hours.

2.    Cost

While air freight is fast, it is also expensive. During the pandemic, air freight rates rose dramatically to levels many of us have never seen before. It was reported in late 2021 that air carrier rates had risen by 155% from 2019.
Despite this, it’s important to understand air cargo cost structure. Air freight is usually billed via chargeable weight, which is computed based on the shipment’s size and weight.
In sea freight, however, weight is not actually a major consideration. For example, for a standard-sized container (20 ft x 40ft), you'll typically be charged a flat rate. When you're using LCLs (less than container loads), the cost is based per cubic meter.
Sea freight is more cost-effective for bulk shipments but as the weight of the shipment decreases, the margin between sea freight and air freight also diminishes.
Aside from transportation cost, another overlooked consideration is the warehousing cost. Due to the size and quantity of bulk shipments, the warehousing fees related to sea freight are much higher compared to those of airports. Both air and sea freight are also subject to customs and taxes so make sure to include them in your overall cost comparison.
While aiming to satisfy customers, bear in mind that your bottom line figures are important to keep the business going. With this, ensure to optimize all costs whether it’s sea freight or air freight, to maximize your profit.

3.    Reliability

Both air freight and sea freight are reliable options but they differ slightly in reacting to schedule adjustments.
When exposed to harsh weather conditions, air freight can easily be thrown off its schedule compared to sea freight.
On the other hand, air freight is better at quickly rearranging or adjusting to a new schedule.
Schedules for sea freight are a little more resilient compared to air freight in the face of bad weather but they are also slightly slower in bouncing back to schedules. These areas have been improved over time due to the forging of an alliance between sea freight companies.

Also read: Dropshipping vs Importing

4.    Other Factors

Product

Some products eliminate the choice between air freight and sea freight. Due to their inherent nature, they won't meet air cargo security requirements so they will only be eligible for sea freights. Below are examples of these products:
·      Flammable products
·      Toxic or corrosive products
·      Magnetic objects
·      Biochemicals and oxidizers
·      Items with gasses
·      Items having a danger sign on the packaging

3rd Party Logistics

When you have identified the proper method of shipment for each product, consider also who and how these services are being carried out. Study the profile and performance of the service provider to ensure a reliable supply chain flow.
It would be better to partner with a logistics company with integrated services – shipment, warehousing, delivery, and hauling – because their services are more synced and collaboration is more seamless.

Environmental Impact

In the course of the operations, business owners and shippers often forget about the impact they make on the environment.
Many of the customers are environmentally conscious, so it also affects the choice of shipment method. Generally speaking, sea freight is eco-friendlier than air freight.

Wrapping It Up

While sea freight is a lot cheaper when in bulk, you can also opt for commercial airplanes but at a higher cost. At the end of the day, you’ll need to balance the tradeoffs between speed, cost, and reliability.
If you are at a crossroads between air freight and sea freight, review the factors we have provided to you above and if you’re still undecided, you can talk with an expert here at The Sourcing Co to guide you with your logistical decisions.]]> The Canton Fair 2023: What Importers & Exporters Need to Know https://thesourcing.co/tpost/zyjrc42nt1-the-canton-fair-2023-what-importers-amp https://thesourcing.co/tpost/zyjrc42nt1-the-canton-fair-2023-what-importers-amp?amp=true Thu, 06 Apr 2023 09:14:00 +0300 Manufacturing and Production The Canton Fair, officially called as the China Import and Export Fair, is the largest, oldest, and arguably the most important biannual trade fair in international trade. Learn more about it today

The Canton Fair 2023: What Importers & Exporters Need to Know

The 133rd Canton Fair is currently scheduled to open in the spring months of April and May 2023. Here’s what you need to know before attending.

The Canton Fair, officially called as the China Import and Export Fair, is the largest, oldest, and arguably the most important biannual trade fair in international trade. Held in China, the Fair is hosted by the Ministry of Commerce of the People’s Republic of China and the People's Government of Guangdong Province.

Organised by the China Foreign Trade Centre, the Canton Fair is held in Guangzhou, China every spring and autumn season of the year. It is often referred to as simply the Autumn Fair.

Since 1957, different exhibitors of various industries from all over the world have gathered in this event to showcase their products with a view to doing business - including exporting their products to overseas customers.

The previous Canton Fair - the 132nd - was held online in three phases from 15 October to 4 November. This year, the 133rd Canton Fair is scheduled to be held both onsite and online on the following dates:

Phase 1: 15-19 April 2023, 9:30-18:00

Phase 2: 23-27 April 2023, 9:30-18:00

Phase 3: 1-5 May 2023, 9:30-18:00

Why should you get involved in the Canton Fair?

This enormous trade fair is the ultimate get-together of industries to import and export with companies and manufacturers in China.

With more than 200,000 visitors from around 200 countries, we expect that the fair will become an excellent platform for businesses across the world to expand their sourcing networks.

Companies in countries such as the United States of America, Europe, and Australia should definitely be interested in this globally recognised trading event – and use it to seek opportunities in the world of international commerce.

Aside from that, this foreigner-friendly trade show is known to have a rich and long history of openness of its market to global trade. This means that businesses from Western countries are very much well-received in this large-scale event, where they can freely build personal relationships and business partnerships with other countries. They can also meet current and potential suppliers for their businesses to establish rapport with them. It practically acts as an efficient and borderless platform to buy and sell.

Finally, the Canton Fair can act as a starting point for Western businesses who are seeking success in China. Aside from offering an opportunity for Western businesses to develop business relationships with Chinese manufacturers, the Fair will also open doors for them to enter the Chinese market.

How to register for the Canton Fair

Registration for the Canton Fair is free. However, if you’re an overseas buyer and want to attend the Fair onsite, you’ll need an invitation, a Chinese visa and a buyers badge. This is the only way you can attend the Fair officially.

1) Your invitation. You have to apply for an invitation to the Canton Fair before you can register for the event. Registration may be done through their official Canton Fair website, the Canton Fair Call Centre, the People’s Republic of China Embassy in your region, or through Chinese foreign trade corporations.

2) Your visa. Unless you’re lucky enough to live in a country that has a visa-free policy with China, you’ll need a visa. The most common for business is the “M” visa. You can usually apply for a visa via the Chinese embassy.

3) Your buyer badge. If you plan on attending the fair onsite, you need to apply for a Buyer Badge to enter the Canton Fair Complex.

Phases of the Canton Fair

The Canton Fair is divided into three different phases.

Phase 1 (15-19 April 2023):

  • Electronics & Household Electrical Appliances
  • Lighting Equipment
  • Vehicles & Spare Parts
  • Machinery, Hardware & Tools
  • Energy + Resources
  • Chemical Products
  • Building Materials
  • International Pavilion

Phase 2 (23-27 April 2023):

  • Consumer Goods
  • Gifts
  • Home Decorations

Phase 3 (1-5 May 2023):

  • Office Supplies
  • Cases & Bags
  • Recreation Products
  • Medical Devices and Health Products
  • Food
  • Shoes
  • Textiles & Garments
  • International Pavilion

Your checklist for the Canton Fair

If you’re looking to attend the Canton Fair, then it’s important to be prepared before you go. There’s a lot to do at the Fair, much to see and much information to collect.

We suggest that you:

  • Decide which phase you’ll attend. The Canton Fair is split into three phases, which we’ve outlined above. Do your research about the different business categories that will be included in each phase, so you can appropriately pick the best one for you and your needs.

  • Get your visa, buyers’ badge and registration secured. We’ve outlined how to do this above.

  • Book your flights and accommodation. Make sure to prioritise booking your flight and your hotels. Travel dates and the location of where you’re staying will likely be required when you apply for a visa. There is a tonne of excellent accommodation in the country so make sure to get the spot that’s right for you.

  • Book factory visits. Generate a list of suppliers that you plan to check out and secure a schedule to visit their factories. That way, you’ll be able to inspect the quality of the products yourself.

  • Get your business cards ready. Get as many copies of your business cards ready as possible, so you can exchange credentials with potential business partners and suppliers.

  • Organise cash & currency. Prepare your budget for your stay in China. You’ll obviously be spending money at the Canton Fair, but you might want to do a little touring on the side. Have your cash ready in Yuan if you can.

  • Get your wishlist ready. Avoid going to the show to blindly search for products. Get your wish list ready and write all types of products that you’re looking for. You can also include questions to ask the suppliers regarding the products.

Conclusion

Now that the Canton Fair is available to attend in person, it is a ‘must-attend’ event for anyone involved in international trade. Participating in the Fair will be an excellent opportunity to meet and exchange with the Chinese market and can generate ideas for you to expand your business in ways you may never have considered before.

If you’re looking to know more about the Canton Fair, get in touch with our team here at the Sourcing Co and we’ll be more than happy to assist. You can also find more information on the Canton Fair’s official website.
]]> FCL vs LCL Shipping: Which Should I Use? https://thesourcing.co/tpost/z0az34vrb1-fcl-vs-lcl-shipping-which-should-i-use https://thesourcing.co/tpost/z0az34vrb1-fcl-vs-lcl-shipping-which-should-i-use?amp=true Tue, 16 May 2023 07:31:00 +0300 Shipping and Freight Learn about FCL and LCL shipping to determine which one best suits your shipment's size, volume, and urgency. Get a detailed understanding of the two options here.

FCL vs LCL Shipping: Which Should I Use?

Containerised shipping has grown exponentially in recent years, with 1.85 billion metric tonnes of cargo shipped in 2020. In the industry, there are two major shipping options: FCL and LCL. If you’re new to logistics, you may have only just heard of these terms. You may even be struggling to understand what they are and the difference between them.

Depending on your shipment's size, volume, and urgency, you'll typically choose either FCL or LCL. Below, we’ll aim to provide you with an in-depth understanding of these two concepts and the different shipping factors that will help you make a well-informed decision about the most suitable shipping method for you.

What is FCL?

FCL is short for Full Container Load. This refers to a shipment that exclusively utilises one whole container. In effect, the shipper shoulders the cost of one container, even when the space inside is not fully utilised.

What is LCL?

LCL stands for Less Than Container Load. This is typically used when a shipment won't fill an entire container. To maximise the space available in the container, the space is shared by different shippers, who all share the cost of the container. Since the shipment is grouped with other shippers, it’s also referred to as ‘groupage shipments’.
In simplest terms, the difference between FCL and LCL shipments is their load. FCL has a homogeneous load, while an FCL has a heterogeneous load.

Which Shipping Option Should I Use – FCL or LCL?

There are several other factors to consider apart from volume (that’s just the tip of the iceberg). We have listed below the relevant factors that will help you choose between FCL and LCL.

Shipment Volume

LCL is appropriate for shipments that have a volume from 1 CBM (cubic meter) to less than 15 CBM. If the volume is less than 1 CBM and the chargeable weight is below 200 kg, you can try alternative air options to carry your shipment.
FCL can be used for any volume, but we advise using it for at least 15 CBM. Listed below are the most common container sizes and their corresponding capacities:
  • 20-foot – 33 CBM
  • 40-foot – 67.5 CBM
  • 40-foot High Cube – 76 CBM

Shipment Weight

LCL is ideal if the shipment's maximum weight per CBM reaches 1 tonne or 1,000 kilograms. Take note, however, that if the weight exceeds the allowable load, the gross weight will become the basis for the chargeable weight.
For small shipments under 1 CBM but with a weight beyond 150 kg, LCL is generally a better choice than air freight.
FCL can accommodate varying weights, depending on the container’s capacity (usually indicated on the container itself). As a general rule, however, if the shipment exceeds the maximum capacity, the remainder of the cargo should be removed to another container.
Depending on a country’s implementation of maximum loads, you can use the following maximum payloads as reference:
  • 20-foot – 18.6 tons
  • 40-foot and 40-foot High Cube – 28.6 tons

Freight Cost

LCL costs are typically lesser for smaller loads below 15 CBM. The total cost is higher for shipments exceeding 15 CBM, depending on the itinerary. Local fees are usually costlier than the FCL. If the shipment is around 15 CBM, it's a good idea to review your FCL options.
FCL shipments can be cheaper if the volume is hovering around 15 CBM. The price per CBM is not always lesser than the LCL, but it's generally cheaper since the local charges for FCL shipments are at a fixed rate per container.

Speed

LCL shipments can reach their destination in up to 4 days or more once they arrive at the port. There are extra days to accommodate sorting and consolidation activities. If a particular consignment is subject to customs inspections, the whole container is put on hold.
FCL shipment transit times are lesser because, once docked, the container is directly unloaded and then delivered to its final destination.

Security

LCL shipments are shared between different shippers. So there's generally a higher possibility of losses, damages, theft, or pilferage. Consider purchasing a marine insurance policy to cover yourself if you incur losses or damages as your cargo is transited.
FCL shipments carry a lower risk of damage, loss, or pilferage since containers are delivered directly to the consignee without any intervention. You can also obtain marine insurance for protection.

Traceability

LCL – Using the Bill of Lading, the vessel and container can be tracked. However, the tracking stops upon arrival of the container or during unloading. This tracking method could also be inaccurate, particularly for numerous handlers. You may seek assistance from a freight forwarder for more information.
FCL - Tracking the vessel or container in FCL is easier because it’s assigned to one consignee. Again, check with your freight forwarder for the applicable shipping plan.

Split Shipment

LCL - For multiple destinations, LCL is more convenient than FCL which involves deconsolidation and sorting at a warehouse. If you have destination points far from each other, you can also easily divide your shipment according to the ports they will be delivered to.
FCL - Split shipment is also possible for FCL but it would entail more cost. To properly split the shipment, it needs to be staged in a warehouse, where you’ll incur additional warehousing costs, handling fees and forklift fees.
Before deciding on the right option for you, however, it’s always important to consult with your freight forwarder to determine the more economical option.

Delivery Appointment

LCL - Depending on the destination, LCL shipments could be easier to book since the shipment’s volume is not high compared to FCL.
FCL - There might be a higher waiting time for an FCL container load to get approved compared to an LCL.

Local Charges

LCL - Local charges for LCL are charged per CBM. Since local charges form part of the rates, you could pay more in LCL compared to FCL.
FCL - Local charges for FCL are fixed and charged per container. The charges are usually cheaper compared to LCL shipments.

Customs

LCL - The process of customs clearing and inspection in LCL is the same as with FCL, but if one consignment gets flagged for inspection (e.g. X-Ray or Contraband exam), all goods inside the same container van are placed on hold. The costs incurred by customs examination will be shouldered proportionally by the container's consignees.
FCL - FCL containers can still get inspected by customs authorities. All costs during customs examination will be charged to the buyer.

Time to take your pick

Do not rush in picking your shipping method because each has its own set of advantages and disadvantages. Carefully go through all the minute details of each factor, weigh them, and pick the one that satisfies most of the mentioned factors.
When choosing between FCL and LCL, it’s not just simply about the volume and freight cost, but the total value provided by one shipping method. On a final note, always remember that at the end of the day, what’s most important thing is that your shipment is safe and secure from its origin to its destination.
Here at The Sourcing Co, we have an expert team of freight forwarders who can help you make the right choice between FCL and LCL. With a deep understanding of both different types of shipment, we’re well-equipped to help you make the decision that’s right for you.
]]> What is a Sourcing Company? What are They and What Do They do? https://thesourcing.co/what-is-a-sourcing-company Wed, 31 May 2023 02:36:00 +0300 Sourcing and Importing When you need to find suppliers to manufacture your goods or provide you with materials, you have two choices. Either you track them down yourself, or you work with a sourcing company.

What is a Sourcing Company? What are They and What Do They do?

When you need to find suppliers to manufacture your goods or provide you with materials, you have two choices. Either you track them down yourself, or you work with a sourcing company.

Read on if you’re looking to gain a thorough understanding about sourcing companies and find the answers to all your questions about how they can help you expand your business.

What is a sourcing company?

A sourcing company is a business that specialises in locating suppliers and manufacturers on behalf of their clients to manufacture the goods they need to run their business.
Sourcing companies make it their mission to negotiate terms with suppliers and obtain the best possible prices and quality, so their clients can land the best deal possible.

Sourcing companies often have strong relationships and a long history of working with their suppliers, meaning they are in the ideal position to negotiate favourable terms for their clients.

Effectively, the job of a sourcing company is to manage the entire procurement process. In that way, they play a crucial role in supply chain management, especially for businesses that rely on outsourcing or international trade.

What does a sourcing company do?

A sourcing company overall acts as a specialised intermediary between their client and third-party suppliers. They provide expertise, market knowledge, and operational support to ensure efficient and cost-effective procurement.

Sourcing companies will typically engage in the following activities:

  • Finding and evaluating right suppliers: Sourcing companies research and identify potential suppliers based on their client's requirements, industry expertise and market knowledge. They will then create a database of reliable suppliers and maintain relationships with them. In evaluating these suppliers, they will often conduct site visits, interviews, and background checks to ensure the suppliers meet the client's standards.

  • Request for Proposal (RFP) management: Sourcing companies help clients create comprehensive RFPs that outline the specifications and requirements for the products or services needed. They will generally manage the entire RFP process, including sending the RFPs to potential suppliers, collecting and analysing the responses, before finally shortlisting suitable candidates.

  • Negotiation and contracting: Sourcing companies negotiate with suppliers on behalf of their clients to secure favourable terms, prices and contracts. They will utilise their industry knowledge and bargaining power to achieve the best possible agreements.

  • Quality control and inspection: Sourcing companies may conduct quality control checks and inspections to ensure that the products or services meet the required standards and specifications. They may inspect the manufacturing facilities, perform sample testing and implement quality assurance processes to ensure consistency and reliability.

  • Logistics and shipping: Sourcing companies handle logistics and shipping arrangements, including coordinating transportation, customs clearance and delivery to the client's location. They will usually work closely with freight forwarders, shipping companies and customs agents to ensure smooth and timely delivery.

  • Supply chain management: Sourcing companies monitor and manage the overall supply chain to optimise efficiency, minimise risks and enhance cost-effectiveness. They may track inventory levels, identify potential bottlenecks and suggest improvements in the procurement and distribution processes.

What is the benefit of using a sourcing company?

A sourcing company takes on the responsibility of helping your business with a sourcing strategy and finding suppliers for you to manufacture your goods, so you can land a good deal with a reliable partner.

Some of these benefits in more detail include:

Expertise and market knowledge

Sourcing companies have specialised knowledge and expertise in identifying reliable suppliers and manufacturers in various industries, that many other companies probably don’t have.

Because sourcing companies possess extensive market knowledge, including understanding market trends, pricing, and quality standards, they can leverage this knowledge to find the best suppliers that can meet their clients’ specific needs.

Time and costs savings

Finding a supplier that meets your needs takes an incredible amount of time and effort. Engaging a sourcing company therefore saves businesses the time in supplier selection, negotiation and due diligence.

Sourcing companies often already have an extensive network of pre-vetted suppliers, which allows them to quickly identify and shortlist potential vendors based on a business's specific needs.

Risk mitigation and quality assurance

Sourcing companies are experts when it comes to ensuring quality and conducting due diligence procedures. They are the masters of conducting thorough supplier assessments, including evaluating their financial stability, production capabilities and quality control processes.

By doing this, sourcing companies help mitigate risks associated with working with unreliable suppliers, such as late deliveries, subpar quality or unethical practices. Sourcing companies often have strict quality control protocols in place, ensuring that products or services meet the required standards and specifications, reducing the likelihood of defective or non-compliant goods.

When should I use a sourcing company?

If you run a business, then you should use a sourcing company when you need help finding suppliers that can manufacture your goods to your specific standards, and ensure that they can arrive at your premises in a timely fashion and without hassle.

As your business expands, it’s likely that so too will your supply network. The amount and types of materials you require can increase, and can also change. It therefore makes sense to use a sourcing company when you start to need materials that are manufactured elsewhere in countries like Vietnam and China.

How can I find a sourcing company?

One common approach is for business owners is to network with other businesses and industry professionals, seeking referrals along the way. Additionally, many sourcing companies will advertise their services online or through industry publications, in order to reach a wider audience. Some companies may also use targeted marketing campaigns or attend trade shows and other events to connect with potential clients.

You’re also currently on the website of a reputable sourcing company right now! You can learn more about The Sourcing Co and what we do right here.

What makes a great sourcing company?

A great sourcing company works with you over a long-term period to help you grow and evolve, offering their expertise on opportunities and being clear with you about financial implications and costs.

In particular, you’re going to need to look for:

  • Expertise – a sourcing company with a diverse team of experienced staff who have the knowledge and the networks to enable them to achieve a top-level sourcing service.

  • Experience – ideally, you’ll want a partner who has been in the game for a long time, and who have partnered with hundreds of businesses across the world.

  • Communication – sourcing companies need to communicate with their clients effectively. You need to make sure that they are committed to keeping their customers informed every step of the way. Ideally, they’ll be able to speak multiple languages and be experienced in cross-cultural communication.

  • Compliance – And of course, you’ll need a sourcing company that understands all of the rules and regulations involved in sourcing products internationally (as there are many)!

Why choose the Sourcing Co as your go-to sourcing company

The Sourcing Co are an international sourcing company based in Guangzhou, in the manufacturing heart of China. Through our international sales offices, including in Brisbane Australia, our expert team are here to help you with everything a sourcing company can do, plus more.

We’ll help you with:

  • Product development: Developing your product from concept and sampling, all the way to production

  • Sourcing: Matching you with suppliers that offer you the best value for money and quality

  • Negotiating: Obtaining the best quotes for your suppliers to manufacture your goods and products

  • Shipping and warehousing: We aim to ensure the whole shipping process is as easy as possible for you, transporting goods by air, sea, road or rail.

Because of our reach and network, we can get you access to suppliers and negotiate favourable terms far more quickly and cheaply than you could if you were trying to on your own.

Let us open the door for you, and to our global network of suppliers. We can take care of every step in procuring your needed products.

Let the team at the Sourcing Co be your one-stop-shop for product sourcing, production and delivery. We’re on your team and will be right alongside you as your business booms and your brand takes off. Learn more about us or contact us today to discuss the order process.

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]]> 6 Reasons Why a Sourcing Strategy is So Important in Your Supply Chain https://thesourcing.co/tpost/t44cltic81-6-reasons-why-a-sourcing-strategy-is-so https://thesourcing.co/tpost/t44cltic81-6-reasons-why-a-sourcing-strategy-is-so?amp=true Wed, 07 Jun 2023 06:30:00 +0300 Supply Chain Management The business of sourcing means finding the best suppliers for your goods.

6 Reasons Why a Sourcing Strategy is So Important in Your Supply Chain

The business of sourcing means finding the best suppliers for your goods.

It involves investigating what manufacturers and suppliers are out there in the global marketplace, establishing a relationship with them and using them to build great products for you to sell to your customers.

As an experienced sourcing company in the Asia-Pacific, with offices in China, Vietnam, Papua New Guinea and Australia, we’ve seen the benefits that a robust sourcing strategy brings to our clients. Whether you run a small start-up company or a global corporate, we’ve outlined 6 reasons why a sourcing strategy is so important in your supply chain.

1.Cost Savings

A well-executed sourcing strategy saves costs across your supply chain, brings in revenue and achieves greater profitability.

The primary goal of a sourcing company is to negotiate the best prices for high-volume, yet high-quality, goods and services. Obtaining well-priced sourced goods means your business can keep the price of its own products down – yet still within profit margins – thereby encouraging customers to purchase more off your shelves.

The ultimate result is enhancing your bottom line – not only are you saving on existing costs, but generating more income in the long-term.

2.Efficiency

Sourcing is critical for your supply chain because it enhances the efficiency of its operations. Well over half of a business’ costs comes from purchasing supplies and the logistics to transport the supplies from point A to point B.

But, without a sourcing strategy to bring these two components together, purchasing and logistics won’t co-ordinate. One 2014 study called Bending the Chain found strong evidence that uniting these elements creates “heightened levels of both functional and financial performance”.

Companies that do this, the study argues, “are able to bend the chain of plan, source, make, and deliver to enable alignment …The result is that they serve customers better with lower operating expenses, cost of goods sold, and inventory”.

Not only does efficiency create a seamless process that minimises delay, it goes right back to achieving the cost savings we discussed above.

3.Getting the right suppliers

Sourcing is not about picking the first supplier you see, taking one look at what they charge and saying ‘Yep, they’ll be good enough’.

Rather, it’s about analysing each ‘candidate’ – what they can offer, how they negotiate, their values, profiles, capabilities, management, track record and reputation. It’s similar to recruiting somebody for a job. For example, when looking at a supplier’s capabilities, ask questions like:

  • Who are their current clients? If multinational corporations have successfully been using them for many years, that’s a great sign.

  • What are their hiring practices?

  • Are they located in a geopolitically stable country?

  • What facilities and security measures have they put in place?

  • How quickly can they recover from an interruption?

Your business will need a supplier that communicates well and that can deliver high-quality goods on time. Suppliers to avoid are those that are more likely to rush manufacturing, develop shoddy products and drive up return rates.

Importantly, you’ll likely need a supplier that is compliant with modern slavery laws, which are becoming more prevalent around the world. This involves identifying – and avoiding – suppliers which carry out actions such as forced labour, servitude and human trafficking.

Countries such as the United States, the United Kingdom and Australia have stringent laws against modern slavery in commercial supply chains, so it’s vital you choose a fair, humane supplier.

4.Relationships

A sourcing strategy is important because it can create long-term, stable relationships with the right supplier – who, with time, can become the perfect business partner.

A long-term relationship with a supplier is critical. Switching suppliers is disruptive, time-consuming and expensive to everybody in your team. A collaborative and win-win relationship with a supplier is what your business should be striving for.

Getting the right suppliers, which we discussed above, is key to establishing such a relationship. If both you and your suppliers work ‘in sync’, it’s much more likely that both of you will succeed. If your supplier wants you to succeed, chances are they’ll strive to succeed themselves.

A long-term relationship demands measuring your supplier’s performance, constant two-way feedback and also asking your customers what they think of the product. By improving each other’s practices, you can help each other achieve commercial success.

5.Risk management

A sourcing strategy, importantly, can help you manage risk across the supply chain. A sourcing process will force you to think about the future, thereby making well-thought decisions and long-term plans to place your business on the path to success.

If you have no strategy, and your supplier runs into a problem – the chances are you won’t catch it, and the problem won’t be solved quickly and efficiently.

Take an example: horsemeat. In 2013, a score of companies and supermarkets across Europe suffered massive commercial and reputational loss when they advertised foods containing undeclared horse meat. Blame was quickly shifted to suppliers, but it demonstrates a classic case of businesses failing to properly manage risks in their supply chain.

A robust sourcing strategy can go a long way to preventing such misfortunes.

6.Competitiveness

Everything we’ve discussed above ties into the 6th reason why a sourcing strategy is so important for your supply chain: seizing a competitive advantage.

In a rapidly expanding, fast-paced international 21st century marketplace, the competition in virtually all industries is only getting more and more challenging.

A well-executed sourcing strategy can help your business reduce costs, develop high-quality products, preserve a constant stream of creativity and innovation whilst also minimising the time you get your products onto the market. The result is a more competitive business that delivers excellent service to its customers.

Questions about your supply chain’s sourcing strategy?

At The Sourcing Co, we’re specialists in developing large-scale corporate sourcing strategies across complex supply chains. So, no matter how big or small your business, we can help you execute the most cost-effective sourcing plan to take advantage of everything we’ve discussed above.

Our clients include some of the world’s leading corporations who’ve placed their trust in us to locate the right suppliers to meet the high-volume shipping demands in their supply chains.

Get in touch with our team at the one-stop sourcing company across Asia, and we’ll be happy to discuss building the right sourcing strategy for you.
]]> Guide to Minimum Order Quantities https://thesourcing.co/minimum-order-quantities Fri, 14 Jul 2023 08:22:00 +0300 Manufacturing and Production When purchasing the right level of inventory for your business, a supplier may require your order in minimum order quantities – often referred to as MOQs.

Guide to Minimum Order Quantities

When purchasing the right level of inventory for your business, a supplier may require your order in minimum order quantities – often referred to as MOQs. ]]> How to Find a Trustworthy Sourcing Agent https://thesourcing.co/how-to-find-trustworthy-sourcing-agent Fri, 21 Jul 2023 04:52:00 +0300 Sourcing and Importing Whether you're seeking manufacturers, wholesalers, or distributors, a sourcing agent can effectively navigate the local landscape to meet your specific sourcing needs.

How to Find a Trustworthy Sourcing Agent

Working with a sourcing agent opens up a world of possibilities for your business.

In essence, a sourcing agent acts as your invaluable partner in locating and selecting the most suitable suppliers in a specific country. Think of them as your expert guide, well-versed in the intricacies of local business practices and customs, and often fluent in their native language.

Whether you're seeking manufacturers, wholesalers, or distributors, a sourcing agent can effectively navigate the local landscape to meet your specific sourcing needs.

However, work with the wrong sourcing company and your business will become vulnerable and exposed to risk. You’ll need to be careful when making your decision about which agent to engage.

Here is our five-step guide to finding the right sourcing agent.

Step 1: Do your research

There are plenty of sourcing companies out there, and so the first step is to do some research. You may have received recommendations from other business owners, but there are plenty of other ways to conduct your own research.

You could attend trade shows, conferences or seminars and workshops to expand your networks. You can also look around for companies with experience in your area or industry and who have a demonstrated experience in the markets you want to grow into

Step 2: Make a shortlist and get in touch

Once you have done the initial research, make a shortlist of candidates. It’s time to dig a bit deeper and learn more about the sourcing companies that are proving to be the best possibilities.

Many companies also offer free quotes or initial consultations, so you can get a better idea of what they can do for you before formally engaging them for their services. Have a chat with them, dig deep and make sure they are right for you.

Step 3: Consider the costs and the risks

Your sourcing agent must be willing to give you clear and detailed information about costs, budget and risks. If you come across an agent and they don’t provide detail about commission or kickbacks they stand to receive, then that is a clear red flag to stay away from them.

Another common problem is where sourcing agents overstate their relationships with manufacturers and would have you believe that they own the factories that are being used. In most cases, sourcing agents won’t actually own factories – they will have relationships with third parties who do.

Step 4: Negotiate a price

If you have found a sourcing agent you like, then see how you go negotiating a price with them for their services.

The negotiation and planning stage provides the perfect opportunity for you to see how trustworthy your potential agent is, and if they are acting with integrity and honesty.

You can also ask them if their price will be lowered if you make the same orders on an ongoing basis.

Step 5: Compare with others and ask questions

Once you’ve negotiated a price, you should compare that price to other sourcing agents you’ve been negotiating with.

However, price is not the most important thing. To make the right decision, and avoid a mediocre (or downright bad) experience, we also recommend you ask the following questions of any potential sourcing agents.

Does the sourcing agent understand your business and vision?

Chances are you have invested a lot of money, time and hard work into your business. It is important to find a sourcing agent who “gets you” and understands the vision and goals you have for your business.

As you commence international sourcing, the quality of your relationship with your sourcing agent can make a big difference in the outcome. Find a sourcing agent who is willing to take the time to assess the opportunities and possibilities you see for your business.

Is the sourcing agent realistic?

Be prepared for the possibility that the goods you are after can’t be sourced. In some cases, despite everyone’s best efforts, there just isn’t a manufacturer that can produce what you are after.

If your supplier tells you that your requested requirements are not possible, that’s actually a good sign! It means they are being honest about the possibilities and what they have found through their research.

Your sourcing agent should also understand the level of quality you are after in your products, and let you know if there are any quality concerns from the proposed manufacturer.

Finally, they should also understand your pricing requirements and be truthful about what is possible with what you have to spend.

What commission will the sourcing agent take?

Some sourcing companies don’t like sharing the details about how they work with and interact with manufacturers. In many cases, however, sourcing agents may receive a commission when they provide work to a manufacturing company.

The kickback they receive can be quite significant, and your sourcing agent should be upfront about any commission they may receive.

When sourcing agents make decisions based on the commission they might receive, you may not be getting the best value or service that you deserve so you have a right to understand how much manufacturers are being paid.

Is the sourcing agent with you for the long haul?

Using a sourcing agent to help you find your stock and products is certainly not something you can “set and forget”. You will want to find an agent who is willing to work with you on an ongoing basis, because even once manufacture begins, you will continue to need your sourcing agent.

Sourcing agents have a role to play in the ensuring the ongoing quality of your products, and be your liaison if there is any drop or change in quality. Your agent can also keep you informed about changes at the factory, including new technology or product options

Get to know The Sourcing Co

We understand how important it is to find a sourcing company that you can trust, and one that is well-connected.

At The Sourcing Co, we are committed to finding the best quality products at the price point you are after. When your business is ready to grow within global markets, we are here to help you through that exciting journey. We’re here to help ensure your vision comes to life and your product makes it to the market.

Get in touch with us today to discuss your next shipment, and your goals when it comes to finding the right overseas suppliers.
]]> 8 Most Common Supplier Problems (and How to Fix Them) https://thesourcing.co/product-sourcing-and-manufacturing/tpost/i6luh7t3u1-8-most-common-supplier-problems-and-how https://thesourcing.co/product-sourcing-and-manufacturing/tpost/i6luh7t3u1-8-most-common-supplier-problems-and-how?amp=true Thu, 24 Aug 2023 07:17:00 +0300 Sourcing and Importing If you’re looking for a supplier to ensure the timely delivery of your goods from overseas, then it’s likely you’re going to face some challenges along the way.

8 Most Common Supplier Problems (and How to Fix Them)

If you’re looking for a supplier to ensure the timely delivery of your goods from overseas, then it’s likely you’re going to face some challenges along the way.

Procurement for a supplier can be a very difficult and complex process, from determining the right pricing to ensuring your relationship is going to last long-term.

Below, we’ve outlined eight of the most common problems you’ll face with a supplier, and suggest a number of tips on how you can fix those problems.

  1. Sacrificing quality for savings

Your customers expect quality products, and so you should expect quality from your suppliers.

However, quality can be expensive. Therefore, to save on costs, we see a lot of suppliers using cheaper materials, sacrificing quality in the process. Businesses, vying for the cheapest option, will accept this because it means they save money.

The result, however, means a suboptimal or even defective product. In the long-term, this can result in higher costs for a business because customers demand refunds or, at worst, sue the business for damages if the product is defective and causes them loss.
Solution:
Cost savings is essential - but it isn’t the only thing that’s important.
To efficiently monitor both quality and cost, you can create a KPI dashboard that keeps track of your products’ quality, and the cost of manufacture. Review these KPIs regularly, as it will guide you in choosing (and keeping) a supplier.

2.Providing your supplier with vague specifications and requirements

If a supplier is going to provide you with a product you and your customers are happy with, then you’ll need to give them the exact specifications and requirements of the product that you expect.

We often see businesses providing vague, uncertain and generally poorly communicated requirements and specifications to their supplier. The result is not only delayed product development, but the manufacture of products that don’t meet your expectations.

The details you’ll need to give your supplier include things like:
  • Precise dimensions
  • Size
  • Colour
  • Purpose
Solution:
Provide your suppliers (through your procurement team) with a comprehensive description and detailed specs of a product so that the outcome is the product you and your customers expect.

3.Failing to conduct a supplier pre-assessment

If it’s too good to be true, it probably is. Many suppliers will enthusiastically and convincingly offer you the best products you could dream of, and verbally guarantee effective results. The result will often be disappointment.

This is because businesses will to subject their suppliers to a rigorous vetting process. They often fail to ask the right questions, seek the right details or understand their suppliers’ own manufacturing process.
Solution:
Create robust supplier selection criteria based on your organisation’s key objectives and values. This will help you choose the right supplier for your business.
You may do this by creating a template on a spreadsheet or specialised software to make the evaluation process faster.

4.Not talking about KPIs

KPIs (or key performance indicators) measure the success of each business. It’s absolutely essential to communicate your KPIs to suppliers so that they know your expectations.
For example, delivery KPIs impose rigorous requirements on suppliers, forcing them to deliver products on time and to your required standards.
Solution:
Make KPIs a priority when selecting a supplier. Clearly define each KPI so that you can relay it to your suppliers. Every quarter, review the performance of your suppliers against your KPIs so that you can gauge their performance and decide whether you need to start looking for alternatives.

5.Making decisions based on ‘gut’

We constantly see organisations making decisions about their suppliers based on ‘gut’ feel rather than concrete data. For example:

  • Making purchase orders based on the wrong assumptions, wrong data or a ‘feeling’ about what might be needed
  • Choosing a particular supplier because you are friends with a person in the company, when they have a poor record of meeting delivery KPIs.

This can often lead to challenges that adversely affect your bottom line.

Intuition is certainly important. It is critical to trust your instincts, especially if you’re experienced and you’ve been dealing with suppliers for a very long time. But it’s also risky. You can minimise your risk by making decisions based on data, which is unbiased and objective information. This is where KPIs (explained) are invaluable.
Solution:
Use data to guide your decision-making, not your gut.
Critically, do not ‘pick and choose’ data that supports your intuition or your personal bias. Analyse all data so you can make the best decisions for your organisation.

6.Doing business without a written contract

When you work with a supplier without a written agreement, there is a high risk that a dispute will arise. And it often won’t be clear who is right and who is wrong, because there is no contract to guide you. A study conducted by World Commerce and Contracting showed that poorly managing contracts can reduce your bottom line by 9%, which doesn’t take us by surprise.

Some of the key terms that should be defined in a written contract include:

  • The parties (for example, the exact corporate entity who is buying and supplying)
  • The scope of work
  • The type of product
  • Rates
  • Incoterms
Solution:
When close deals with a supplier, make sure you have a well-drafted contract. It is always a good idea to engage a lawyer experienced in international trade to help you negotiate favourable terms.

7.Procurement Bypass

Even when procurement procedures are already in place, employees or departments can still ‘defy’ them by purchasing items or services on their own (without going through approved processes). This is called “procurement bypass”

Management is then taken by surprise when the expense report comes out – as they’ll see purchases they never approved. If this is tolerated, it can significantly impact an organisation’s bottom line.

8.Failing to take into account inflation properly

Procurement and supply chain professionals always take into account inflation in their projections, but it is always a challenge to determine the nearest estimate. There are a lot of factors contributing to inflation, from demand-pull and cost-push to increased money supply and currency devaluation.

If you fail to take inflation into account correctly, you’ll end up spending more money than your business can handle in the long-term.
Solution:
Understand how inflation is affecting the costs in your supply chain and, if necessary, re-negotiate the contract with your supplier to take those costs into account.

Key takeaways

While dealing with suppliers can be challenging, there are solutions to every problem. Addressing these challenges will usually requires a proactive and collaborative approach, emphasising clear communication, transparency and a mutual commitment to shared goals.

By adopting a strategic approach to managing your suppliers, you can identify potential risks and opportunities for improvement, fostering stronger partnerships that enhance your efficiency and profitability. Regular performance evaluations, timely feedback and constructive negotiations can lay the groundwork for sustainable, long-term relationships with suppliers.

If you need any help finding the right suppliers for your business, the team at The Sourcing Co can assist. We’re a professional sourcing company that can help you find the ideal supplier to manufacture and deliver the goods you need to grow your business and keep your customers happy – all while mitigating the risks discussed in this article. Get in touch with our team right here.
]]> Supplier Relationship Management 101 https://thesourcing.co/tpost/ujscy8z7o1-supplier-relationship-management-101 https://thesourcing.co/tpost/ujscy8z7o1-supplier-relationship-management-101?amp=true Tue, 29 Aug 2023 05:00:00 +0300 Supply Chain Management A business thrives because it receives a continuous inflow of goods and services from vendors. To sustain these relationships, you’ll need to adopt solid supplier relationship management (SRM) practices.

Supplier Relationship Management 101

The key to achieving a cost-effective and smooth supply chain is the effective management of suppliers.

A business thrives because it receives a continuous inflow of goods and services from vendors. To sustain these relationships, you’ll need to adopt solid supplier relationship management (SRM) practices.

Like CRM or customer relationship management, SRM is a discipline under supply chain management, which will help guide you in fostering healthy relationships with your business partners – in this case, your suppliers.

What is SRM?

Supplier Relationship Management (SRM) is a strategic approach that organisations adopt to actively manage and nurture relationships with suppliers across their supply chain. The purpose of SRM is threefold:

  1. to enhance collaboration,
  2. to optimise supplier performance,
  3. to mitigate risks.

By fostering a more cooperative and communicative environment, SRM builds trust and strengthens the bond between a company and its suppliers. This collaboration encourages joint problem-solving and promotes innovation, leading to the development of new and improved products or services.

Benefits of SRM

Forging a strong relationship with your suppliers can bring a huge range of benefits to your organisation, including:

1.Higher profits

Effective SRM contributes significantly to a company's bottom line. By establishing stronger relationships with suppliers, you can negotiate more favourable terms, such as volume discounts, early payment discounts or reduced prices for bulk purchases.

Suppliers, being closer to the production processes and materials, can also offer valuable insights to improve product quality and reduce production costs if they have a good relationship with you.

2.Greater efficiency

Efficient supply chain operations are crucial for a company's success. SRM streamlines procurement processes, reduces lead times and enhances supply chain responsiveness. Improved communication with suppliers allows for better coordination and planning, ensuring timely delivery of materials and components.

A well-managed supplier base also means fewer disruptions in the supply chain, leading to smoother production processes and on-time delivery to customers.

3.Greater price stability

In a volatile market, price fluctuations for raw materials and components can significantly impact a company's financial performance. Effective SRM helps mitigate this risk by fostering more stable pricing agreements with suppliers.

Longer-term contracts and commitments with suppliers provide price stability and reduce exposure to sudden price hikes in the market.

4.Continuous improvement

Effective SRM is not a one-time process but an ongoing commitment to improvement. Regular performance evaluations and feedback mechanisms facilitate a continuous improvement cycle with suppliers.

Through open communication, both parties can address challenges, identify areas for enhancement, and jointly develop solutions. Suppliers, being key stakeholders in the supply chain, can contribute valuable insights and innovations that drive continuous improvement in product quality, processes and sustainability.

Implementing SRM in your organisation

Now that you understanding the benefits of SRM, you may be wondering how to properly integrate it into your business. Below we’ve outlined what you can do in five steps.

1.Clearly outline your objectives

Before implementing SRM into your organization, it's crucial to establish clear and measurable objectives. Determine what you want to achieve through SRM, such as cost reduction, improved supplier performance, risk mitigation or fostering innovation.

Ask questions like:

  • What do you want out of an SRM strategy?
  • What do you need from your suppliers?
  • How will you measure the effectiveness of your relationship with them?

Align these objectives with your company's overall business goals to ensure that SRM initiatives contribute to your success.

2.Segment your suppliers

Not all suppliers are the same, and treating them uniformly may not yield optimal results. Segment your suppliers based on relevant criteria such as type of product, location, quantity, size and strategic importance.

One effective segmentation approach is the Kraljic Matrix, which classifies suppliers into four categories: strategic, bottleneck, leverage, and non-critical. This segmentation allows you to prioritise resources and efforts based on the criticality and potential impact of each supplier on your business.

3.Create a strategy for each supplier segment

With your suppliers segmented, develop a tailored SRM strategy for each group. To refer to the Kraljic terminology:

  • For strategic suppliers, for example, focus on building collaborative relationships, joint innovation and long-term partnerships.

  • For bottleneck suppliers, work on risk mitigation and contingency planning to ensure supply chain stability.

  • Leverage suppliers can be targeted for cost reduction initiatives and negotiation.

  • Non-critical suppliers may be managed with standard procurement practices.
Source: https://procurementtactics.com/kraljic-matrix/

Each strategy should include specific goals, key performance indicators (KPIs), and action plans.

Communicate the strategy clearly with suppliers, ensuring they understand their role in achieving mutual objectives.

4.Monitor your strategy

Implementing SRM is an ongoing process that requires continuous monitoring and evaluation. Regularly track supplier performance against the established KPIs and objectives.

Use data analytics and performance dashboards to gain insights into supplier performance, delivery times, quality metrics and compliance. Engage in open communication with suppliers to address any challenges or concerns promptly.

By monitoring your SRM strategy, you can identify areas for improvement, early warning signs of potential disruptions, and opportunities to capitalise on supplier strengths.

5.Continual Improvement

Continuous improvement is at the heart of effective SRM. Use the insights gained from monitoring to drive continual improvement in supplier relationships and supply chain performance.

Engage in regular feedback sessions with suppliers to discuss performance, opportunities for innovation, and areas for mutual improvement.

Encourage collaboration and knowledge sharing between your organization and suppliers. Supplier development programs can be implemented to enhance supplier capabilities and ensure they meet your evolving business requirements.

Looking to develop a supplier relationship management strategy?

As an integral part of the supply chain, your responsibility is to keep the supply flow smooth and free from hindrances. That game changer is having a robust supplier relationship management in place.

If you aim for sustainable and cost-efficient business growth, you’ll have to get over the conventional means and invest in close partnerships with suppliers. Remember, your suppliers are not just companies providing you with goods and services - they are your partners.

If you’re looking for the right suppliers and partners with your business, then get in touch with our team at The Sourcing Co. We’re a sourcing company specialising in finding suppliers in the Asia-Pacific region for business across the world, helping you develop excellent relationships and achieve a cost-effective supply chain for your organisation.

You can get in touch with us right here.
]]> What is Supplier Management? A Comprehensive Guide https://thesourcing.co/what-is-supplier-management Thu, 09 Nov 2023 04:16:00 +0300 Supply Chain Management If you’re running a business and relying on overseas companies to manufacture your products, supplier management should be a critical element of your operations.

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How to Calculate Sales Margin: A Comprehensive Guide

How to Calculate Sales Margin: A Comprehensive Guide

Is your business leaving money on the table? You’re not alone—around 43% of small businesses in Australia report zero profit, often due to high operational costs and incorrect pricing. These challenges can reduce your potential revenue and make it hard to achieve profitability.

A key factor in addressing these financial issues is your sales margin. While it’s not the only cause of zero profit, understanding and improving your sales margin can give you a clear picture of how much profit you’re making after covering direct costs.

By managing both your expenses and your sales margin effectively, you can improve your business's financial health and set a path toward sustainable growth.

What is Sales Margin?

Sales margin measures the profitability of a product or service as a percentage of revenue. It represents the amount left after deducting direct costs, revealing the portion of each sale contributing to covering overhead and generating profit. A higher sales margin equates to greater profitability.

Sales Margin vs. Gross Profit Margin

While often used interchangeably, there's a subtle distinction:

  • Sales margin typically refers to the profitability of a specific product or product line.
  • Gross profit margin is a broader measure, reflecting the overall profitability of a company's core operations before deducting general and administrative expenses.

Both are essential for financial analysis, but they serve distinct purposes.

The Importance of Sales Margin

Sales margin is a cornerstone of financial health. It:

  • Assesses profitability: Revealing the efficiency of your operations and product offerings.
  • Informs pricing: Guiding strategic pricing decisions to optimize revenue and competitiveness.
  • Identifies cost-saving opportunities: Pinpointing areas for efficiency gains and cost reduction.
  • Attracts investors: Demonstrating your business's financial strength and growth potential.

How to Calculate Sales Margin

The formula for calculating sales margin is:

Step-by-Step Guide to Calculating Sales Margin

Step 1: Determine Sales Revenue

Sales revenue is the total amount of money generated from sales before any expenses are deducted. This can be obtained from sales reports, invoices, or accounting software.

Example:

A company sells 1,000 units of a product at $50 each.

Sales Revenue = 1,000 × 50 = $50,000

Step 2: Calculate the Cost of Goods Sold (COGS)

This includes direct costs like raw materials, labor, and manufacturing overheads. Ensure you account for all direct costs, including sales discounts, allowances, materials, labor, commissions, and any other expenses tied to producing or acquiring the product.

Example:

The cost to produce 1,000 units includes $20,000 for materials and $10,000 for labor.

COGS = $20,000 + $10,000 = $30,000

Step 3: Find Your Gross Profit

Subtract COGS from your sales revenue.
Example:

Gross Profit = $50,000 − $30,000 = $20,000

Step 4: Calculate Sales Margin Percentage

Divide Gross Profit by Sales Revenue. This gives you the gross margin in decimal form.
Example:

Step 5: Convert to Percentage

Multiply the result by 100 to get the sales margin percentage.
Example:

If you sell 1,000 units at $50 each, generating $50,000 in sales revenue, and your COGS (including all direct costs) is $30,000:

Gross Profit = $50,000 - $30,000 = $20,000

Sales Margin = ($20,000 / $50,000) x 100 = 40%

Important Note: Accurately calculating COGS is essential. Include all direct costs, such as discounts, allowances, materials, labor, and commissions.

Analyzing Sales Margin

High Sales Margin

A high sales margin indicates that a company is able to sell its products at a price significantly higher than the cost to produce them. This can be due to strong brand recognition, superior product quality, or efficient production processes.

Low Sales Margin

A low sales margin suggests that a company's production costs are too high or its sales prices are too low. This could be due to intense competition, higher material costs, or inefficiencies in production.

Strategies to Enhance Sales Margin

  • Strategic Pricing: Carefully consider price adjustments to improve profitability without sacrificing customer satisfaction.
  • Cost Reduction: Streamline operations, negotiate favorable terms with suppliers, and eliminate unnecessary expenses. Optimize logistics by implementing a robust logistics management system to reduce transportation and handling costs.
  • Product Optimization: Focus on high-margin products, discontinue underperformers, and consider adding value through features or services.
  • Operational Efficiency: Implement robust cost control measures to maximize resource utilization. Effective warehouse management practices can significantly improve operational efficiency and reduce costs.

By mastering these strategies and consistently monitoring your sales margin, you can significantly improve your business's financial performance.

Bottom Line

Mastering sales margin is essential for any business seeking profitability and growth. By understanding this critical metric, you can make data-driven decisions to optimize pricing, control costs, and boost financial performance.

Remember, a healthy sales margin is a reflection of both efficient operations and the delivery of exceptional value to customers.

As your global sourcing and procurement partner, The Sourcing Co. offers end-to-end solutions to optimize your supply chain and drive sales margin improvement. Our expertise in global product sourcing, procurement optimization, and supply chain management allows us to deliver tangible results for your business.

Together, we can unlock your business's full potential for sustainable profitability.

Ready to elevate your sales margin? Contact us today to explore how our tailored solutions can drive your business forward.
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