Our world has expanded a whole lot since the advent of the internet. It’s enabled people to come together in countless ways. And it’s revolutionized how we work. Now more than ever, people are able to work remotely, reach new audiences, communicate instantaneously, and so much more.
Another benefit is the ease at which businesses can source products and services internationally. It can be more cost-effective, reduce production time, and expand your product base, among other things. And while there are numerous advantages to outsourcing work to overseas suppliers, there are a few things to consider before you start using them. In this blog, we’re covering a variety of things to keep an eye out for as you explore options for outsourcing your supplier relationships.
1. Government Requirements
It’s critical to understand your supply chain. And when dealing with foreign suppliers, there are more factors that you must consider. A big one is that you must ensure that all of the various government regulations that apply to your products are met.
When it comes to dealing with overseas suppliers, there are several government regulations to consider:
- Product safety regulations
- Intellectual property laws
- Contract law
- Customs regulations
Ensuring that all of your contracts are legally binding is one of the most critical things you can do in an import/export firm. As an importer or exporter, you must make sure that all of the products you ship to another country are legal and up-to-date when they arrive.
As a result, you must complete the required documentation well in advance of delivering anything to your foreign consumers or receiving anything from your foreign distributors.
2. Contractual Agreements
You’ll need to make sure that all your expectations and verbal agreements with your overseas suppliers are translated into signed contracts. Contractual agreements ensure that each party upholds their side and that there is less of a headache down the road.
Due to the widespread acceptance of electronic signatures worldwide, completing your legal documents for any service or product agreements that you wish to import from another country is going to be reasonably simple and painless.
You can now electronically sign all your contracts and paperwork. All you need is an internet connection and a bit of time to prepare the documents in a way that protects your company and makes your agreements legally binding.
3. Time Zones
Time zones can be tricky. It’s important that your overseas supplier understands the difference between your time zone and their time zone. If you live in the UK and you’re working with a supplier in New York, they may send an email at 11 PM on a Friday and expect a prompt response. And it’s likely that you’ll have similar issues.
Understanding both your time zones will not only help you sync your communications but your deliveries, too. In some cases, it’s a good idea to set up a weekly or biweekly meeting with your supplier to ensure that everyone is on the same page and operating effectively.
4. Language Barriers
This is especially important if people in your company aren’t fluent in the language spoken by your supplier.
If you deal with international suppliers, it’s crucial that you have someone on your team who speaks the language of your supplier and can communicate clearly with them. Communication is the key to a successful business relationship. Though a language barrier might make this more difficult, it doesn’t have to be a breaking point.
An interpreter might be needed for important meetings or phone calls with your supplier. Look at services that offer contractual interpreters to help bridge this divide when necessary.
5. Customs Regulations
Product designs manufactured overseas often require altered customs classifications when being imported back into the country (meaning special paperwork needs to be filled out). When possible, it helps to avoid products covered under strict customs regulations, so this process isn’t necessary.
Consider what products you’ll be importing/exporting and do some research on how difficult they’ll be to cross international borders.
6. Shipping Costs
This can add to the price of your product, especially if it must be shipped back and forth between countries a few times during production (for example, when there are material shortages). And with shipping costs already being a major factor for eCommerce businesses when considering their bottom line, it’s vital to minimize additional overhead costs.
It’s important to research your options for shipping and delivery. This is especially true if you’re working with a factory overseas since shipping can add on to the price of your product.
7. Quality Control
You’ll need to check in on your supplier regularly—at least once every six months—to make sure they’re up to your quality and security standards. You’ll also want to make sure that the location where your product is being manufactured has adequate security measures in place since you also want to protect your intellectual property.
While it’s important to find suppliers and manufacturers with a well-established reputation, you can’t always just take their word that the product is up to your standards. You’ll want to keep them honest by making sure they’re delivering on their promises and meeting your expectations.
And paying a little more to work with a more reputable company is worth it. You’ll get a better product in the end, allowing you to charge a bit more while also solidifying your reputation.
8. Intellectual Property Rights
Some countries have stricter intellectual property laws than others. Without extensive research, it’s unlikely that you’ll know the nuances of laws between each, so it’s simply best not to blindly regard any overseas company as ‘reliable’ when it comes to protecting your intellectual property rights.
For bigger businesses or any business that is outsourcing a large amount of labor, manufacturing, or products, it’s a good idea to consult a legal entity about any particular nation’s laws.
9. Design Control
When you’re dealing with suppliers overseas, it’s crucial to get as much control over the design process as possible. You need to make sure that your product continues to represent your brand. Few businesses can afford for their customer base to be confused about the maker or quality of the product.
Because many language barriers can exist between you and your overseas supplier, it’s important that your supplier understands your expectations. This means establishing rules for how designs must be handled during production so mistakes are avoided.
10. Currency Exchange Rates
Currency exchange is another big factor to consider when using international suppliers. Exchange rates change all the time, affecting your overhead costs and bottom line.
Typically, businesses have two options for dealing with exchange rates: a fluctuating and fixed exchange rate. The fluctuating currency exchange rate is riskier. A shift in the favor of your currency can make the cost of production go way down, but a more unfavorable shift can completely ruin any expected profits. For this reason, it’s usually wise to see a fixed exchange rate, even for short time periods, to minimize risk.
It’s a good idea when dealing with overseas suppliers to make sure you’re working with a reputable currency exchange company that will convert your dollars to the appropriate currency.
11. Minimum Orders
To get the best price when dealing with overseas suppliers, it’s critical to establish a minimum order quantity (MOQ) as a company.
This saves you money on unnecessary inventory and aids your supplier’s efficiency by preventing them from producing more goods than is required.
You’ll have to do some research to work out the minimum you can order from your supplier, but it’s worth bearing in mind that the more often you place orders, the more your supplier will be motivated to give you a better deal.
12. Local Expertise
An important step in using overseas suppliers is finding someone who knows how to navigate these relationships. It’s not a good idea to start the process without any kind of help, especially if it’s your first time doing it.
Find a professional or professional organization that specializes in building and maintaining these kinds of relationships. Chances are their relationship with suppliers and knowledge of the processes will save you a whole lot of money.
You also need this person to be able to judge the quality of your supplier’s work, so they’ll know if something needs to be reworked or replaced completely.
13. The Human Factor
Doing business with someone on the other side of the world can be challenging at times. After all, there are time zones, language, culture, and other differences that make managing a long-distance relationship a difficult endeavor. If you truly want to improve and maintain your relationship with your suppliers, you might want to consider forming a joint venture or even a formal business partnership with them.
14. Pricing Fluctuations
If the price of materials increases, which is typical in some industries, it will affect the final price of your product. This means you’ll have to either absorb these extra costs or charge more for your products on top of increasing material prices.
To be fair, this is a common issue regardless of if you’re sourcing products internationally or not. Still, it’s an important factor to be aware of.
15. Sourcing Expansion Issues
Your supplier may experience delays when expanding their operations due to new equipment purchases or hiring additional staff members. For example, if the factory is still hiring people for their workforce, you’ll have to wait until they’re up and running again before you can begin placing more orders.
And promises are not always as reliable as they may seem. A plan to increase production might be in the works, but it’s very rarely something that is completed by the planned date.
Make sure the products you want are in stock at the time that you need them. Other clients withdrawing orders from the same supplier can cause production capacity to fill up. In this scenario, you could want to hunt for another provider with greater production capacity. Either way, it’s important to have contingency plans in place in case the supply of any particular product starts to drop off.
Managing International Suppliers Easily
The world is growing more global, and with it, business interactions are becoming more borderless. You may establish effective business relationships with overseas suppliers while being as confident and secure as if you were working with a local source. But you’ll need to take a few extra steps to make sure you’re doing it right.
In the process, make sure you have great supplier relationship management in place. KORONA POS keeps your ordering organized and automated so you can always count on products arriving on time and in the right quantity. Learn more by scheduling a product demo below.