Managing Your Supply Chain in China
Tags: Company Verification, Credibility, Due Diligence, OEM, SMBs and SMEs
Estimated reading time: 2 minutes
Many small businesses rely on importing Chinese goods from exporters in order to provide products and services to their customers. It is convenient and simplifies lots of things. However, there can be some “surprises” at this convenience, which is almost no “control” over the manufacturer.
Less control = More risks
You may run into unwanted surprises when you have no control over the manufacturer. When the overseas manufacturers are fully booked, you may not get enough supply, or your orders can get delayed. Your business is at risk if a dispute occurs involving the Chinese exporter or anything happens to it.
Hence, business owners should consider managing their supply chain and here is why.
Establish a direct relationship with manufacturers
Consider moving away from the importer-exporter relationship.
Instead, you want a business partner who can help you build a supply chain under your control, such as an OEM or manufacturing contract. You will have more access to important information such as suppliers and the price of raw materials. Although you may bear the cost of price fluctuation in raw materials, in return, you will have a reliable supply chain under your own control. In addition, your business partner’s interest is much more aligned with yours.
Collaboration among multiple suppliers is critical in managing the international supply chain. Without some degree of control over all the main suppliers involved, it is hard to guarantee on-time delivery from overseas markets. Therefore, signing a multi-party master agreement with all suppliers along the supply chain is something to consider. Such agreements clarify each party’s responsibilities such as the timing for delivery, quality standard and payment. For you to have a contract enforceable against the relevant parties in China, it is always advisable for an experienced local lawyer to draft or review the contract for you.
Check the potential partner by conduct a due diligence
For you to know who you are dealing with, it is critical to get some basic but very important information about the potential partners checked. For example, you can engage legal professionals for due diligence service to confirm whether your potential business partner is in good standing, legally qualified to do certain businesses, and have the capital required or is simply a shell company.
This article is provided By Mary Mao, a business lawyer in Shenzhen, China with over 11 years of experience in commercial contracts.
Ms. Mary Mao
Trustiics Recommended Lawyer
Senior Lawyer at Beijing W&H Law Firm Shenzhen Office
Mary Mao is a business lawyer in Shenzhen, China, with over 12 years of experience in commercial contracts.
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