Due Diligence When International Sourcing
International sourcing makes a lot of work and is quite complicated. Add the fact that it’s easy to get ripped off, and you have big reasons to seek a domestic international sourcing company’s help. Do not trust anyone overseas with your intellectual property, your private information, or your money.
Due Diligence required. If your company is going to embark on international sourcing, then proper understanding of the world market, law, pitfalls, trading custom, tax, procurement, and supply chain management is needed before it can reap more profit from your merchandise. Looking for worldwide sources can be challenging.
Why International Sourcing?
Limit inventory cost to increase profit. Most companies should want business to go well in their country, and may also prefer purchasing manufactured goods locally, but in richer countries, domestic manufacturing and supply is priced out of the market. For struggling, starting, or small businesses to compete, or even just stay afloat, they have to mind costs at every turn. Domestic manufacturing costs lead some turns to steer domestic companies offshore.
International Sourcing Alert
International sourcing is not a business tack to embark on without proper consideration. Companies take great pains in order to master the international sourcing process from overseas manufacturing, and they have to have enough perseverance and awareness, or else money spent can be money lost down the drain! To anticipate a wrong turn, a company might search online for available suppliers that could make it easy to get on board this difficult, complicated, but rewarding method of limiting inventory cost while increasing profit. Who can you trust? Can you trust all suppliers? No, many of them appear each day as a new supplier, wholesaler, or manufacturer, and they’re really just one person in an apartment or internet cafe in some under-developed country trying to take as much from the richer countries as possible in a short time. Can you trust all international sourcing companies or websites that vouch, promote, or advertise for all suppliers? No – just this February 2011, Alibaba, a respected and vastly popular international sourcing website was caught in a fraud scandal that led its top executives and some high ranking employees to resign in shame. That site was selling verified supplier accounts to con artists, thwarting the procurement process for many.
All companies, online, on the phone, and in person, domestic and foreign, that deal with global manufacturing outsourcing and procurement, should undergo close scrutiny. Don’t let anything go unnoticed, as what you are betting on is a big investment for most companies. It is common for individuals and pockets of thieves dealing with international sourcing to profile themselves as companies with which you could safely do business. Advertising plays a big role in endorsing almost anything these days and fraudsters can pose as anything for any length of time. The laws in some foreign countries go against the richer countries on purpose, so don’t think you will have any retribution when ripped off.
Who Vouched For The Supplier?
- Authentication: The unscrupulous individuals and groups of crooks can get authenticated as a real outsourcing manufacturer or vendor by a third party verification service (which itself may or may not be legitimate). Just because such verification is, or seems to be done by a company that is not connected with that specific website, or the international sourcing company being authenticated, doesn’t mean it’s real.
- Testimonials: Same goes for testimonials. People create multiple online profiles, accounts, and websites to testify for themselves as a routine part of their marketing.
- Reviews: Fake review websites proliferate the Web and convince people to buy stuff every minute.
- Favorable Product Comments: How hard is it for a thief to log on to several websites and post comments in favor of the fraudulent service they’re providing? Not. It is not hard at all, and it is common practice.
- Overseas Procurement Services: If foreign trade is so corrupt, do you think they’d stop short of setting themselves up as fake procurement agents? You have to be able to visit the office of the company representing you. If you cannot trust the so-called overseas manufacturer, you cannot trust the overseas procurement agent either.
- Popular Websites: If a website ranks well, and is popular, it almost inevitably becomes a marketers haven for often unscrupulous behavior such as the points above..
International Sourcing Protection
Some precautionary steps you can take:
- Document all communications;
- hold back on any international sourcing commitment until you are 100% sure;
- don’t sign with contract manufacturing companies until a trusted and thorough analysis is in your hands;
- restrict payment to an initial deposit as small as possible;
- withhold the balance until the standard of quality that you specified was met with the product in your possession;
- don’t pay until you get assurance from the shipping company that the container holding your purchased goods really does contain what you ordered;
- inspect the goods upon receipt, making notes on the bill of lading;
- photograph damaged shipping containers.
This might sound like just another expense, but it is imperative to find the right firm to help you out when you seek international sourcing. Imagine losing a lot of time and money to cheating and errant manufacturers who have placed ads that are not synonymous to what they professed to be. You wouldn’t want to start all over again with the process from step 1, right?
Don’t trust overseas procurement services. Trust only a legitimate domestic procurement sourcing firm that can
- show documents upon a client’s request,
- invite you for an actual meeting,
- or a visual inspection at their headquarters,
- provide you with a reliable lineup of referrals and references,
- and allow 3PQC for check and balance.
You need not worry about the extra money spent for sound, and due diligence. It’s value is in the potential savings of what could have been lost or stolen from you. Outsourcing manufacturing is good; getting ripped off is bad.
Since 1983, Con-Tech International, a Multi-million dollar company in New Orleans, LA, has been used by many U.S. and international companies for global sourcing and to procure parts that require custom manufacturing.