You’ve got a great idea for a product, managed to secure some capital to get it produced and you’re pumped to start selling. The next step is finding somewhere to get your product made. You’ve heard that making products offshore can be much less expensive, but how do you find a supplier who is reliable and will it all actually work out cheaper?
In this article we are going to give you step by step tips on how to find an offshore supplier, how to get the products imported into South Africa and what to look out for throughout the entire process.
Find a local logistics company
The very first step, before you even think about finding a supplier, is to source a local and reliable freight forwarder or logistics company to find out how to get your orders shipped and cleared at South African customs. Make sure you cover all the ins and outs of each step of the shipping and importing process. That should include how long it all takes, if you can track the order along it’s journey (there’s usually an app for that), what happens when it reaches customs, how much will it cost, how long will it take to get through customs, how long will delivery take to your door once it’s been cleared. Ask as many questions as you can think of. The charges issued to you by a freight forwarder or logistics company can mean the difference between your shipment being cleared or it being destroyed by customs, so you want to make sure you get it right!
It’s wise to note that, as an individual, you have an unofficial customs limit of five international imports per year up to a goods value of R20 000. Anything over that requires that you have an import license. That said, customs can still require you to produce an import license before releasing your goods, even if the goods are valued below R20 000.
Finding a Supplier
There are loads of online resources you can use to find suppliers located all over the world. Websites like alibaba.com or globalsources.com can help put you in touch with suppliers instantly so you can decide which one to use in no time at all. Here are a few tips to bear in mind when sourcing a supplier:
- Make a point of contacting ten or more suppliers who are verified and have had listings for more than 3 years. Think about your requirements and any special or specific terms and conditions and create a ‘must-have’ list for essential elements as well as a ‘nice to have’ list for those things that are handy to have but won’t be a deal breaker if a supplier can’t accommodate the request.
- When contacting your list of suppliers be very specific about your requirements and expectations and then request a catalogue, price list and MoQs (Minimum order Quantities).
- Of the ten suppliers you contact roughly 60% will respond to your request. Then it’s research time! Visit their websites, ask them for references, do as much homework as you can to whittle the suppliers down to two or three based on language, past references, location, price, etc using the lists you created.
- Reiterate your requirements to your chosen two or three suppliers and remember that MoQs are always negotiable. Very often suppliers will try to force higher MoQs onto you, but stand by your requirements and let the suppliers come to the party. If they don’t, move on to someone else.
- Always order samples! You will probably need to pay for these but they will give you a very good idea of what to expect from the supplier in terms of quality. Samples can cost a lot of money but are well worth the outlay to understand what a supplier can and can’t do. Make sure you are 100% satisfied with the sample before going ahead with an order as it could turn out to be a costly mistake if something is missed.
Placing the Order
- Once you have decided on a supplier you like, place the first order. Start with an order that’s about 75% of the size you have in mind and build up to 100% as you and your supplier get to know each other.
- Make sure to confirm shipping costs before the order is placed. If the supplier is based inland ask for FOB (Free on Board). This means that the supplier is responsible for getting your order to a harbour or airport.
- The supplier will most likely request 100% payment up front, however it might be worth requesting to pay 50% when you place the order and the remaining 50% prior to shipping, this will ensure that the supplier prioritises your order over others.
- Most suppliers will accept payments from PayPal, Escrow, bank transfers, etc. Keep an eye on the exchange rate however, as you will more than likely pay for the order in USD, GBP or EUR. USD is the most common currency used. Remember that the South African Reserve Bank may want more information on the international payment so speak to your freight forwarder and, if necessary, get them to arrange payment.
The Manufacturing Process
- Ask questions about the manufacturing process. This will give you more of an indication of how professional the supplier is for your next order. The more forthcoming your chosen supplier is with this extra information, the more trustworthy they are likely to be.
- Stay in touch with the supplier periodically and request photos at every step of the way. The last thing you want is for your products to be shipped and they are all incorrectly or badly made.
- The actual manufacturing process can often be the trickiest part of the process simply because you are not nearby and so aren’t able to inspect the final product.
- Push the supplier to stick to their delivery date.
Shipping to South Africa
Your supplier is now finished with your order and they are ready to ship it to you.
- Generally speaking a lot of smaller shipments are carried in the cargo holds of planes so travel time to the SA borders is greatly minimised but this is a much more costly exercise. Orders are more economical when sent by ship, but take much longer so bear this in mind when you think of how many pallets your order will be sent on.
- Don’t ship it by standard Post, it will take forever to get to you, rather use a dedicated courier/freight service like DHL, UPS, TNT etc. Your freight forwarder will be able to advise you on the best courier for your product type.
- Once your shipment arrives at customs you will need to pay VAT on your goods as well as any customs duties that apply. Customs duties are calculated based on the classification of the products and the duties applicable by law. Some goods are duty free, others can carry duties well over 45%. Speak to your freight forwarder or logistics company for more info on what these are likely to be based on your type of goods.
- Understand that payment for shipping from the supplier, customs and VAT will be for your account, so be sure to take this into account when calculating the overall cost of your items.
Receiving your Goodies
Your goods have cleared customs and they have finally been delivered to your door, but is there anything left to do?
- Get in touch with your supplier. Let them know that you have received the goods and let them know what condition they’re in e.g. if there are any faults or if they’re all okay. This will help them understand your requirements for the next orders.
- Check your order! Inspect the packaging if applicable, check the goods thoroughly to ensure that there are no faults and check your branding on the items. If there are any faults at all (no matter how small) report them to your supplier as soon as possible. More often than not, although you won’t be able to return the goods, the supplier will be willing to give you a credit for the next order you place with them.
Log the stock as inventory and spread the word about your new products that are ready for your customers to buy.
Obviously, these tips are just that – tips. Sourcing an offshore supplier can be an incredibly lengthy, tedious process and there are bound to be hiccups along the way, but it may be a good trade-off if you are saving lots of your capital to get the goods produced.
The main aim is to get good quality products produced affordably and in good time. Your logistics provider will be your greatest asset thorough this process, so don’t try to do this on your own, especially not with bigger orders.
Something to bear in mind however, is if this whole process sounds a bit scary or perplexing, then go a different route; try to find local suppliers in South Africa who can produce your goods instead. There is a growing base of good local manufacturers and they generally come with much less hassle, more flexibility and better communication.