After the samples have been approved, the time has come to seal the deal with the chosen factory and order the product. A classic mistake of beginners is to order the total amount that they want to sell at the end. Those who do this expose themselves to financial damage in case there is a manufacturing problem and may find themselves with a considerable amount of defective or unsuitable products for distribution.
So, the right thing to do is to order an experimental relatively small quantity. First, you need to check if there is an MOQ for the order. The factory might try to persuade you to buy a very large quantity either because it wants to sell more or because producing a small quantity is not profitable for it. Once you’ve checked this out, find out if there is a setup cost for the production line or alternatively the cost of producing a proper mold. As we noted in the previous chapter, the supplier usually produces a cheap temporary mold for samples and it does not hold up in bulk production. The fixed template cost can range from hundreds to thousands of dollars, depending on the size of the product and the materials it consists of.
When closing the order, it is very important (!) to pay attention to the shipping and payment terms. If you are considering EXW, remember that the cost of the shipment to the factory’s nearest port, and the cost of shipment to the destination country will be added to that price.
In case the payment conditions are different, you and the supplier must determine who is responsible for the damage to the shipment at any point on the way of the products to the destination country. Determine whether the factory provides you with the necessary documents to transfer the product through customs, and whether it provides insurance on the products while they’re in the container.
Pay attention to the requested currency (Yuan/Dollars).
It is very important not to bargain with the Chinese. Once you try to lower the price, the quality of the product will decline accordingly. Therefore, consider the total costs of the product and shipping so you can calculate the potential profit and leave a margin for errors. Work only with a supplier whose initial bid is acceptable to you and do not hope for a discount later.
Talk to the supplier and set a time for the end of production so you could estimate when the shipment will arrive at the destination port, go through customs and finally get to the distribution warehouse. Make sure you decide on a delivery time that leaves extra time in the event of an unexpected delay. For example, on the Chinese holiday, it is recommended to set the delivery date for a month before the holiday.
Everything we have discussed so far will not be valid if you don’t have a contract. Be sure to record in writing any communication with the supplier and confirm the order of the large quantity only after signing a contract with the supplier.
Write in the contract the terms of what happens if something is not consummated from the side of the supplier (penalties) whether it is financial compensation or a commitment to the production of additional proper products. Write the terms of payment in the contract: the payment currency, the platform through which the transfer will be made, and when each sum will be paid.