This presentation provides best practices for private label sourcing from China to avoid quality, payment, and communication problems. It recommends: 1) Defining product requirements and quality control criteria upfront; 2) Qualifying suppliers through trade shows, samples, and audits; 3) Issuing purchase orders with inspection requirements. It also discusses pre-shipment inspections to check for defects and decide whether to accept shipments. Managing quality, payment processes, and profitability are essential for successful private label sourcing.

1. 1
These are slides from a presentation at
“Private Label Sourcing & Amazon FBA
Selling” Meetup in Singapore

2. Online  Trade shows  Magazines  Research
(NASDAQ-GS: GSOL)
Private Label Sourcing from
China – Best Practices
Peter Zapf,
Global Sources
28 Sept, 2016

3. Problems We See
• Quality
• Payment
• Usually these are communication and
process management problems
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4. Avoiding Problems
1. Define/Know your product requirements
2. Qualify suppliers
3. Request samples
4. Write objective quality control (QC) criteria based on the
samples
5. Issue PO with QC criteria included
6. Receive supplier confirmation that they can meet QC criteria
7. Pay initial payment (often 30%)
8. Book third party inspection (for when manufacturing is
complete)
9. Review inspection report
10. Pay final payment (often 70%)
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5. Qualifying Suppliers
• Current export markets
• Main customers
• Product certifications
• Attend shows
• Manufacturer vs. Trading Company
• QC checklist
• Position yourself well
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6. Samples
• Requesting samples
– Sample fees
– PayPal payment
• Review quality: Product and packaging
• Develop QC criteria / checklist
– Test name
– Test description
– Required result
– Finding
– Classification
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7. Defining Quality Requirements
• Quality Control Requirements
– Defines what to check & how to test
– Classifies severity of issue
• Critical: Product doesn’t function
• Major: Product functions, but customer is likely to return product (or write
a bad review)
• Minor: Customer is unlikely to return product (or write a bad review)
• Sample Size: Level II most common
• Acceptable Quality Limit (AQL)
– Specifies number of defects allowed:
• Critical / Major / Minor - 0 / 2.5 / 4.0 very common
• Stores like Target or Walmart usually inspect at 0 / 2.5 / 4.0
• 0 / 1.0 / 2.5 AQL is quite strict and would qualify an item as rather high-
end or luxury to some degree
• For many car parts, plane parts, and pharmaceuticals, the accepted defect
rate is much lower
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8. Defining Quality Requirements
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9. Placing the Purchase Order
• Purchase Order
– Products & Quantities
– Terms & Conditions
• Supplier pays for re-inspection if first inspection fails
• 2% price reduction for every 3 days if the shipment
is late
• Quality Requirements
• Packaging Requirements
• Certification Requirements (you should pay)
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10. The Inspection: What to Expect
• You receive the report, and you decide
whether to accept the shipment
• Inspectors are paid to find problems…
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12. The Inspection: What to Expect
• If inspection fails you can:
– Accept product & ship
– Ask supplier to rework or replace product and
then ship or re-inspect
– Walk away, losing your 30% payment
• Include a clause in your PO saying supplier
will pay for any required re-inspection
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13. The Inspection Report: Summary
Free report at http://www.v-trust.com/
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14. The Inspection Report: Remarks
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15. The Inspection Report: Pictures
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16. Some Inspection Companies
• Who can help:
– Old guard: TUV, SGS, Intertek, Bureau Veritas
– Newer professional providers: AsiaInspection,
Sofeast, InTouch Quality, ProQC, V-Trust, Asia
Quality Focus
• What does it cost:
– US$300 per man day
– Usually 1 man day
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17. Managing Quality
• Quality doesn’t begin with the pre-shipment
inspection, it ends with the inspection
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18. Payment
• Don’t buy branded products
• Bank account scams
– Rouge employee
– Phished account
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19. Managing Profitability
• Order size
• QC at factory
• Ocean vs. Air shipping
• Ship direct to warehouse
• Pack to avoid receiving miscounts
• Return rates: Product quality & reviews
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20. Keep in Touch!
• GlobalSources.com
• Global Sources Exhibitions
• Global Sources Summit – For Online &
Amazon Sellers
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21. Online  Trade shows  Magazines  Research
(NASDAQ-GS: GSOL)
Thank you
Join us for our next Meetup:
Singapore: http://www.meetup.com/Singapore-Private-
Label-Sourcing-and-Amazon-FBA-Selling/
Hong Kong: http://www.meetup.com/Hong-Kong-Private-
Label-Sourcing-and-Amazon-FBA-Selling/