• Product Sourcing---
  Sources of Supply in Exporting-Importing
  • Advance Payment and Deposit
• Purchase Order (P.O.)
  • Sample Form:  Purchase Order
  • Sample Form:  Purchase Order Cover Letter
  • Terms and Conditions of Purchase
• Guide to Effective Sampling---
  Quality Management and Strategy
  • Diagram:  Sampling of Goods
• Product Inspection
  • Defect Classifications and Buyers' Behavior
  • Inspection Report and Its Implications
  • Sample Form:  Inspection Report
  • Single Sampling Plan (MIL-150D)
• Product Rejection, Rework and Re-inspection
• Unauthorized Product Substitution

The term purchaser or trader is used here to refer to the export-trader, while the term vendor refers to the export-manufacturer, which sells to the export-trader. For the definition of export-trader and export-manufacturer, please see Types of Export Businesses.

The task of purchasing in the exporting demands patience, dedication and high-level of negotiating skills. A small additional discount that the purchaser can get from the vendor may save an important export deal that otherwise would have gone sour. The purchaser being able to get a better price may mean a higher profit margin for the company. The purchaser has to follow up with the vendor to ensure that the order will be ready on the delivery date.

Traders rely mostly on the export-manufacturers for the supply of export goods. Few traders have their own subsidiary factory. In some cases, a trader (e.g. trader A) may buy from another trader (e.g. trader B), where trader B is the exclusive export representative of a manufacturer whose product the trader A requires.

"You name it, we source it" is a commendable business principle for the trader. In practice, however, the large trader---giant trading company and buying office---is in a better position to cope with this principle.

A large trader normally handles many product lines. It has strong resources to source, buy and deliver the goods. For a small trader, it is beneficial to specialize in one line of product, so that the sources of supply are focused to one line. Through the 'concentrated' approach, it is easier to build an industry reputation.

Product Sourcing for Global Markets

Traders normally continue to search for new products for existing and new customers. The new product usually commands a higher profit margin. At times, the buyer may request the trader to look for a specific item or to contact a particular manufacturer, which could be supplying the buyer's competitor and other traders.

The government external trade department normally maintains extensive trade publications from which the trader may source products from the vendors. The publications typically include various trade directories (i.e., export directory, manufacturers' index, buyers' guide, business yellow pages) and export-oriented magazines, gazettes and newsletters. Export associations and libraries may also maintain such publications. The publications can be obtained from the respective publishers usually through a paid subscription.

Reliability of the Suppliers

It is important to know whether the vendor can supply a consistent product quality on time, before issuing a purchase order. Any order that deviates from the contracted specifications and quality will result in the non-delivery within the contracted time for shipment.

A delay in the vendor's delivery can cause a lost profit and may spoil the exporter's reputation. Such a delay may mean the reschedule of export shipment, if not the buyer's cancellation of the order. The shipping schedule to certain countries is available only every 2 or more weeks. As such, rescheduling of shipment may mean waiting for another 2 or more weeks.

A delayed delivery may also mean issuing another letter of credit (L/C), that is if L/C has expired, or amending the L/C. In both cases, it means additional bank charges and loss of time to both importer and trader. The importer may request the trader or the vendor, depending on the sales agreement, to reimburse the contingent charges.

Another drawback in a delayed delivery is the cancellation of the order. This may happen in the case of seasonal products (e.g. raincoats and winter wears) and fashion and promotional sales, where a product loses its usefulness or its intended purpose after a period of time.

Product Information

In order to discuss business with a buyer, the export-trader must have adequate information about the product. The vendor's catalogue usually contains the item number, product specifications, and packing information. Information such as the price, payment terms, delivery time, and production capacity are essential in an export business discussion.

Production Capacity

The production capacity is very important when doing business with large foreign importers such as chain stores. It could be a waste of time and money to offer your products to large importers if your production capacity is low.

Before the 1970's, many manufacturers relied on the traders for exporting. The export business then was far less competitive and the occurrence of the bouncing cheque/check---NSF cheque/check (no sufficient fund or cheque/check with insufficient fund in the bank account)---was less frequent. At that time, many manufacturers did not require an advance payment or deposit from the trader, even for a new account. The trader usually paid the manufacturer in one or two weeks after the negotiation of the letter of credit. In the mid-1970's, many manufacturers started exporting directly. During the oil crisis in late 1970's, the occurrence of the 'bouncing cheque/check' was rampant. The terms of payment have changed since then. The manufacturer demanding an advance full payment or a deposit from the trader is not uncommon now, especially for a new account.

In certain countries, the export-trader has to finance the manufacturer---by advancing funds to the manufacturer---to procure the necessary materials in making the export goods. The financing turning into a 'bad deal' is not uncommon.

In order to judge the true characteristics of a lot---a collection of units of product---samples must be drawn at random, unless the lot requires 100% inspection. The unit refers to the unit of product (e.g. piece, set and box).

If one lot of cargo is stowed uniformly as in the Diagram: Sampling of Goods below, the inspector may use the random number based on the H-W-D (High-Wide-Deep). Referring to the diagram below, the H is 1 to 2, W is 1 to 3, and D is 1 to 2. The random number 1-3-1 is the box A, while 2-2-2 is the box B.

Assuming that a lot size---batch size or shipment size---to be inspected is 12 units and the required sample size is 3 units, the correct way to draw the samples is from all parts of the lot, for example, marked Right in the diagram. Drawing the samples from one segment only is incorrect, for example, marked Wrong in the diagram. It is incorrect to judge the true characteristics of a lot when the samples are drawn from a segment, row or corner.

In case of a full container load shipment, always inspect the goods before loading, not after loading. Accessibility is very important in random inspection. A lot size of one TEU (twenty-foot equivalent unit) may measure to 19' x 7.5' x 7.5' (5.79m x 2.29m x 2.29m). Despite its relatively large size, it is important to draw samples from different parts of the lot.