Guide to finding the right clothing manufacturers in China

Learn how to find the right partners in affordable outsourcing destinations. 

Looking to design your own T-shirt or launch a knitwear collection? Outsourcing to China or other low cost countries could be your only option.

In this article, I explain what you need to know when selecting a clothing manufacturer, substance regulations, material quality and managing the product development and production process.

Regardless of whether you are an apparel start-up looking to try out a new product line, or you consider yourself the next Karl Lagerfeld, this article is packed with actionable advice for you. But first, I will explain why buying wholesale clothing from China is rarely an option.

Buying wholesale clothing from China

The Minimum Order Quantity (MOQ) of clothing and textile items is often 300 to 500 pieces per design. That translates into a major investment, assuming that you want to launch an entire collection. Many importers assume that the solution to this is skipping manufacturing to purchase off shelf clothing from wholesalers.

Of course, there are clothing and textile wholesalers in China. In fact, there are tens of thousands of them. However, these wholesalers, trade items manufactured for the Chinese market. Take a look at Taobao.com (China’s Ebay) and see for yourself. You can get a T-shirt for 2 dollars and a pair of jeans for the price of a Big Mac meal. But, China is not a magic land where basic economics don’t apply. In other words, you do get what you pay for.

In fact, you might get a bit more than you really want. At least in terms of regulated substances, such as Formaldehyde and AZO-colors. China’s substance regulations are more lax than those in the west. Thus, buying wholesale clothing from China is rarely (if ever) an option, unless you are willing to risk having your items seized by customs – or face a forced recall.

Important factors when selecting a clothing and textile factory

Not all clothing and textiles manufacturers are equal. Making a random factory selection online, without verifying that the supplier is able to reach your quality requirements, is likely to end up in disaster. Below follows an introduction to the three main factors that really matter, when selecting clothing manufacturers in China.

#1: Substance control and compliance with foreign textile regulations

Clothing textiles are regulated in most countries, including the United States, Europe and Australia. Most applicable safety standards, such as REACH (Europe) and FHSA (United States) regulate substances, such as formaldehyde, AZO-colors and asbestos. Most Chinese manufacturers, especially the smaller ones, are not aware of the substance content in their textiles.

It’s a deeply rooted issue that goes way beyond the manufacturer. All clothing manufacturers purchase fabrics and components from sub-contractors. The number of sub-contractors can range from two or three, to more than one hundred. Ensuring that no non-compliant fabric slips through requires the supplier to test a large number of samples, which most small factories consider too expensive and time consuming.

#2: Textiles labeling requirements

Clothing and textile regulations are not only limited to substances, but also product and packaging labeling. These labeling requirements vary greatly between different countries. However, most countries require labeling to cover Country of Origin (Made in China), textile fiber content and washing instructions.

However, a supplier cannot really be compliant or non-compliant with labeling requirements. In fact, it’s your job to design the textile label, and verify that it’s compliant with applicable regulations in your country. The supplier’s job is to print it. That said, they must be able to provide you with information about the textile fiber content and washing instructions.

#3: Fabric quality

Good suppliers provide high quality fabrics and bad suppliers provide low quality fabrics. But, it’s not that simple. A couple of years ago I learnt that myself, the hard way.

In 2011, we were tasked with managing the product development process of a new polo shirt collection for a European brand. They had already selected a new supplier in the southern Fujian province to manufacture their new designs. It was a good supplier. Clean facility, long history, plenty of capital, modern machinery and a strict quality management system.

The client received the samples and testing began. A few weeks of usage and washing later, it was clear that the material quality was far below the clients' expectations. While they wanted to match brands like GANT and Ralph Lauren in terms of quality, this sample would go straight to an outlet.

Obviously, the client was upset about this, and we submitted a complaint to the supplier. They made another batch of samples. But the result was the same. This was when we realized that this may be a reliable supplier, yet unable to match our buyers quality requirements. It turned out that they were indeed specialized in making low end apparel, and pretty good at it too!

Before you get started, you need to get your fabric specifications in order. Never assume that a Chinese clothing and textiles manufacturer is specialized in making items matching your quality requirements, regardless of their technical qualifications.

Product development process

When you have selected a few suppliers (not only one, as explained further down in this article) it’s time to put them to the test. Keep reading, and find out how to manage the clothing product development and production process:

Step #1: Design drafting, material selection and product specifications

Chinese manufacturers are entirely accustomed to producing items according to buyer specifications. While some suppliers offer design services, they will certainly not help someone to design a new collection based on a random inquiry on an e-commerce platforms like Alibaba.

Before you even bother to contact manufacturers, you need to get your specifications in order. These include, but are not limited to, the following:

• Design drafts
• Design elements (e.g. collar)
• Dimensions
• Fabric type (e.g. 96% cotton and 4% spandex)
• Fabric weight (e.g. 120 gsm)
• Printing or embroidery (e.g. screenprint)
• Pantone colors
• Buttons (design, material)
• Seams
• Textile label (design files and dimensions)
• Compliance requirements (e.g. AZO-free colors)

You may also complement a product specification with physical product samples, in case you intend to replicate a certain color, material or design elements of an existing product. However, certain components, such as buttons, are better left open until you know what the supplier has to offer.

In case you fail to provide sufficient product specifications, you are likely to receive items of very poor quality. Misunderstandings occur easier than you could possibly imagine, and there is no universal definition of what “good quality” is. Nothing should be left out of your product specification.

Step #2: Sample development

This is when it gets interesting, but act with caution. First of all, it’s way too early to make a final supplier selection at this stage. Instead, you shall select at least three or four suppliers that produce clothing samples simultaneously.

In my experience, roughly 50% of the suppliers fail to manufacture satisfying samples. They might lack the precision to get the seams straight, provide low quality material or prove that they don’t really care that much about following your design requirements.

Samples take time to develop, and often require a few revisions. All of a sudden three months have passed. If you have made a final supplier selection too early, you might need to start all over again. That’s why it’s critical to keep several supplier options at hand at this stage. Thereby, you can simply ditch the supplier failing to produce satisfying samples, and move on with those that succeed. Yes, it costs a bit extra to buy samples from four suppliers, rather than only one. But, considering the time and money you will save, it’s well worth it.

Step #3: Compliance testing

Previous compliance means that a supplier can prove that they are able to ensure compliance. While that is a key qualification requirement, it’s not a guarantee for future compliance. Thus, you shall submit material samples for compliance testing, before mass production begins.

But, this is also when it gets really complicated. Fabrics are purchased from sub-contractors, and suppliers rarely keep them in stock. The fabric samples that are available during sample production may not be available by the time you place your order. Even if the fabric used for mass production is visually identical, it may come in another batch (thus it may contain other chemicals) or be from a completely different sub-contractor.

In a worst case scenario, this means that you could end up with clothing made of non-compliant fabrics, even though the pre-production fabrics passed compliance testing. However, despite this risk pre-production fabric testing is critical. One way to minimize the risk further is to have fabric samples compliance tested as soon as the batch used for your items arrives in the supplier warehouse, but before mass production begins. That way you can at least avoid a situation where you are left with an entire batch of non-compliant apparel. Sounds complicated? Not so much, if you follow the process below:

1. Select fabrics and confirm applicable substance regulations
2. Ask your supplier if the fabric used for mass production originates from the same batch and/or from the same sub-contractor
3. Collect and submit pre-production reference fabric samples to the test laboratory
4. Supplier begins mass production and order fabrics from one or more subcontractors
5. Collect and submit batch sample reference fabrics to the test laboratory
6. If compliant: approve production

As one material, and sometimes color, requires a separate compliance test, costs increase if you use many different fabrics and colors. If you are on a small budget, try to limit the number of different fabrics used in your apparel.

Step #4: Sales contract

Before you pay the deposit and production begins, a Sales Agreement shall be signed by the clothing manufacturer. The main purpose of the sales contract is not to get prepared for future disputes, but to prevent them.

First of all, it shall prevent misunderstandings. Thus, it shall include product specifications, design drafts, material specifications and color samples. You may also attach physical samples, for the supplier to sign and stamp.

However, these specifications may be useless unless you put pressure on the supplier to actually comply. This can only be achieved if you make the supplier understand that you will verify compliance, and that you have a bargaining chip at hand, in case they wouldn’t.

In order to verify compliance, you need to follow up with Quality Inspection. I’ll get back to that in a bit. The payment is also critical. If you pay a supplier 100% in advance, they no longer have an incentive to remake or repair defective items, in case the quality inspection fails. This is why the final balance payment shall be withheld until the quality is verified.

Step #5: Quality control

Manufacturing is not a science. Quality issues are certain to occur, to a varying degree. They can’t be completely eliminated, but they can be managed and reduced to a degree that they don’t affect the viability of your business.

Forget about returning defective items to China. Low cost manufacturing is cheap for a reason. Instead, you must verify that your clothing reaches your quality requirements before it’s packed and shipped. Thus, a Quality Inspection shall be executed in the manufacturer’s facility, after production – but before shipment.

There are a number of defects that may occur when manufacturing clothing. Below follows a list of defects I have stumbled upon:

• Poor seams (e.g. not straight, loose threads)
• Discoloration
• Skewed embroidery
• Incorrect dimensions
• Loose buttons and zippers
• Dust and dirt

However, certain quality issues cannot be detected during a single factory inspection. For example, poor quality fabrics may lose fitting, only after a few washes. This is why extensive sample testing, and actual usage, is critical, before production begins. 

This article is re-published with permission from Frontier's content partner, ChinaImportal, an e-commerce platform that assists businesses looking to import products from China.

See the original article here.

How to start an importing business

Small businesses worldwide are increasingly getting involved in the trillion-dollar importing and exporting sector. 

With the rising demand for products by consumers in Africa, now is the right time to consider establishing an importing business.

Get our handy guide for start-up importers and access essential advice on how you can establish your own importing business and become successful in the lucrative international trade.

Click on this link for more

Private equity navigates regulatory headwinds

Chief executive officer of tax and management services firm Intercontinental Trust Limited, Ben Lim, gives insight on private equity growth in Africa and the evolution of regulatory environments to make investing more efficient.

With your 15-year history in Mauritius, how have you have built your business, and how has Mauritius evolved to be a gateway for investment into Africa?

Today we see Mauritius as the key financial centre for Africa, and indeed African private equity, having seen a real shift in the investment flows from other emerging markets to Africa in recent years. To provide some context, in the early 90s, I witnessed the emergence of Asia, particularly China and India, through investments passing through Mauritius, and our business was heavily weighted towards those regions. When the financial crisis emerged in 2008, we saw a significant change in investment flows, and we re-focused our business from Asia to Africa. Mauritius on the whole seemed to follow this shift. 80% of all investment companies in Mauritius pre-2008 were Asia-bound, and post-2008, 70% of all investment companies in Mauritius are now Africa-bound. It makes sense; although an island, we form part of Africa, we are a member of the African Union, Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA), and we are building the skills and intermediary businesses that so many of the businesses in Africa need as they grow.

Our business largely serves the private equity fund managers in South Africa, we have a strong foothold in this market. Interestingly since around 2009, these managers have sought to look for investible opportunities beyond their home market, to other countries in Southern Africa and even further afield to other countries in sub-Saharan Africa.

We see this as an increasing trend as well as a general pick-up in the number of fund managers and activity in some of the larger economies of Africa, such as Kenya. East Africa, we believe, is a real private equity growth region of the future. 

How have the regulatory environments in Africa evolved to be more conducive to PE funds and their ever increasing pool of global investors?

If we look at East Africa specifically, I think there are still a number of tax systems that can be inefficient for international investors investing directly in those countries. For example, in Tanzania, the tax system lifts the corporate veil and taxes the beneficial holder, which can result in double taxation exposure for a non-domestic investor. Mauritius is in the process of negotiating a Double Tax Agreement (DTA) with Tanzania to alleviate investors in funds domiciled in Mauritius of this double exposure, as well as other nations, including Algeria, Lesotho, Malawi and Togo. The government of Kenya is about to introduce capital gains tax, which had previously been absent from the tax system, and which can be a significant return drain for private equity investors. While this tax is on the horizon, Mauritius has ratified a DTA with Kenya that is awaiting enforcement. Once enforced, this will significantly benefit Mauritius-domiciled funds investing in Kenya.

One country which has structurally morphed into an attractive region for private sector investment is Rwanda. The government has put in place a number of structural enhancements to consolidate the socio-economic recovery and to generate sustainable and equitable growth and poverty reduction. Further, Rwanda's government has signed a DTA with Mauritius which is awaiting ratification. Rwanda recently ranked second of all African countries in the World Bank Group's Ease of Doing Business Index, behind Mauritius which ranks number one, and ahead of South Africa in third place.

Overall, Mauritius has worked very hard towards increasing efficiency and reducing risk for those investing in Africa, on a relative basis. The below table provides a snapshot of how investing in Africa via Mauritius can benefit investors.

Investor Promotion and Protection Agreements (IPPAs), mentioned in the table can provide comfort to investors who are investing in countries where there are risks of nationalisation or expropriation. The IPPAs encourage and protect investments by virtue of measures to minimise any deprivation of investments, and in the worst case scenario, any deprivation of investments will have to be justly compensated. IPPAs with Mauritius exist with Burundi, Madagascar, Mozambique, Senegal, South Africa, and Tanzania, with a further 14 IPPAs awaiting ratification, including Kenya and Rwanda.

Given the current trends, it is likely that Africa will finally emerge from its history to position itself as one the most affluent and developed regions of the world, developing at a much faster rate than one would have predicted only a couple of decades ago. We are confident that Mauritius will remain the preferred hub as a gateway for investments in African private equity and venture capital markets. 

Intercontinental Trust Limited operates in Kenya, Seychelles, Singapore, and South Africa. The firm serves Africa-focused private equity funds with targeted capital commitments of approximately US$ 5.5-billion. 

Article sourced from Frontier's content partner, African Private Equity and Venture Capital Association 

Top 6 private equity deals in Africa

Consumer-facing sectors are proving to be the most compelling for private equity in Africa, as demonstrated by the type of deals in July.

The Abraaj Group invests in Tunisian private hospital

The Abraaj Group announced its funds had acquired a majority stake in Polyclinique Taoufik S.A., the second-largest private hospital in Tunisia with 164 beds.

The investment will help the hospital to consolidate it’s strong position in the market by further increasing patient capacity and adding new services, upgrading and renovating the hospital, and investing in human resources and training.

To implement its growth strategy for Clinique Taoufik, Abraaj will draw on its extensive experience in the healthcare sector, gained from investing in businesses across the Middle East, North Africa and Turkey.

Population growth in North Africa is expected to reach 190 million by 2020, and with life expectancy also on the rise there is potential for further demand for quality healthcare services.

Tunisian healthcare sector made up almost 7% of GDP in 2013.

The investment is the sixth by Abraaj in Tunisia. It’s portfolio includes baked goods company Moulin d’Or; Unimed, a leading player in sterile form pharmaceutical products; and Plastic Electromechanic Company (PEC), which specializes in plastic injection, the assembly of electrical equipment and harnesses, and medical products.

AfricInvest Group and FMO form SFC Finance

AfricInvest Group and FMO (The Netherlands Development Finance Company) are part of a consortium which created SFC Finance, a senior secured lender providing funding for growth or expansion to small and medium enterprises (SMEs) in Africa.
SFC Finance will structure its loans with tenors adapted to the cash generation capabilities of its customers. Shareholders committed equity of US$20-million, alongside an initial US$50-million debt facility extended by the Overseas Private Investment Corporation. 

Debt financing for SMEs in Africa is poor, particularly the lack of credit facilities with repayment schedules that reflect company cash flows, a factor which has inhibited their growth. SFC Finance will address these needs, and also SME governance and environmental and social responsibility.

Amethis Finance announces final closing at US$530m

Private investment fund, Amethis Finance, saw final close of their first fund at US$530-million, which included institutional investors from Europe, US and Africa, together with close to 40 European and US entrepreneurs and family offices. 

Amethis has already made five investments since announcing their first close 18 months ago, in fast -performing companies in Kenya, Ghana, Cote d’Ivoire and Mauritius - in the banking, oil and gas, retail distribution, and logistics sectors. 

The Fund's shareholding structure mixes classical institutional investors (banks, insurance companies, fund of funds) with successful private entrepreneurs from the manufacturing and services sectors who are investing often for the first time in Africa and are looking to know better the continent. It assists its investors in their expansion, notably through co-investments.

Economic models are rapidly changing in Africa, with consumer and retail oriented companies taking advantage of those evolutions. This rapid growth is creating significant capital needs for local companies, and Amethis’ strategy is to foster long-term ties with well-established, high-growth African businesses that need long-term capital. 

Private European and US entrepreneurs and family offices are increasingly investing in Africa, and see the continent as the next world frontier for growth.

DPI and PIC in consortium acquisition of RTT

Development Partners International (DPI), through African Development Partners II, and the Government Employees Pension Fund (GEPF), represented by the Public Investment Corporation (PIC), acquired 80% of the RTT Group, Africa’s largest privately owned parcel distribution company, for an undisclosed sum. Ethos Private Equity leads this consortium.

The investment will expand RTT's offerings, and help to tailor services to specific customer needs.

RTT is a market leader in third-party logistics and distribution, and a forerunner in break bulk and express distribution. The company operates across sub-Saharan Africa, comprising over 120,000m2 of warehousing and cross docking facilities. RTT has a combined fleet in excess of 1,200 vehicles and employs close to 5,000 people. Revenues exceed R2.5-million per annum.

Fusion Capital buys equity stake in Kenya’s first free newspaper

Fusion Capital acquired a 40% equity stake in Xtra Publishing Limited, a free newspaper and digital content company in Kenya. 

Xtra will leverage free print and digital services in an attractive new media hybrid model. The company launched the region’s first free newspaper in March and is already the third-largest newspaper in Kenya. The newspaper will be supported by online and mobile services targeted at the young professional demographic. IPSOS/Synovate readership surveys confirm that the newspaper has secured the young, urban professional readership, providing near zero wastage for advertisers.

The investment by Fusion will be utilized in advancing IT and editorial systems, and for working capital requirements.

Kenya and East Africa is showing encouraging trends in digital news and entertainment dissemination. The statistics show impressive growth with Internet usage having doubled between January 2010 and 2011, from 3 million to 7.5 million users. Usage further increased by another 65% between October 2010 and October 2011, rising to 14.3 million users.

That figure corresponds to over 36%of the population having access to the Internet (WAN-IFRA 2012).

Helios Investment Partners and IFC in US$630-million equity fundraising round for Helios Towers Africa

Telecommunications towers company, Helios Investment Partners, and the International Finance Corporation (IFC) participated in Helios Towers Africa’s latest equity fundraising round, which raised US$630-million in new equity resources from existing and new shareholders.

Existing shareholders including Quantum Strategic Partners, Helios Investment Partners, Albright Capital Management, RIT Capital Partners and IFC, added to their current stakes and are now joined by new shareholders, Providence Equity Partners and IFC African, Latin American, and Caribbean Fund.

Helios also expects to complete negotiations shortly on new and extended debt facilities of over $350-million with a strong syndicate of international and local lending institutions.

Following this latest injection of capital, Helios will have raised over $1.8-billion in external financing since inception in late 2009 to fund acquisitions and organic growth.

The telecommunications towers industry in Africa has huge potential. There is need for 100,000 Points of Service (PoS) to merely satisfy demand for 2G coverage and associated capacity demand over the next five years. This PoS requirement is underpinned further by the growing demand for 3G and 4G data, which is driving the need for significant additional infrastructure capacity and in-fill across the continent.

Helios owns over 7,800 towers in Africa.

5 steps to planning a business trip to China

By Fredrik Grönkvist

So, you’ve found a couple of suppliers online and want to find out if they are everything they claim to be. That’s a good first step.

But, boarding the next flight to China, with a list of three random suppliers you found online, is most often a complete waste of both time and money.

In this article, I explain how you need to prepare yourself before your business trip to China, and what to should look for while you’re there.

#1: Is the supplier able to show compliance with product regulations in your country?

In most industries, less than 5% of the suppliers are able to show previous compliance with American, European and Australian product regulations and standards. Assuming you don’t verify their compliance prior to your visit, you’ll waste a lot of time visiting suppliers that are neither willing nor technically capable of complying with the relevant standards.

Besides, compliant suppliers tend to be above average in other aspects. Apart from the obvious legal requirements, I also consider compliance a strong indication of the supplier’s technical expertise.

#2: Schedule meetings with as many suppliers as possible

All manufacturers are not equal. Expect at least 50% of them to not be what you expect. It’s bad out there. I’ve been taken to factories that have not been operational for months. Factories that would barely pass for junkyards.

I can even recall one really weird situation a couple of years ago, in Xuzhou, when I was taken to the same factory twice in the same day. First in the morning, when a representative of a Trading Company took me there. The second time in the afternoon, when the actual owner of the factory picked me up.

It felt quite awkward to tell the boss that I had already visited their factory earlier that day. Not to mention that I wasted my entire afternoon. Not that there’s much else to do in Xuzhou…

The lesson here is that you’ll return home empty handed if you visit one or two random suppliers. It’s not enough. Schedule visits with at least five or six suppliers, and list a handful of backup suppliers – in case the first round fails to live up to expectations.

#3: Make yourself familiar with the geography

China is a big country, with hundreds of industrial clusters on the east coast. If you’re lucky, you can limit your visit to a single city. Certain industries are in fact concentrated to single cities, such as Shenzhen. However, in other industries, suppliers are scattered all over a province – or even the entire east coast.

First of all, you need to make a traveling plan. Getting to China is easy, and there are direct flights to major cities such as Shanghai, Hong Kong, Shenzhen, Guangzhou and Beijing. But most suppliers are not located in these cities (with the exception of Shenzhen). Instead, you are likely to find yourself spending time provisional cities like Taizhou, Foshan, Dongguan and Changzhou.

Getting there is not that much of a hassle though, thanks to China’s high speed train network. You can get to basically any city on the east coast by train. And that’s about as far as you need to get on your own. Any supplier worthwhile visiting will take you from there to their factory by car.

#4: Confirm the suppliers factory address

It’s common that suppliers, even those who are manufacturers, trade products supplied by subcontractors. It’s not always a bad thing though, but I prefer to be aware of such arrangements before I make my way to whatever village the supplier is located in.

All Chinese companies have a registered address. If the supplier is actually manufacturing the products, the factory should be located at the same address as specified on their Business License. There are exceptions, but this is the general rule.

If the supplier brings you to another address, they are probably taking you to a factory that’s not theirs. But then again, sub-contracting is not always a bad thing. What’s important is that you make your supplier understand that they are going to be held liable for defective products. This is a relatively small issue when dealing with qualified and organized manufacturers, that are in turn outsourcing certain products to sub-contractors. They have assets, and it’s not so easy for them to “disappear” in case things turn out bad.

But that doesn’t apply to smaller trading companies, that consist of little more than an a small office and a few employees. Apart from old laptops and dusty product samples, these companies have no assets. They can’t afford to compensate you if they would run into quality issues. It may also be in their interest to align with the manufacturer, rather than you, in case of a dispute. Stay away from these companies.

That being said, there are also reputable Trading Companies that act as exporting platforms for tens, sometimes hundreds, of manufacturers.

#5: Prepare product related questions

When communicating with a supplier on the internet, you rarely get further up their organization than the sales agents. However, you can expect a lot more attention when you show up in person at the suppliers factory. This means that you’ll get access to their managers and engineers - the people who are actually qualified to talk about their products and manufacturing capabilities.

Whenever I go out to visit suppliers and sit down with their engineers, I get to hear things the sales agents never told me. Probably because they are more concerned with making the sale, rather than telling me the truth. But also because sales agents are not engineers, they spend their days drinking tea and gossiping with their friends on WeChat -  apart from a few occasional conversations with potential customers. The engineers, on the other hand, are qualified to tell you what they can do, and what they can’t. I can recall plenty of times when the sales agents had promised things the supplier was simply not able to deliver on.

While you got the manager’s attention, it’s also a golden opportunity to make them understand that you’re not a gullible idiot. Make them aware of planned quality inspections and lab tests. It’s always good to put pressure on a supplier to comply with your quality requirements and product specifications.

Chinese companies are top heavy, and the only way to make things run smoothly on the production line is by applying pressure on the people in charge.

Inspecting the factory

The production line tells a lot more about a supplier than their brand of instant coffee or what car the owner is driving. Perhaps his new Audit was (involuntarily) financed by the last customer who didn’t bother to hire a quality inspector. The first thing to look at is how well they monitor product quality during the different stages of production. This is what you need to take a closer look at:

#1: Incoming materials

Manufacturers are not “Santa Claus workshops” that make every single material and component in house. They purchase components and materials from tens, sometimes hundreds, of domestic and foreign subcontractors. When quality issues occur, these subcontractors are often to blame (and many suppliers try to use that card).

What really matters to you is that the supplier checks the quality of the incoming materials and components. They shall also separate components and materials that are compliant with certain standards (such as REACH), from those that are non compliant. A supplier that’s not able to manage such separation is a major liability.

#2: Production lines

Manufacturing is not a science, there are always quality issues. What differentiates a good supplier from a bad supplier, is that the former monitors quality during the production process – and minimizes the number of defect units that slips through unnoticed.

A supplier that cares about maintaining a high quality standard has several checkpoints throughout the assembly line. They shall also be able to show how they define and manage defective units. A supplier claiming to have a zero defect rate during production is simply not monitoring their production well enough – if at all.

#3: Assembled products

Products coming off the assembly line shall also go through a final check. While a supplier is not necessarily testing every single unit, a final quality check shall include 2-5% of the batch. Finally, the supplier shall also maintain quality control records. If they claim to be ISO certified, they are even required to maintain records.

Is the supplier’s production lines busy?

It speaks for itself. A supplier with empty warehouses and dozing workers is obviously not doing that well. There’s a lot of overcapacity in China. Plenty of suppliers barely get enough orders to make ends meet. Doing business with such manufacturers is a liability. Even if they have the best intentions, suppliers operating on the edge of bankruptcy are not liquid enough to compensate buyers in case serious quality issues occur.

Before you leave, check out the factory warehouse

Not all manufacturers in China are geared towards Western markets. Many, of not most, are primarily made products for the domestic Chinese market, and developing markets in Asia, Africa and Latin America. That’s not saying that these suppliers are “bad”, but it may indicate that the supplier is not that knowledgeable about Western quality requirements and product certification requirements.

That’s why spending some time in the factory warehouse is a wise decision. This is where the suppliers stack hundreds of cartons, before being loaded into containers and shipped to buyers around the world. There’s only one thing that’s better than a warehouse full of goods about to be delivered, and that’s a warehouse full of goods addressed to buyers in your country.

These are strong indications that the supplier is not only kept busy with regular reorders, but also that they are well aware of product regulations and quality expectations in your market. And that is something you shall never take for granted when doing business in China.

This article was first published here

Fredrik works at ChinaImportal, an e-commerce platform that assists businesses looking to import products from China.

10 things to consider when planning your marketing strategy for Africa

By Tielman Nieuwoudt

When supply chain management in Africa is the topic of discussion, frequently used words include inefficiency, bottlenecks, bureaucracy, corruption, poor infrastructure and the occasional “chaos”. It is easy to fall into the trap of grouping all African countries into the same categories. The growth on the continent has sparked renewed interest in overcoming retail supply chain challenges. 

Below are 10 issues impacting retail supply chains in Africa:

Lead times - Importing products in Africa remains challenging and lead times could be anything from four to six months. The African continent has the most landlocked countries, further increasing lead times.

Outlet base - The numerous traditional trade outlets (e.g. spaza, dukas or souks) remain the biggest segment of the market and modern trade is still in the very early stages of development.

Fluid outlet base - The outlet base is fluid with new shops opening and closing. Seasonality also plays a part as some shops might stop selling ice cream and cold  beverages during the rainy season.  In addition, not all shops or selling points are permanent structures and some are roving hawkers.

Alternative channels - Beyond the traditional outlets, companies also need to understand alternative channels. For example, in Nigeria, “Table Tops” and the “Go-Slow” channels are important channels.  “Table Tops” are tables, set-up as temporary sales points to sell a limited number of stock keeping units (e.g. mobile phone carts). The “Go-Slow” channel or hawking channel, sells various types of merchandise that is normally easy to carry or transport (e.g. biscuits).

Markets -  Markets in Africa plays an important role. In some cases products flow from agents, who sell product directly to wholesalers based in  markets. For example in Lagos (e.g. Idumuta) and Addis Ababa (e.g. Mercato), markets remain a primary purchase channel for a number of product categories.

Moving away from trading - As African markets become more attractive, companies are moving away from trading (e.g. export agent and wholesale) and adopting a more organised Route-to-Market system, employing distributors to directly service the outlet base.

Route-to-Market considerations - Moving goods to a large fragmented outlet base is difficult and costly. Small groceries often have limited cash flow and  space to stock products. Finding the right model can take time and patience. Outlets are often  situated in high density and congested areas and companies are increasing looking at alternative distribution means, including micro distribution to reach these hard to reach areas.

Poor execution and stock out - What happens in the last 10 meters of retail supply chains is really important. In African markets, customers often experience stock outs because of poor planning and in-store execution. As small groceries have limited space and cash flow, they often require more frequent deliveries, in some cases daily.

Intermediaries - As small groceries have limited cash flow and space, they often require an intermediary, such as wholesaler, to break bulk. The wholesaler is often in close proximity to these outlets and provide a basket of goods, and in some cases credit.

Consumer satisfaction is availability - Retailers that sell undifferentiated products compete on the basis of product availability. Having the right product in the right place, at the right time (and frequency), with the right brand, at the right price, may be what really drives customer satisfaction.

The hottest selling oil and gas products in Africa

The oil and gas sectors will continue to thrive due to the rising demand for energy on the continent.

By John-Paul Iwuoha

The severe shortage of electricity in many parts of Africa is causing people who can afford it to spend more on petrol and diesel to generate their own electricity. Millions of individuals and companies in Africa now spend a lot of money every year on oil products like petrol (gasoline), diesel and kerosene to provide their own electricity, and the demand is expected to continue increasing. 

There are more than five major products that result from refining crude oil, but I will focus on the top four that are highest in demand and most popular with consumers in Africa. There are many other products that are applied for various uses such as road construction, aviation and marine fuels, and in chemical and manufacturing industries.

Petrol

Petrol (technically known in the oil business as Gasoline, Premium Motor Spirit or ‘PMS’) is one of the most popular and widely consumed oil products in Africa. It is estimated that Africans consume more than 100 million litres of petrol every day. The number of vehicles (especially private cars) is increasing across Africa. The volume of petrol Africans buy will continue to increase as more people buy cars or depend on petrol-powered buses and other means of transportation. The electricity problem is also likely to encourage the petrol business as most individually-owned power generators run on petrol.

Diesel

Diesel is technically referred to in the oil business as ‘AGO’, an abbreviation of ‘Automotive Gas Oil’. It is commonly used by heavy-duty engines which power many of the large trucks, tankers and trailers that transport heavy goods (and people). Diesel may not be as popular as petrol (or gasoline) but it remains a very important fuel to the economy. It helps to move most of the heavy goods (like agricultural produce, building materials, imported goods and raw materials) that drive trade and commerce. There is growing potential for trucking and haulage businesses across Africa. As the demand for trucking and haulage increases, so will the volume of diesel that will be consumed. Diesel is also commonly used as fuel for bigger power generators that produce electricity for factories and medium-large companies. As more of these factories and companies demand more electricity and (if) the electricity supply situation worsens, the demand for diesel is also likely to increase.

Kerosene

Technically known as ‘Household Kerosene (HHK)’, Dual Purpose Kerosene (DPK) or Paraffin, kerosene is one of the most widely consumed fuels in Africa. It is commonly used in homes and households to provide heating, lighting (in kerosene lamps) and for cooking food. Especially in low and middle income households, kerosene remains the cleaner, more effective and often cheaper alternative to charcoal and firewood. Kerosene is very likely to remain a hot-selling fuel as environmental awareness discourages more people from destroying our forests to produce wood for firewood or charcoal.

Cooking Gas

Cooking gas, also known as ‘Liquefied Petroleum Gas’ or LPG is expected to become the preferred fuel for household cooking and heating in Africa’s future. Although cooking gas is not yet as popular as Kerosene in many parts of the continent, it is considered a cleaner, more efficient and cheaper option than kerosene. Unlike Kerosene, charcoal and firewood which produce soot and other harmful particles when they burn, cooking gas burns more efficiently and is much safer for the health of humans and the environment. 

As more Africans join the economic middle class and migrate to the cities, the demand for cleaner and cheaper fuels like cooking gas will surely increase. Climate change concerns and a growing consciousness to preserve our natural environment will lead to higher adoption of cooking gas as the preferred fuel for households.

Tips for succeess in the oil and gas business 

You may need a lot of start-up capital

Most entrepreneurs often do not consider the oil and gas business because they think it’s exclusive to the ‘big boys’ who have a lot of capital at their disposal. While this is not entirely false, it is not impossible for individual entrepreneurs and small businesses to play in the oil and gas business. You don’t have the money? Start small. Look for like-minded partners to invest or you could consider other proven ways to raise capital for your business. You could start a low-capital kerosene retail business in your neighbourhood or invest in a cooking gas refilling station. If you can find the capital, you could become a supplier of diesel or petrol to businesses in your area who will need it to power their generators.

Watch out for the risks

While there is money to be made in the oil business, you shouldn’t forget that the products you will be dealing with are very high inflammable. So, safety should always be a priority for you. Applying safety procedures at all times and using the right safety gear (like fire extinguishers etc.) are very important. Theft and loss (through spillage) are also common ways to lose your products. Taking out an insurance cover is always a good strategy to protect you in this regard.

Get the necessary licenses and permits

The oil and gas sector is usually well-regulated. In most countries, a permit or license may be required for anyone who wants to start an oil and gas related business. You will need to contact the relevant government office in your country to find out the required registration, licenses or permits for businesses that operate in the oil business. If you don’t comply with the rules, your products may be seized, you could pay a fine or serve jail time for running an unauthorized business. In countries that offer subsidies to operators in the business, it may be difficult (if not impossible) to claim these subsidies if you’re not registered with the relevant government agency, trade or workers’ associations.

It works best if you can find a niche for yourself

There already exists a huge demand for oil and gas products on the continent. However, there is a lot of competition because it’s relatively esasy to start if you have the capital. To avoid the crowded marketplace and unhealthy competition, this business will work better if you can find dedicated customers or an undersupplied area of town and dominate it. For these two customer segments (dedicated customers and areas suffering from scarcity of oil products), there is a good potential to make more profit. Rich homeowners, businesses, factories, schools, office buildings and shopping malls are just some examples of customers who can become dedicated to a supplier who can meet their needs for petrol and diesel. You just need to think of creative ways to separate yourself from the crowded competition.

Browse insights, credible business opportunities and investment opportunities in the oil and gas sectors here 

John-Paul is chief editor at www.smallstarter.com, Frontier's content partner.