A Simple Guide to
Understand More About Sourcing

What does MOQ stand for?

MOQ stands for Minimum Order Quantity and it refers to the minimum amount of a product that a manufacturer requires to be ordered for starting the mass production. This is a common requirement in the manufacturing world as it ensures that the manufacturer has a certain level of commitment from the buyer and minimizes the costs associated with producing small quantities of a product.
For example, if a manufacturer has an MOQ of 100 units for a specific product, the buyer must order at least 100 units of that product in order to place an order with the manufacturer. The MOQ may vary based on the product and the manufacturer, and some manufacturers may have flexible MOQs that can be adjusted based on the needs of the buyer.
The manufacturer may agree to start production for an order below the minimum order quantity (MOQ), but the buyer may have to pay a premium for this service.
The MOQ for bags and the likes is often set at 500 pieces. This means that the manufacturer requires an order of at least 500 pieces of a specific type of bag before they begin the production.

What does SKU stand for?

SKU stands for Stock Keeping Unit and it is a unique identifier for each product and variation of a product in a company's inventory. It is used to track inventory levels, sales and order management. An SKU is typically a combination of letters and numbers that represent specific characteristics of a product such as size, color, model, and brand. This information helps the company keeping track of their inventory and manage their supply chain more effectively.
For example, an SKU for a red t-shirt in size `medium` could be "RT-M". This specific SKU can then be used to track how many of these red t-shirts in medium size have been sold, when they need to be restocked, and how much they cost. Having a clear and organized SKU system can improve a company's efficiency and accuracy in managing their inventory.

What is sourcing in fashion?

Sourcing is the process in the fashion and retail industry, involving the identification and selection of the necessary materials, fabrics, final products (ODM), and other components required to produce clothing and accessories. The process often involves working with suppliers to obtain the minimum order quantities (MOQ), right materials at the right price and within the required timeframe.  

What is the difference between sourcing and procurement?

Sourcing and procurement are two related but distinct functions within the supply chain management process.
Sourcing is the process of finding and selecting suppliers for the goods a company needs to operate. This process involves identifying potential suppliers, evaluating their capabilities, and negotiating terms and conditions. Sourcing also involves finding the right balance between price, quality, and delivery time to ensure that the company gets the best value for its money.
Procurement, on the other hand, is the process of acquiring goods and services from suppliers. This process involves negotiating contracts, managing the purchasing process, and ensuring that the goods or services are delivered on time and meet the required quality standards. Procurement also involves managing the relationship with suppliers, monitoring supplier performance, and ensuring that the company complies with all legal and regulatory requirements.

What is OEM?

OEM stands for Original Equipment Manufacturer and refers to a manufacturing company that produces goods in white label, which are then marketed and sold by another company under its own brand name. This is a common practice in the fashion industry, as many fashion brands lack the resources or expertise to produce some of their SKUs in-house.
This allows fashion brands to focus on their core competencies and to dedicate more resources to their core businesses.

What is OBM?

OBM stands for Own Brand Manufacturer in the fashion industry. This refers to a business model where a company designs, produces, and sells its own products under its own brand name. In this model, the company assumes full control over the entire production process, from product design and development, to sourcing raw materials, to manufacturing and marketing.

What is ODM?

ODM stands for Original Design Manufacturer. This refers to a business model where a company designs and develops products for another company, who then markets and sells the final product under their own brand name. In the ODM model, the design and development process is typically managed by the ODM, who uses their expertise in product design, development, and manufacturing to create a product that meets the specific requirements of the other company. The ODM is responsible for all aspects of product development, from design and prototyping, to sourcing materials and producing the final product.

What additional costs should I consider when importing goods from China, apart from the production cost?

When importing goods from China, other than the production cost and any applicable taxes or fees in China, you should consider the following ones:
Shipping costs: The cost of transporting the goods from China to your country, including freight, and any additional handling fees.
Import duties: Taxes imposed by your country's government on imported goods, usually based on the value and type of goods.
Sales tax: A tax on the value added to goods or services, charged by most countries on imported goods. I.e. European Union Countries and United Kingdom: the value-added tax (VAT), Canada: The Harmonized sales tax (HST), Australia: The goods and services tax (GST), India: The goods and services tax (GST), USA: Sales tax.
Tariffs: Taxes imposed by your country's government on imported goods, based on the type of product and its origin.
Customs clearance fee: The fee charged by the customs authority in your country for clearing the goods through customs.
Insurance: The cost of insuring the goods during transit from China to your country.

How to find wholesale suppliers in China?

This is a list of the main online B2C and B2B online Chinese platforms, where you can source or buy products:

Alibaba Group:
a. Alibaba.com: One of the largest B2B online marketplaces in the world, offering a wide variety of products from Chinese suppliers.
b. AliExpress: An online retail service that offers products from Chinese suppliers to individual consumers.
c. 1688.com: A B2B platform connecting buyers with Chinese suppliers, offering a wide variety of products across multiple industries.

JD.com: A leading Chinese e-commerce platform offering a wide range of products, including clothing, home goods, and groceries.

Tmall: One of China's largest B2C online marketplaces, offering products from both domestic and international brands.

Be aware that these platforms may require a Chinese bank account.

What is a backlog in sourcing?

In the context of sourcing from Chinese suppliers, a backlog can occur when there is a delay in the manufacturing or delivery of goods. This delay can be caused by various factors, including raw material shortages, production line issues, or shipping delays.

What is wholesale buying from a Chinese factory

Wholesale buying from a factory involves purchasing goods directly from a factory at a bulk or wholesale price. This type of purchasing is often used by businesses who want to buy goods in large quantities for resale or personal use. By purchasing directly from a Chinese factory, buyers can often obtain lower prices than they would by purchasing through a middleman or distributor. This is because they are able to bypass the additional costs and markups that may be added by intermediaries in the supply chain.
However wholesale buying from a Chinese factory without the help of a sourcing agency can be risky. Some of the downsides include a lack of knowledge and experience in the Chinese market, quality control issues, payment risks, logistics and shipping issues, and intellectual property infringement.

What is the bill of materials (BOM)?

The Bill of Materials (BOM) is a comprehensive list of all the raw materials, components, sub-assemblies, and parts that are required to manufacture a product. It is a key document in manufacturing and supply chain management that provides a detailed breakdown of all the items needed to produce a finished product.The BOM typically includes information such as the part number, description, quantity, and unit of measure for each item. It may also include additional information such as the supplier, lead time, cost, and any special instructions or notes.

What is the Certificate of Origin (COO)?

A Certificate of Origin (COO) is a document used in international trade to verify the country in which a product was manufactured, produced, or assembled. The COO contains information such as the name and address of the exporter, the name and address of the importer, a description of the product, and the country of origin. The COO is an important document in international trade because it can affect the application of tariffs, duties, and other trade restrictions. Some countries require a COO to be presented before goods can be imported, while others may accept a COO to facilitate trade between countries that have established free trade agreements.

What is dropshipping in Amazon?

In the context of Amazon, dropshipping refers to a retail fulfillment method where a seller lists a product for sale on Amazon without actually holding any physical inventory of the product. Instead, when a customer places an order, the seller purchases the product from a third-party supplier who then ships it directly to the customer. With dropshipping on Amazon, the seller never handles or owns the product, but instead acts as an intermediary between the customer and the supplier. This can be a convenient and cost-effective way for sellers to start a business without the need for significant upfront capital or inventory storage space.

What is DDP and why it is so popular among Amazon Sellers?

DDP stands for Delivered Duty Paid. It means that the seller takes full responsibility for delivering the goods to the buyer's location, including handling customs clearance and paying import duties and taxes. The buyer only needs to accept the delivery.

What are the common shipping and logistics options available for importing products to Amazon fulfillment centers?

Common shipping and logistics options include sea freight, air freight, express couriers, and utilizing Amazon's partnered carriers. The choice depends on factors such as cost, speed, product volume, and urgency. It's recommended to compare quotes from multiple freight forwarders and select the option that best fits your needs.

Are there any specific product compliance or regulatory requirements I need to be aware of when sourcing for Amazon?

Yes, it's crucial to be aware of product compliance and regulatory requirements for the specific products you plan to sell on Amazon. These requirements can include safety certifications, labeling regulations, restricted substances, and country-specific regulations. Conduct thorough research or consult with experts to ensure your sourced products comply with all applicable standards.

How do I calculate the total landed cost of my sourced products, including shipping, duties, and fees?

To calculate the total landed cost, you need to consider the product cost, shipping fees, customs duties, taxes, import handling fees, storage fees, and any additional charges incurred during the importation process. Working with a freight forwarder or customs broker can help provide accurate estimates and breakdowns of these costs.

What are the key considerations for sourcing products from overseas suppliers?

When sourcing products from overseas suppliers, key considerations include language barriers, cultural differences, shipping and logistics, import regulations, quality control, and intellectual property protection. It's important to establish clear communication channels, conduct due diligence on suppliers, and ensure compliance with local laws and regulations.

What factors should I consider when selecting a supplier for my Amazon products?

When selecting a supplier, consider factors such as product quality, pricing, production capacity, lead times, communication capabilities, minimum order quantities (MOQs), and their experience working with Amazon sellers. It's crucial to choose a supplier that aligns with your business goals and can consistently meet your requirements.