Inventory Sourcing from Overseas: Risks and Challenges

Sourcing goods from across seas is a lucrative idea, especially when you have a budding business which is already growing faster than expected. However, there are a number of things that come into play when dealing with overseas transactions; import and export laws, legal implications, quality, feasibility are just a few of them.

Here are some important things cannot be overlooked if the global outsourcing is on the agenda:

Legal Implication: Sometimes, one product covered under a patent in a certain country can be illegal to monetize in another, and vice versa. Manufacturers can often overlook these nuances and ship the product anyway, potentially causing the company legal issues. The solution is to research the product well, taking care to ensure it does not bear too many similarities with the products of other companies. On the contrary, if it’s a novel idea, it is advisable to get a patent for the said product. This can be done by hiring a lawyer from the outset; this helps enhance the viability of the product giving it a legally authorized status in the market, while also protecting you from possible legal implications, especially from businesses overseas.

Quality Check: As a business owner, cheap cost of production is your top priority. However, the growth of your business depends on customer satisfaction and quality of delivery. Dealing with bulk manufacturers does save you money, at least in the initial years, but can sometimes lead to low-quality products. It’s essential that you choose the sourcing unit carefully. You can even work with sourcing partners to ensure your product’s quality remains top-notch. Another great way to ensure quality is to have a representative in the country to personally inspect the factories – this helps in authenticating the reputation of the manufacturer.

Cost: Unit economics is an essential part of a successful business. This is why businessmen often calculate a single unit cost and formulate judgments based on it. Despite this straightforward math, the total cost incurred might turn out to be a losing deal. Transportation, customs and duties, brokerage services in the country of production, brokerage services at the business owner's end, insurance, banking, and a variety of other factors should be considered to determine whether outsourcing is worth it. Additional costs can include fumigation, examination, and coordination costs. Consider all of these factors while mapping your financial projections. If you’ll be saving money after all things considered, then you can be sure you’re making a smart decision.

Cultural Differences: A number of challenges like language barriers and cultural holidays may turn out to be a headache for you. For example, if you don’t have a French speaker in your group, it could pose as a hindrance while trading in France. Similarly, if trading during the Chinese New Year in China, be prepared to put your deal on halt for at least a month as the country shuts down during that period. Apart from this, a time difference of over 12 hours may cross your path – an issue that may cause communication barriers and misunderstandings. To solve this problem, we suggest you have a written contract that lays down the definition of essential terms. Those can include quality products, sample terms, prices, logistics, payment gateways, penalties, dispute resolution mechanisms, arbitration clauses, and more.

Transportation: Effective transportation of goods is a key factor while noting down the challenges of overseas trade. International transportation is usually taken care of by the manufacturer, but once in the country, then it will be your responsibility. That may prove to be a challenge at times, especially if you’re in the field of e-commerce. It is important to nail down the procedure of product distribution beforehand. Additionally, it is a possibility that transportation costs may exceed your actual net profits. To avoid losses on this front, the road ahead needs to be mapped out well in advance.

These are just a few basic conditions to be kept in mind while engaging in trade, but the best way to mitigate risk is to partner with a trading company. Michaels Global Trading may be the answer to all your trading woes. Having executed numerous liquidation and recovery processes all over North America, MGT is one of the forerunners in global trading services. Transparency and round-the-clock support is something we ensure for all of our customers. Our vision is to provide quick, safe and valuable sales all over the world.

For more information about outsourcing from overseas, give Michaels Global Trading a call at 888-471-5066 or contact us here.

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