Placing a large purchase order & paying upfront

[F1ash]

I'm working on a startup business and am in the process of placing my first proper purchase order for packaging which is worth over £15k. The packaging will be coming from the far east and will have a lead time of 12 weeks.

Because I have no trading history the supplier wants me to pay upfront, which is understandable. I'm just concerned I have no security if the shipment is delayed or not fully fulfilled.

Does anyone have any experience with these kinds of purchase orders that can give me some advice? I was wondering about setting up a letter of credit or maybe using some sort of escrow system?

Thanks for any advice.

 

[Moneyman]

Packaging is one of those things that the chinese suppliers often cheat on. i know that is a horrible generalisation but believe me it happens a lot.
They have a reputation for cutting the specifications and sending third rate stuff.
With packaging they just dont seem to see the importance of it as part of the image of your company and only the quality you specify will do. Be very careful. get an agent such as product sourcing services ltd to make sure that everything is perfect before it goes in the crate.

 

[GraemeL]

purchase order for packaging which is worth over £15k. The packaging will be coming from the far east and will have a lead time of 12 weeks.

Because I have no trading history the supplier wants me to pay upfront, which is understandable.

Hello,

Both parties want to minimise risk, fair enough. Importing is about taking a risk to get more reward. All you have to decide is what degree of risk do you want to take? The less risk, the less reward - because you will be paying 'insurance' for want of a better word to reduce the risk.

Have you met the supplier? Been to the factory? Know anyone else personally who buys from them? If your answer to all of these is no, then you are taking maximum risk. Same for the factory - they dont know who you are.

I would not recommend you to do any trade on that basis, never mind pay up front. The only reason to pay up front is if you 100% trust the supplier.

In my opinion, you must reduce risk. You should use an agent in China to negotiate for you; visit the factory if you can; pay no more than 30% up front; have an independent QC check before the container is loaded; pay balance against B/L. The profit on your first order does not matter so much, much more important to learn and not lose at least £15k, as you most easily can.

G

 

[wolfitman]

Paying 100% up front would simply be crazy and is not required if the supplier is genuine and you are also.

30% for bespoke products would be 'normal' and 70% on copy of BOL.

As others have said. Visit personally or use an agent. Never trust so much money with somebody you do not know in reality.

pm me if you want the Company checking out and I'll get one of my Chinese people to do some digging for you if it helps.

I'm leaving tomorrow to go back as I have a container loading next week and will be there at the factory personally...

Nick from Audio Sourcing Limited.

 

[MOIC]

The fact that your supplier has asked for 100% payment upfront should send alarm bells ringing.

My advice is to do it through an agent that can do the following for you:

1 - Check and verify the supplier.

2 - Check that the ordered items are correct and to your standard.

3 - Arrange the samples before any payment is made, including deposit.

4 - Verifying the company bank account to where the deposit payment is being sent to.

5 - Check the order before final payment is made.

Has a contract of terms been agreed ?

Don't be in such a hurry that this causes you to be negligent (not saying you are, but please do the above for peace of mind)

If you need any further advice, please PM me.

Good luck with your purchases

 

[F1ash]

Thanks for all the advice. I should add that the order is through a reputable UK packaging supplier who already supply many of my would be competitors.

 

[GraemeL]

First you say:-

The packaging will be coming from the far east and will have a lead time of 12 weeks.
.

Now you say "I should add that the order is through a reputable UK packaging supplier"

Appears that all the advice given on importing was unnecessary?

G

 

[F1ash]

First you say:-



Now you say "I should add that the order is through a reputable UK packaging supplier"

Appears that all the advice given on importing was unnecessary?

G

Well, no, it's still useful advice! I'm more concerned about the best way to pay for it so I have some security.

 

[MOIC]

You will find that your UK supplier needs the 100% payment in advance as, presumably, your packaging has your own brand and will be worthless to them if you do not pay them.

Slightly different from doing your own importation.

Why don't you deal directly with a factory in China? A £15,000 order can save you at least 20%.

Worth considering . . . .

 

[James Wang]

What is the name of the packaging supplier? There are several huge packaging suppliers with production site in china. Those big name can be trusted for sure. ... But since you are buying from them for the first time... It is better to negotiate for better payment term.. like 70 upfront, 30% upon at the destination. so you can check quality by yourself before pay the rest.

 

[MOIC]

What is the name of the packaging supplier? There are several huge packaging suppliers with production site in china. Those big name can be trusted for sure. ... But since you are buying from them for the first time... It is better to negotiate for better payment term.. like 70 upfront, 30% upon at the destination. so you can check quality by yourself before pay the rest.

Don't trust any suppliers at face value.

Be safe.

Be sure.

Make sure your money is protected and the goods are checked before final payment is made.

It's the only way!

 

[Acejason]

HI F1ash.
This is my first post here, wish help you someway.
Trust or not turst? this is a question.
1. You maybe visit China to make the inspection by yourself after you paid the deposit 30% but before put into container.----------This is the most efficient way to make you fell relax.
2. Find your partner in China to do that, must be trustworth.
3. Trust the factory meanwhile to ask the factory sales to provide you more details of production.
4. If using 3rd part payment, there would be a lot of extra-cost. If your company can make L/C, maybe you can using L/C at sight for the balance also.
As a factory myself, I also do the packaging products, I do not agree the man who looked upon the packaging indutrial, all over the world have cheaters, all over the world have jails.
My understanding is that. usually the factory is willing to make long term cooperation, you choice is very important for them.

 

[Acejason]

Hello,

Both parties want to minimise risk, fair enough. Importing is about taking a risk to get more reward. All you have to decide is what degree of risk do you want to take? The less risk, the less reward - because you will be paying 'insurance' for want of a better word to reduce the risk.

Have you met the supplier? Been to the factory? Know anyone else personally who buys from them? If your answer to all of these is no, then you are taking maximum risk. Same for the factory - they dont know who you are.

I would not recommend you to do any trade on that basis, never mind pay up front. The only reason to pay up front is if you 100% trust the supplier.

In my opinion, you must reduce risk. You should use an agent in China to negotiate for you; visit the factory if you can; pay no more than 30% up front; have an independent QC check before the container is loaded; pay balance against B/L. The profit on your first order does not matter so much, much more important to learn and not lose at least £15k, as you most easily can.

G

Excellent!!

 

[Wowgiftchina]

I suggest to check the pre-production sample.

 

[banfa]

agreed with previous posters

payment terms should be in your favour and you should have all the details to hand before you hand over any money.

and because packaging often comes in such large quantities its hard to do QC effectively.

also you want to know more about the packaging of the packaging, is it going to be wrapped in polybags? how heavy will it be when it comes to unloading, is it manageable at your end, will inks run if its not sealed properly. Its hard to control these factors without someone looking over it so to speak.

avoid buying CIF from factories without inspection as standard.

My 2 pennies worth anyway

Richard

 

[jenifer S]

Normally if we need to place a big order to my supplier , i surely use our reliable partner in China to help us to check everything for us. Coz we can't take this risk ,after the goods are well quality controled ,and loading into the container is ok. So normally is using by 70% against BL.