While buying locally is easier and preferable for most applications, industries play by a different rule-book. For instance, some specialized plant and machinery parts may not be available locally, or it may be cheaper to produce and import. The success of your transaction – getting the right, high-quality products at the right time – depends on a number of factors including supplier selection, term negotiation, quality control and effective communication. These are discussed in detail in the following paragraphs:
1. Choosing your supplier
Naturally, you will begin your search with online directories or contacts from trade shows. However, remember these suppliers pay for stands and listings, and hence their backgrounds are not screened rigorously. Run a background check on your potential supplier: where is their factory if they claim to manufacture the parts? Can you get a capacity audit done? Do they have verifiable references, preferably in your country? Do their products fulfil similar regulatory requirements as your own country's?
Avoid larger suppliers if you have small order quantities – they will likely give a very high price and not care about your shipment. Choose smaller factories where there's close quality monitoring and better customer service. For large orders, larger manufacturers can deliver much faster and cheaper. Ensure that the contract you draw prohibits subcontracting, as some suppliers display nice plants, only to subcontract the actual work to a different workshop.
2. Defining the product and quality control
Industrial machinery products are very specific; giving vague descriptions can leave you with a product that you can't use. When stating your requirements, define exact specifications on dimensions, quality, material and safety standards – don't use ambiguous statements like "same quality as products you supply to other Australians". In addition to specifications, include tolerance ranges and ensure your contract defines specific penalties in the event of non-compliance.
You can have a third-party inspection firm verify quality on your behalf if you can't travel to the factory yourself. The quality control procedure depends on the product – final random sampling is sufficient for some, but in-production control may be necessary for others. Especially for large orders, you can order and pay for a pre-production sample and then pay for the rest once you receive and assess the sample. Check the material quality, mode of transportation and packaging, duration of transportation as well as safety standards.
3. Negotiate payment terms and penalties
Bank transfers (T/T) are commonly used for importation/exportation payments. Find out what percentage of deposit should be paid, and when the balance should be paid. Remember that custom requests (such as parts/products the manufacturer can but doesn't usually make) may have separate charges. Never pay for the product in full before receiving it, as you won't have any leverage to exert should the product fail to meet your specifications.
Talk to your bank about getting an irrevocable letter of credit (L/C) as your payment method if dealing with a new supplier or making large orders. It's more expensive than typical bank transfer, but it reduces payment risk for both you and your supplier. You'll send a draft to the supplier then file with your bank upon approval. Whatever terms and penalties are negotiated must be clearly stated in your contract.
