Supply Chain Mgmt Bus Process - HSRC-5013-RNA

CTQ8: International Trade: https://bespokesourcing.com/10-advantages-of-sourcing-from-

china/#:~:text=If%20done%20successfully%2C%20importing%20products,uninterrupted
%20supply%20throughout%20the%20year

https://www.icontainers.com/us/2016/03/09/tips-for-importing-from-china/

Discussion Topic

You are a ToolCo – a Canadian retailer of specialty tools popular with both homeowners and
contractors.

Due to a very high quality of your tools your business has grown from just a few specialty stores
to a large network of stores coast to coast. Currently, all your tools are manufactured in Canada,
however, as your volume continues to increase your current supplier advised they don’t have
capacity to support your growth. You have found a reputable manufacturer in China, and you are
considering signing a contract with this vendor.

Your CEO asked you to submit a brief report outlining benefits and concerns of using the
Chinese vendor. Specifically, you have to address issues related to new import activities ToolCo
would have to take on, and make practical recommendations for ToolCo senior management..

Here is the brief report outlining benefits and concerns of using the Chinese vendor.

Canada is second largest trading partner with China, passing Britain and Japan. 6% of total
world trade (import and export) for Canada is accounted by China now. Imports from China have
grown by almost 400% between 1998 and 2007.

Tool Co. company can definitely benefit by trading with Chinese vendors if they are taking
appropriate measures and opting for appropriate resources.

Benefits:

Within the international businesses, manufacturing from China is now considered as a practice,
recognised as a vital Asset to benefit from reduced costs. This has turned a Chinese
manufacturing as a staple for several brands to utilize the opportunity. Such as:

 Low Labour cost

 Growing Chinese Economy
 Low-cost Country sourcing advantages: Speed
 Expansive Supplier Base
 Reducing the Risks: Fraud risks, undue charges, untimely deliveries as you are directly
involved with every step within sourcing.
  Cost- value
 Better scaling Capabilities: You can increase your sourcing products from a few thousand
to more than a million in just a few days or week.
 Freedom to choose Desirable Factory
 Sourcing from China: Sustainability
 Direct Sourcing
 Reactivity: Alone speed is not sufficient, if we are receiving wrong goods at faster pace.
For the profitability, reacting promptly to customers preferences. E.g., production and
purchasing based on demand minimize inventory issues and maximizes return on
investment.

Concerns/Issues:
 Meeting the specific rules and regulations for specific products.
 Choosing a reputable supplier
 Signing a firm sales contract when importing from China
 Closing our international sales contract with transport conditions and Incoterms
should already be concluded: Incoterms are international; commercial terms that govern
responsibilities related to international transport established between purchaser and
supplier. Different types of Incoterms are available, purchasing under one or other can
change the total cost substantiality. It’s highly recommended that we resolve this
before we place final signature on the sales contract.
Most Suppliers would prefer EXW incoterm because it puts the most obligations on
buyer and in most cases when supplier doesn’t possess export license. In these cases, best
option would be opting for FOB (Free on Board), in this we as a buyer, are responsible
for designating and booking freight, but supplier must have the goods ready and loaded
on the ship at the port of origin.
FOB is more preferable because the supplier who accepts and suggest working
under FOB incoterm are mostly of much higher quality than those under EXW.
The FOB Incoterm can be taken as proof that the Chinese supplier who works with
it knows what he or she is doing, has experience in exporting, and is reputable.
 Choosing the means of best international transport.
 Keeping in mind the both transit times for both shippers and customs
 Keeping GRI (General Rate Increase) in mind: The GRI represents increments in freight
rates that shippers apply at the beginning of each month, and that afterward are reduced
weekly until they rise again at the beginning of the following month. So, planning ahead
would get us the dates and GRI of choice.

REFERENCE:
Government of Canada. (2021 Feb, 17). The Canada-China Global Commerce Picture and
Supply Chain Links. Retrieved 2023 March, 15th. From
https://www.international.gc.ca/trade-commerce/economist-economiste/analysis-analyse/china-
canada-2020-commerce-chine.aspx?lang=eng