Client Overview
Our client is a prominent South American manufacturer specializing in premium alcoholic and non-alcoholic beverages. With a diverse product line that includes Tequila, Rum, Vodka, and Whiskey, they maintain a robust presence both domestically and internationally, particularly in Latin America.
The Challenge
The client was looking for a reliable and cost-effective way to source glass bottles for one of its beverages from China. The client had been buying from a domestic supplier but was paying higher prices and was unsatisfied with their current due to higher costs and quality concerns. The client wanted to find a better supplier that could offer more competitive pricing and better quality.
Project Scope
This project focused on sourcing high quality glass bottles specifically for the client’s popular tequila product. It demanded meticulous attention to detail, stringent quality standards, and effective communication throughout the sourcing process.
The IMEX Edge: Our Team and Approach
The client contacted IMEX Sourcing Services, a B2B supply chain management company specializing in importing from China. IMEX offered the client its comprehensive 360 Degree Sourcing Service, a fully outsourced supply chain management service that covers everything from supplier research and due diligence to quality control and delivery.
Being in business for well over a decade, providing supply chain management services for clients across various industries and niches, IMEX was well-positioned to manage this project.
The dedicated team, led by a sourcing manager and supported by a sourcing specialist and merchandiser, collaborated closely under the supervision of a quality control manager. Their collective efforts focused on crafting a meticulous sourcing strategy and implementing rigorous processes from initial research through supplier selection and sample approval.
The team’s approach was methodical and detail-oriented, starting with industry and product research. They identified key factors that affected the pricing, like raw-material options and common quality issues in the industry. This research played a pivotal role in supplier shortlisting, conducted in multiple stages. Post vendor approval, the team developed and approved samples in consultation with the client and developed a QC Plan, before finalizing the order.
How IMEX Added Value
IMEX Sourcing Services significantly enhanced the sourcing process for the client, ensuring exceptional results through strategic and detailed actions. Here’s how:
1. In-Depth Supplier Research: IMEX conducted comprehensive research to identify top-tier suppliers and address potential quality control issues, ensuring a seamless sourcing process from the start.
2. Strategic Supplier Shortlisting: Utilizing a rigorous methodology, IMEX shortlisted suppliers who offered the best value, combining cost-effectiveness with superior quality standards.
3. Detailed Quality Control: IMEX’s meticulous approach to quality control reduced the risk of defects. This included implementing an extensive QC plan and performing multiple inspections to guarantee product excellence.
4. Skilled Supplier Negotiation: In the post-production phase, IMEX showcased its negotiation expertise. They successfully negotiated with suppliers, ensuring the client’s interests were safeguarded and securing advantageous terms for future orders.
Through these strategic efforts, IMEX not only met but exceeded the client’s expectations, providing high-quality glass bottles at competitive prices and fortifying the client’s supply chain.
Sourcing Phase
Industry Research
In this phase, the sourcing team conducted comprehensive research on the glass bottle industry in China. The main objectives of this research were to:
- Understand Manufacturing Processes: Detailed exploration of glass bottle production techniques, including melting, forming, annealing, and finishing, highlighting factors like raw materials, equipment, technology, and skills that impact quality and efficiency.
- Identify Industry Trends: Recognize the latest trends and innovations within the glass bottle industry.
- Analyze Industry Characteristics: Understand the primary characteristics and challenges of the glass bottle sector.
- Locate Supplier Clusters: Identify key regions and clusters of glass bottle suppliers in China.
The sourcing team used various sources of information, such as online databases, industry reports, their factory network, and industry contacts to gather relevant and reliable data.
The main findings of the industry research were:
- Competitive Landscape: The glass bottle industry in China is highly competitive and fragmented, with thousands of suppliers varying in size and scale.
- Manufacturing Processes: Key processes include melting, forming, annealing, and finishing. Quality and efficiency depend on raw materials, equipment, technology, and skills.
- Raw Materials: Primary raw materials are silica sand, soda ash, limestone, and cullet (recycled glass). Quality and price vary based on sources and availability.
- Glass Types: The main glass types are high-quality white glass and crystal white glass. High-white glass is cheaper but has more impurities and lower transparency. Crystal white glass is more expensive but has fewer impurities and higher transparency.
- Industry Challenges: Environmental regulations, energy consumption, quality control, and innovation are major challenges. Stricter environmental standards aim to reduce pollution and emissions. Energy consumption is a significant cost factor due to the high temperatures required for production. Quality control impacts product safety and performance. Innovation is essential for improving efficiency, reducing costs, and meeting customer demands.
- Supplier Regions: Main regions and clusters include Shandong, Jiangsu, Hebei, Henan, and Guangdong, known for abundant resources, advanced equipment, skilled workers, and convenient transportation.
Product Research
In this phase, the sourcing team conducted detailed research on the specific product that the client wanted to source: glass bottles for tequila. The main objectives of this research were to:
- Understand Product Specifications: Gather the client’s product specifications, requirements, and expectations.
- Analyze Pricing Factors: Identify key factors influencing the pricing of glass bottles.
- Identify Quality Issues: Discover potential quality issues and risks associated with glass bottles.
- Industry Standards: Identify relevant industry standards and certifications for glass bottles.
The sourcing team used various sources of information, such as the client’s website, product samples, online platforms, and industry publications, to gather relevant and reliable data. The sourcing team also consulted with the quality control manager to ensure that the product research was aligned with the quality standards and protocols.
The main findings of the product research were:
- Pricing Factors: Key factors include raw material options, bottle weight, design, mold cost, order quantity, packaging cost, and transportation cost. Raw materials impact glass quality and transparency. Bottle weight affects material and energy consumption. Design influences mold cost and production complexity. Mold cost impacts initial investment. Order quantity affects economies of scale and bargaining power. Packaging cost affects product protection and presentation. Transportation cost impacts delivery time and risk.
- Quality Issues: Potential issues include non-conforming finishes, uneven bottoms, bubbles or defects, inconsistent sizes, scratched surfaces, and breakage during transportation. These issues can affect sealing, stability, appearance, usability, and safety.
Supplier Research Methodology & Shortlisting
In this phase, the sourcing team conducted a systematic and rigorous research and shortlisting process to find the best suppliers for the client’s product. The main objectives of this process were to:
- Send RFQs to multiple suppliers, including the ones identified during the industry research and product research phases and, additional suppliers.
- Conduct initial and detailed background checks on suppliers to verify their legitimacy, reputation, and capabilities.
- Shortlist quotes from selected suppliers based on criteria such as price, quality, lead time, and communication.
- Present the final shortlist of quotes to the client for approval.
The sourcing team used various tools and methods to conduct the supplier research and shortlisting process, such as online platforms, industry contacts, and supplier interviews.
The main steps of the supplier research and shortlisting process were:
Supplier Research and Shortlisting Process
First Round Shortlisting
1. RFQs Sent to Multiple Suppliers:
- The sourcing team sent RFQs to suppliers identified during industry and product research phases, plus additional suppliers.
- Utilized various supplier research tools and existing industry connections, including trade associations and referrals.
2. Initial Background Checks:
- Ensured suppliers were legitimate factories, avoiding middlemen or trading companies common in China.
3. Shortlisting Criteria:
- Passed initial background check.
- High-quality communication—responsiveness and ability to answer technical queries.
- Competitive and realistic pricing.
- Quality assurance—certifications and inspection reports.
- Lead time—met client’s delivery expectations.
- Minimum order quantity matched the client’s needs.
Second Round Shortlisting
1. Supplier Evaluation:
- Shortlisted 9 responsive suppliers with good track records.
- Discussed technical details to prevent cost-cutting measures.
- Requested and evaluated samples for quality and consistency.
2. Advanced Due Diligence:
- Conducted detailed background checks for high-risk factors like legal disputes and financial troubles.
- Verified supplier scale, history, business size, production capacity, equipment, technology, and skills.
Final Shortlist & Presentation of Quotes
1. Top 3 Suppliers:
- Selected based on overall suitability for the client’s product and requirements.
- Conducted final negotiations for pricing and terms, leveraging local team expertise for better outcomes.
- Achieved additional pricing reductions from 2 out of 3 suppliers.
2. Client Presentation:
- Presented final shortlist of quotes with a detailed comparison of supplier profiles, quotes, pros, and cons.
- Provided recommendations and suggestions based on expertise and experience.
IMEX Advantage:
- Expertise in supplier research and shortlisting.
- Comprehensive background checks and quality assurance.
- Strategic negotiations leveraging local knowledge.
- Detailed evaluation and presentation ensuring the client gets the best options.
Sample Development & Approvals
The client approved the final shortlist of quotes and decided to proceed with two suppliers due to the tooling costs involved in sample development. Once the quotes were approved, the sourcing team initiated sample development with both suppliers. They provided the suppliers with the client’s product specifications, requirements, and expectations, requesting two samples from each supplier: one for internal approval and one for client approval. The suppliers developed the molds, which took some time, and eventually delivered the samples.
The samples from each supplier were sent to IMEX’s office in Guangzhou for thorough inspection and approval by the sourcing specialist, QC manager, and account manager. This meant that up to three people approved the product internally before it was sent to the client. After passing internal approval, the samples were sent to the client.
Both samples from the two suppliers were well-made and appeared to be of good quality, but there was a notable difference: Supplier A’s bottle had clear transparency, while Supplier B’s bottle had a bluish tint. The sourcing team investigated this issue and consulted experts, leading the QC manager to conclude that the bluish tint in Supplier B’s bottles was due to material variations, primarily caused by higher impurities, which also resulted in slightly lower material costs. The sourcing team informed the client about this issue.
To the sourcing team’s surprise, the client preferred the bluish tint and chose Supplier B as the primary supplier, designating Supplier A as the backup supplier. This dual-supplier strategy is a standard practice advised by IMEX to all clients, as it provides flexibility and resilience in the supply chain. As we will see later, this approach proved to be very beneficial in this case, as it often does.
Image: The Mold for the Tequila Bottle
Production Phase
Contract Signing & Deposit
The client sent the deposit for the production to begin to IMEX.
At this stage, a quality control checklist was made by the QC team and sent to the client for approval. The checklist contained the product specifications, quality standards, inspection methods, and acceptance criteria for the product.
The checklist was translated into Chinese by the sourcing team so that it could form the basis of physical inspection of goods by the QC Inspector as well as the sourcing team.
The quality control checklist was approved by the client and confirmed by the suppliers.
Finally, IMEX signed a strong purchase contract with each supplier in Chinese. The purchase contract contained clauses on several subjects, including but not limited to:
- Inspection conditions and environment
- Dispute settlement mechanisms
- Quality control processes to be employed
- Product specifications
- Compensation clauses
The deposit payment was released to the suppliers after the contracts were signed and production kicked off.
Pre-production Sample
As a standard process, our sourcing team always insists on a pre-production sample, which is made after the raw materials have been delivered to the factory. This is an additional QC step that eliminates the risk of inconsistency or discrepancy between the initial sample and the final product. Very often, factories in China offer great samples, but the final product could be very different.
Unfortunately, this is a step that does add a few additional days to the process, and sometimes when clients are on a tight deadline, they do not have this luxury as was the case here. The client had a hard deadline to hit and did not want to wait for another round of sampling and approval.
Pre-shipment Inspection & Post-production Sample Approval
Once the goods were ready, the team sent an inspector to the factory to conduct a pre-shipment inspection (PSI), a standard component of IMEX’s 360 Degree Sourcing Service. The PSI involved randomly selecting products based on the defined AQL (Acceptable Quality Level) Standards and checking them against the approved QC checklist. Additionally, the inspector examined the packaging and labeling.
The PSI results were documented in a detailed report with pictures and sent to the client. During this stage, the inspector selected a random sample and sent it back to IMEX’s office in Guangzhou. This sample, known as the “post-production sample” (PPS), was compared to the “golden sample” (the approved initial sample) for final clearance. The PPS underwent a thorough inspection and approval by our team before being sent to the client.
The product met most of the expected standards, except for a few minor issues found in a small proportion of the bottles, such as bubbles and scratches on some surfaces.
Image: Bottle from the Pre-shipment Inspection
Negotiation & Solutions
The QC manager contacted the production manager of the supplier to understand the cause of the issues. The supplier claimed these minor defects were unavoidable due to the manufacturing process and production techniques, arguing they did not significantly affect the functionality or appearance of the bottles. They also refused to provide replacement units or compensation.
The sourcing manager then took over the negotiation, persuading the supplier to accept responsibility and offer a solution. Leveraging the fact that IMEX had another approved supplier capable of providing the same product without these issues, the sourcing manager applied additional pressure.
Eventually, the supplier agreed to remake a small batch and replace the defective products. However, this process would take an additional 10 days, delaying the delivery of the order. Given the client’s tight schedule and market demand for their products, waiting was not an option. Therefore, the decision was made to conduct a 100% inspection of the goods at the supplier’s expense, dropping the defective products, which constituted about 3% of the total batch.
Post-Production
While IMEX typically supports clients with logistics, this particular client had their freight forwarder managing shipping and delivery from China to Uruguay.
Post-shipment and post-sales, IMEX’s focus shifts to crucial activities such as:
- Creating Back-Up Suppliers: Developing alternative supplier relationships ensures access to comparable or superior products at competitive prices, reducing reliance on a single source and preparing for contingencies.
- Refining Product Based on Feedback: Continuous improvement based on real customer reviews helps in adjusting product specifications, design, quality, or packaging to enhance performance and appeal.
In one instance, when the client sought a repeat order, the original supplier cited a machine issue necessitating cost increases—a common occurrence in China. Reasons include initial underquoting to secure business with later price adjustments, underestimation of stringent standards’ cost impact, or assumptions that clients won’t switch suppliers despite price hikes.
Having a second approved supplier proved invaluable here. While some clients might accept price hikes due to time constraints in sourcing new suppliers and developing samples, IMEX and the client deemed the increase unreasonable. Despite supplier resistance, they opted to switch, successfully lowering costs and ensuring timely order completion with the new supplier.
Final Outcome
Subsequently, we have conducted multiple shipments with the current supplier, maintaining relatively stable quality throughout. Additionally, we implemented minor product tweaks and further standardized our processes to ensure consistent raw materials and manufacturing procedures.
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