How to Identify These Traps in a Supplier’s Quotation and How to Avoid Them?

How to Identify These Traps in a Supplier’s Quotation and How to Avoid Them?

All product sourcing starts with a quote, which is the price for the product order based on the information shared by the buyer. The Chinese wholesale suppliers or manufacturers will consider the procurement request and create a quote for the price of the goods. However, most of them make critical mistakes when budgeting for product orders and focus only on the price in order to evaluate the cost. 

 

A quotation is like a price list offered by the Chinese wholesale suppliers and contains information as a general rule, which includes the header, product technical parameters, basic product information, price quote terms, and other pertinent information. A quotation header will consist of details like the quotation title and basic information about the seller, including the manufacturer’s name, logo, address, contact information, etc.

 

  • Basic product information: This will include serial numbers, specific models, product names, prices, specifications, and other information. 
  • Product technical parameters: Specific technical parameters will also be included.
  • Price terms: This is the payment method, shipping, and other similar remarks for payment.

 

However, most buyers only understand the bits and pieces of the quotation and not the entire quote. Due to this lack of understanding, it can cost them quite a bit of money on their products. Here are some common mistakes made by buyers.

 

  • Focusing on price only: Quotation is not only the price but also the information within the complete quotation meaning. Most buyers think that the quote provides the final cost of the completed products. They do not consider information like taxes, raw materials, and the period the quotation will remain valid. 
  • Paying attention to only the quotation of the main material: Many manufacturers and suppliers give low-pricing quotes in order to gain buyer’s interest. Buyers who are not familiar with the terms of a complete product quotation often miss the fine print. Remember that once the supplier provides a low quote to the buyer, they will raise the price on some of the obscure parts of the goods. Though they are often small in number and volume, they can add up quickly. Buyers rarely take note of them since the prices and amounts are small. 
  • Focusing only on product pricing quotes and ignoring the changes in supplier raw material costs: Many buyers do not pay attention to the cost of the raw materials. Raw materials often have fluctuating prices,which means that manufacturers will use this to leverage higher prices on products. If the price of the raw materials goes up, the quotation price will also go higher. But if the price goes low, teh suppliers will not change the quotation and keep the higher price. 

 

The Strategy of a Sourcing Agent

 

Therefore, a professional sourcing agent is crucial for proper procurement. These teams have intimate knowledge of the common tricks of suppliers and have contingency plans in place for effective countermeasures. They have a standardized and unified quotation format. They can make the suppliers provide quotes based on the cost structure. 

 

The quotation format will be the same as the requirements of the sourcing agent. If the buyer wants to make a large purchase, the sourcing agent can send the simple quotation format to the supplier, who can use it for the quote, format, and cost calculator. This helps the sourcing agents calculate the supplier quote information and determine purchasing costs. The agent can learn the final price from the supplier and use it to compare quotes across many regions. 

 

Since it is a unified quote template, it makes it harder for suppliers to hide costs on products. The calculations and comparisons are based on the cost structure of the sourcing agent, who has a deep knowledge and understanding of the information on the quotation form. This decreases the chance of an error in the price of products. It also makes communication between the parties easier. 

 

What You Can Do As a Buyer?

 

  • Study the quotation provided in detail: The quotation may often have information that does not match the buyer’s information. Hence, it is important that you read, review, and study the information in the quote very carefully. 
  • Pay attention to the flexible items in the quotation: Remember that certain products have special design parameters, and suppliers often offer flexible quotations for goods in such cases. They do this because their goal is to make way for future price increases on the products. Buyers who are not careful may have to pay extra costs that the supplier recommends, and they are able to make more profit because of the misunderstanding. Some suppliers may also use a tiered quote method that will include quantity discounts. However, most buyers select the wrong quantity order. 
  • Going Deep into the factory to analyze: you can request your sourcing agent to study the supplier’s main raw materials costs, material loss rate, quoting process, average profit margins, and conformity rate. This will give them a chance to learn whether the supply of raw materials is guaranteed and easy to deliver.

 

To Conclude

 

Advanced planning and gaining a complete understanding of the quotation can help you get proper procurement. Also, it is important to maintain and control the production process in order to keep the quality high. A sourcing agent can be your perfect solution to solve any issues with quotations.

 

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