Low Cost Country Sourcing Part 3

TIP 3: Conduct in-depth due diligence on LCCS suppliers
It is dangerous for a company to simply look at an overseas supplier's website, get a quote for the goods, check a few references and start to do business. Buyers should specifically pre-screen any supplier, most of all a LCCS supplier, before entering into a contractual arrangement, advises Morgenstern.
"If you were to find 50 suppliers on the Internet, I guarantee 40 of them are traders," he adds. "The risk is that you are buying from multiple parties under the guise of one, unless you go to that country and kick the tires."
Morgenstern recommends sending a commercial and technical team of procurement staff, supply and quality engineers to conduct due diligence on a potential supplier on-site. Ideally, a U.S. company should establish an international purchasing office (IPO) in the supplier's country. If that cost is prohibitive, he suggests working through a third-party consultant or broker—after extensive due diligence as well—to minimize delays and product liability issues.
"You could end up with a scenario that maybe the first sample parts pass muster, then you see a dramatic drop-off in quality," Morgenstern says. "We highly recommend a sustained approach of supplier on-boarding."