The Importance of Due Diligence

Due Diligence is the first and most important step to take in the sourcing process of any product from China. And it plays a vital role in our Stage 1 Research and Tender Service that establishes a solid sourcing foundation by identifying legitimate and reputable  suppliers.  The definition itself tells us what every prospective importer needs to do in order to protect themselves and ensure that their supplier will deliver the products they order as specified. Let’s take a look at how the due diligence process applies to the sourcing and importing of products from China.
Firstly, we see that Due Diligence is a process of investigation; an investigation into the details of a potential investment. And the process of investigation encompasses an examination of the operations and management of the potential investment in addition to the verification of material facts.  If we were to apply this simple definition to sourcing and importing of products from China it would look something like this:

Due Diligence for the Importing of Chinese Products
Process of Investigation – To examine the operations and management of the source of the products that we intend to purchase and verify that they are capable of supplying these products at acceptable levels of quality, consistency, and price. To examine the products  (investment) we intend to purchase in terms of quality and specifications.
Details of Potential Investment – The products in terms of quality, specifications, price, and availability. The supplier of the products in terms of quality control, pricing, production capacity, delivery dependability, reputation and standing within the industry.

The big difference between importing products directly and buying locally is the necessity for a thorough due diligence process that must be done in order to be successful.  Practically all of the enquiries we receive requesting dispute resolution assistance and/or troubleshooting with existing or prospective suppliers are based on the lack of due diligence from the start.  We must remember that finding the product we want is not the problem.  Finding the right supplier who can and will supply consistently over a long period of time is.  This is why we highly recommend prospective importers utilize our Research and Tender Service so as to avoid disappointment and financial loss with an inappropriate supplier in the future. The benefits over time will outweigh the cost of this service many times over.

The purpose of the due diligence process used in our Research and Tender Service is to  ensure that only bonafide suppliers are introduced to our clients.  Below is a simplified illustration of the due diligent process that results in a short list of prospective suppliers that tender for your business.  It is not uncommon for more than 25 prospective suppliers to be investigated and contacted in order to ensure a short list of 4 or 5 qualified suppliers.



These are just a few examples of why suppliers may not make the short list. The reasons are to numerous and varied to list here.  The moral of the story is do your due diligence and get what you’re due.

I believe there is no other service offered in Australia as comprehensive and flexible as ours. If you would like to know more about due diligence and our Research and Tender Service, please don’t hesitate to contact us.