THE SOURCING

BIBLE

By Greg Mercer
CEO of Jungle Scout

In partnership with
CONTENTS
03 Introduction

04 Chapter 1: Navigating Alibaba.com

09 Chapter 2: Creating a List of Potential Suppliers

12 Chapter 3: Supplier Outreach

19 Chapter 4: Negotiation and Hiring

23 Chapter 5: Inspection, Shipping, and Inventory Management

31 Chapter 6: Forming and Maintaining Business Relationships

33 Conclusion

34 Glossary

CONTENTS
 3 Jungle Scout

Greetings!

You are here because you have downloaded the all-inclusive, go-to guide for all things Product Sourcing. If you’re a
new seller navigating suppliers for the first time, I will guide you throughout the entire process and help you establish
a professional and successful relationship with your future product manufacturer.

When you’re dealing with hundreds of potential candidates, it’s hard to know who is trustworthy, if the quality of
the product manufacturing will meet your standards, and most importantly, will you get ripped off? These are all
legitimate concerns we will try to ease as I address each step of the production process. I want to simplify this aspect
of your product launch to make it as pain-free as possible!

The best thing you can do is arm yourself with a wealth of knowledge about your product and the qualities you are
looking for in a business relationship.

This ebook will guide you through the crucial steps of setting up an Alibaba account, searching for suppliers, evaluating
the results, and contacting each one. There are pitfalls to watch out for and a list of criteria that will help you move
forward into the negotiation and hiring phase and finally on to the logistics of shipping your product and managing
inventory.

Our main objective is to find a trustworthy supplier whom you can build a long term and mutually beneficial relationship
with. Once you’ve established that, you’re well on your way to building a solid foundation for your Amazon FBA business.

I hope you get lots out of this ebook. If you have any questions or
feedback, just drop us a line at
support@junglescout.com

CONTENTS
 4 Jungle Scout

CHAPTER 1

Navigating Alibaba.com

Alibaba.com is a global trading platform for buying and selling, and our #1 recommended source on the internet when it
comes to finding a product manufacturer. It has the largest network of suppliers in the world and I have yet to find a product
I couldn’t source by using this platform!

There are alternative platforms such as Global Sources that you are free to test out and apply the same principles we’ll be
going over, but for all intents and purposes of this ebook, we’ll be using Alibaba as our sourcing platform guide.

If you’re worried about potential scams, fear not! These marketplaces have checks in place to vet the suppliers they allow to
do business on their websites, which should alleviate any hesitations you may have.

Account Setup

Before you get started and dive into your research, you will want to create an account that will enable you to use some of their
features such as creating a favorites list and utilizing the in-app messaging center.

Joining is free! During the setup process when you are asked for your company name, although it specifies a legally registered
company, you have the option to enter your
established business name or your own name
in the company name field if your company/
brand is not yet registered. You can also put a
business name that you intend to set up too.
This allows you to begin familiarizing yourself
with the sourcing process even if you aren’t
fully setup. We use the name Jungle Creations
for our Amazon business!

CONTENTS
 5 Jungle Scout

The benefit of having your company registered and/or trademarked would provide more legitimacy before you reach out to
potential suppliers, but it isn’t necessary when you’re just beginning the research phase. You can always update your company
and contact information in your account settings on an ongoing basis.

You can then personalize your account by category and subcategory and get searching!

Keyword Search Suggestions

This step is pretty straightforward, considering the amount of time you’ve spent researching your product up to this point.
By using your existing list of keyword search terms, you can simply plug them into the Alibaba search engine to find a range
of potential suppliers in your product category.

You want to cast a wide net and start with a broad list of potentials that will enable you to sort them by a variety of filters.

Image Search Option

You can also skip the keyword search and snap a photo of what you’re looking for. There are two ways to go about this: first,
you can download the Alibaba.com extension called Source Now. While you’re product searching on Amazon (or any site)
you can take a screen shot that will instantly take you to Alibaba.com with supplier options!

Or, you can download their mobile app which offers the same image search feature. As you can see below, I took a quick
photo of my laptop stand and voila - multiple laptop stand suppliers! Try playing around with both the site, extension,
and app to get a feel for your options before you start filtering prospective suppliers.

CONTENTS
6 Jungle Scout

You can also preview the app layout below to see all of the same website features and functions that can be
accessed right from your phone!

How to Filter Results

The column on the left hand side of the page is going to list specific filters you can utilize to sort your search results by both
product features as well as supplier features.

Product Features
Filtering your search results by product features at this stage isn’t the most helpful tool Alibaba has to offer, to be honest.
The filters (Material, Use, Style, Feature, etc.) are generated based on your keyword input. You’ll be searching a variety of
keywords, and typically I’ve found that the product feature filters rarely correlate to the product I’m trying to source.

CONTENTS
 7 Jungle Scout

For example, if I’m searching for a travel beach blanket, some of the filters are completely irrelevant. And the ones that
might seem relevant - as soon as I tick the box to narrow my results, I’m given a list that moves even further away from the
product I’m researching. Unless you have a very specific list of product specifications, it’s wise to start filtering your results
first by scrolling down to the supplier features...

Supplier Features
Preferences will vary based on the nature of your business, product, and location. You may want to work with a specific area
or region (both are filter options), but mainly you will be concerned with Supplier Type. This filter allows you to find the
most reputable suppliers in your search - the ones that meet the standards of even the toughest critics.

CONTENTS
 8 Jungle Scout

We’ll go over general descriptions, but you can find more in depth definitions in the glossary at the end of this book.

By checking the box for the following features, this guarantees that the supplier is compliant with:

Trade Assurance: A free service that protects your orders from payment to delivery. If you have a dispute with
your supplier, you can submit a claim to Alibaba to review.

Gold Supplier: A premium membership for suppliers which includes onsite check
and promotional opportunities to improve their appearance in search results.
Just so you know: this only indicates that a supplier pays an annual fee to Alibaba; there are no company
requirements to qualify for this status, however it does help weed out any potential scammers who wouldn’t go
through the effort to become a gold supplier.

Onsite Checked: Onsite operations are checked by Alibaba and the existence of the
production location is confirmed by a third-party verification company.

Assessed Supplier: Facilities are assessed by a third party inspection company and an Assessment Report is
available to download.

CONTENTS
 9 Jungle Scout

Navigating Supplier Profiles

Manufacturer vs Trading Company

Before you can sift through the supplier profiles in your results, it’s important to note that there are two very distinct
categories of suppliers you’ll come across - manufacturers and trading companies.

From the outset they might appear to be one and the same, but they are actually two very different operations.

A manufacturer means they manufacture products in their own factories.

A trading company acts as a middleman, and will source products from manufacturers and then sell them to you.

You may see a benefit to utilizing a third party to research and negotiate with manufacturers on your behalf, but it
comes at a cost. Generally I believe it’s better to work directly with a manufacturer to not only keep your costs down,
but to have greater visibility into where your products and raw materials are coming from.

Note: Some experienced sellers DO work with trading companies to great success and don’t mind paying slightly
more for inventory, so long as it makes sense in their profit calculations and their ability to build a reliable
relationship with the trading company.

You will have the ability to track your product throughout the entire process and implement any changes when
necessary. Without a middleman, the response time will be much quicker, and we know time is money! Plus, building a
relationship directly with your manufacturer will benefit your brand in the long-run (more on that later).

When you begin your supplier research on Alibaba, you can usually find out their business type in their company
profile. This may not always be the case and you’ll need to do your due diligence to determine what type of supplier
you’re working with.

The simplest way to go about this is to take a look at the products they are manufacturing. Are they similar enough to be
sold into the same niche? Or are they all over the place in different categories? You can assume a supplier with similar
products is indeed a manufacturer, and a knowledgeable one at that. Their experience with your specific product/
category and related materials enables them to help you navigate the most important aspects of the production process.

Now, there is always the possibility that a supplier is both a manufacturer AND a trading company. This would
mean they manufacture some products, as well as source from other manufacturers. Not a deal breaker, but something
to look out for when you’re conducting your outreach!

In order to find top candidates, you need to put them to the test. In our experience, we have followed the advice of
sourcing experts to hone in on a set of criteria that we can routinely use during this research phase time and time again.
Once you get a grasp on the following three tests, you can implement them every time you reach the sourcing stage.

CONTENTS
 10 Jungle Scout

CHAPTER 2

Create a Top List of Suppliers

3 Tests to Pass
Back when we first launched our Million Dollar Case Study, we were looking for a few simple guidelines that would
assist us in narrowing down our list of supplier candidates. A few “tests” if you will, that would quickly determine
whether we should invest our time in reaching out and ultimately find a supplier we could build a relationship with.

During one of the webinars, Gary Huang, the founder of 80/20 Sourcing and expert of all things product sourcing,
introduced us to the idea of 3 tests we could run that would find an ideal supplier:

Test 1: Common Thread

When scrolling through the supplier’s profile page and list of products, make sure each listed product is similar to, if
not the same as the product(s) you are sourcing.

This is where the trading company vs. manufacturer distinction comes into play; to reduce the risk of working with a
trading company and spending more money, you can assume a supplier with similar products is indeed a manufacturer,
and a knowledgeable one at that. Their experience with your specific product/category and related materials enables
them to help you navigate the most important aspects of the production process.

CONTENTS
 11 Jungle Scout

This is a great example of a manufacturer - the products are of similar materials and functionality, and the supplier
identifies as an outdoor products company. A specialist in our chosen category and product material is just what we’re
looking for.

On the other hand, if a supplier’s page lists electronics, children’s toys, and clothing items - that doesn’t really make
sense. Those products require different machinery and materials and it would be safe to assume they are a trading
company.

Test 2: Export Breakdown

As I mentioned before, you may or may not have a regional preference for the location of your supplier. I mean,
international shipping costs are international shipping costs, right? (wrong!) This actually isn’t a matter of shipping
costs, but rather the supplier’s experience within a particular marketplace.

If you pick a supplier that already exports to your marketplace (i.e. the United States), then they will have experience
with the expected level of product quality and manufacturing. Some product categories may require additional testing
to pass through customs; this varies entirely from product to product and from marketplace to marketplace. But if you
find a supplier that already works with that same product in that same marketplace, they will be much more likely to
be able to help and provide you with relevant test certificates or declaration of conformity.

Tip: If your supplier is not knowledgeable about testing requirements, you can also speak to a company like
Asiainspection.com (we used these for all MDCS products for testing requirements and quality assurance), and you
can also speak to your Freight Forwarder (more on this later) to ask about any specific requirements to pass through
customs

CONTENTS
 12 Jungle Scout

On the supplier’s profile page the Trade Capacity section breaks down the countries of export and indicates where
the majority of their products are going. This example is promising for a seller importing to the United States because
we can see 80% of the product is going to North America and Western Europe, and the supplier will be up to speed
on their specific standards of quality control.

Also note the verified check marks which indicate a third party has assessed and certified the supplier for quality
and integrity in their production process. The audit reports are also available to view and download for your own
inspection.

Test 3: Established Business

One of our key requirements to make the Favorites List cut was a minimum of two years experience trading/
manufacturing. Why? The answer may be obvious but it’s generally in your best interest to work with a manufacturer
who has a strong track record in your product category, and specifically in your desired market.

A new supplier may tempt you with a cheaper quote, but without a proven history of success, it may end up costing
you more in the long run. Especially if you’re just starting out as a new seller, this is not an area you want to cut costs
in.

Create a List of Favorites

Once you start spotting suppliers that pass the tests and meet your general requirements, it’s time to start forming a
list of your favorites. Make sure each shortlisted supplier meets the following key requirements:

• Has a gold supplier badge

• Trading for a minimum of two years
• Accept payments in a method you are comfortable using
• Has the Trade Assurance badge to protect your orders

Right on the main results page, you can simply click on the heart in the upper right corner of the featured product
photo (see below), and you have easily started your list of favorites!

CONTENTS
 13 Jungle Scout

Or, you can also add a supplier to your favorites list right from their profile page.

It’s optimal to generate a list of at least 20-30 potential product suppliers, with the intention of cutting that list down
to a list of your top 3-5 candidates. You will be their harshest critic to get there!

CONTENTS
 14 Jungle Scout

CHAPTER 3

Supplier Outreach

General guidelines and criteria to know before you reach out

Now that you’ve narrowed down your list of top contenders, it’s time to start reaching out. You’ll be sending a Request
For Quotation (RFQ) to each supplier on your list to gather basic information, and to see if they’re a good fit.

Alibaba has a message center built right into their platform which is by far the easiest way to initiate contact.

To make this process as simple as possible, we recommend creating a generic template that you can fire off to all of
the suppliers on your list. Before you run off and do that, there are a couple of things to consider first -

CONTENTS
 15 Jungle Scout

Set up an email to organize responses

Decide on an email address to use - whether that’s a business email or a personal email, it’s important to have a system
in place once the replies start rolling in. If you’re just starting out, you may want to create a business email address
in order to look professional and have the negotiating power on your side. Furthermore, creating a simple one page
website about your business with basic information and your contact information using service like Squarespace can
help you jumpstart this process.

Just be sure to update your contact email in the Alibaba account settings. Suppliers may email you directly, or when
they send a reply in the message center, you’ll receive a notification via email.

Personal note: when expert sellers here at Jungle Scout have used a simple Gmail address to launch their Amazon
business, there have been no issues re: their professionalism!

List of key product requirements

This is where you must be as detailed as possible. You need to have all of the information and requirements pertaining
to your product on hand in order to get the most accurate quotes as quickly as possible. You’ll be able to identify if a
supplier is unable meet your specific needs and take them off your list as you zone in on the right manufacturer.

Overview of Spec Setup

Know your specs! Product specifications will mainly come from your product and competitor research phase. In
general you’ll need to consider the basic design, materials, and dimensions. If you have a generic photo to include in
your email, even better! If you find a photo of a similar product from an Amazon competitor you’d like to reference,
just be sure to remove all branding/logos before sending.

Remember, when you’re improving upon an existing Amazon product, take into consideration the
reviews left by buyers and address these questions:

• What are the concerns that existing customers have with the product?
• How can we position ourselves selling this product?
• What do the existing reviews, both good and bad, have to say about the product?
• What manufacturing requests would we make to our supplier?

By fine-tuning some of the key elements and product features, the greater the potential you have to
take over the competition.

CONTENTS
 16 Jungle Scout

Even at this early stage while you’re just gathering information from potential suppliers, you can stick with generic
photos, but I advise you to have a general idea of some of the basics you’re looking for such as,

• Printed logo on the product?

• Material type/quality preference
• Type of packaging, printing, labels
• As many of the smaller “features” on the product itself outlined as possible

The more they know, the more accurate they can be with an initial quote. If you start to add on additional things later,
you’ll definitely see an increase in price. Some of this is unavoidable and you won’t know what changes or add-ons
need to be made until you receive samples, but start out as detailed as possible.

Email Template

Let’s put together a basic template that you’ll be able to use over and over again for all of your supplier outreach. We
want to cover 3 things:

1. Icebreaker!

To make yourself stand out in a sea of email quote requests, use this opportunity for a friendly introduction. Giving
a little background on yourself, your business, and your goals will go a long way.

Additionally, if you demonstrate your product knowledge by providing specifics and asking the right questions, you’ll
establish yourself as a serious and trustworthy business owner.

2. Product specifications with as much detail as possible.

• Product Measurements
• Material
• Specifications
• Packaging
• Any other critical points (safety, branding, etc)

3. Call to Action

To conclude your Request for Quotation (RFQ), include a numbered list of specific questions that you want answered
such as,

• Can they manufacture this product?

• Past experience with this product?
• Can they handle your suggested product modifications?
• What is your MOQ (Minimum Order Quantity)?
• Request price for volume order and sample

CONTENTS
 17 Jungle Scout

You can even start to negotiate at this stage with a potential “test” order with plans to place larger orders in the future.
The ball is always in your court - you are paying the supplier for their goods and it’s perfectly acceptable to let them
know you will continue sending business their way if things go well.

To make sure all of your questions are answered as thoroughly as possible, number each of your questions, spacing
them apart and even bolding the font to call their attention to reply with a complete information request. This will
not only save time, but also (hopefully) provide helpful answers in the responses that will enable you to evaluate who
would be a good fit.

As we also mentioned, you can attach photos right in the messaging app. Even if they are generic, they will help
illustrate your requests and breakdown any potential language barrier.

Million Dollar Case Study

In 2017 I created the Million Dollar Case Study to give you unfiltered access to the entire journey of a product launch.
Our goal was to sell one million dollars worth of products and document every detail every step of the way.

Since the creation of MDCS, our team has collaboratively and publicly launched products in both the US and UK
markets with great success, and the studies continue to be one of the best resources for Amazon sellers! For example,
below is an email template from the case study where we launched baby hooded towels:

CONTENTS
 18 Jungle Scout

This is a perfect example of a standard RFQ that includes all of the elements we talked about, and the suppliers were
able to give us quick, simplistic quotes in return. To give you a headstart, I also included our basic email outreach
template here to use however best fits your needs.

As you get into deeper discussion with potential suppliers to hash out product details and features, you may
see the quotes begin to increase. You can be as thorough as possible in your initial outreach, but sometimes
this is completely unavoidable.

Supplier Responses
To be honest, many of the suppliers that you reach out to won’t be a great fit, and some may not respond at all, but
that is all part of the process to uncover those few that are ideal. As long as you reach out to a substantial number you
should have plenty of options to work with.

A lot of this may sound obvious, but when a supplier responds to your email they should be professional and prompt.
They should be able to communicate clearly with a good grasp of English, answer all of your questions, and explain
any challenges. Ultimately you’re looking for a business partner that you can build a relationship with, and you want
to start with a solid foundation.

These positive traits should move potential suppliers right to your shortlist!

• The supplier is being proactive and engaging with the product specifications and requirements that I
have outlined
• Fast and friendly responses, which answer all of my questions
• The initial quote price is feasible (remember, you can also negotiate)
• Offering suggestions or advice that I haven’t yet thought about is an added bonus!

Organization is key at this stage and I recommend that you start recording each reply, regardless if they are positive
or negative.

Track responses in a detailed spreadsheet (use our template here!):

• Supplier name and location

• Contact person’s name and contact info
• Date RFQ sent and reply
• MOQ - minimum order quantity
• Price quotation
• Sample cost
• Notes – delivery lead time, other notes

Once you move beyond the initial messaging stage using the Alibaba platform, it’s recommended that you move
communication completely over to email where you can easily refer to previous conversations and organize replies.

CONTENTS
 19 Jungle Scout

Red Flags

There are also a few indicators of a “Bad” Supplier response:

• Pricing is way off – If the pricing is way off from other quotes you receive, either too high or too low, then just
walk away. Something is off, and it’s better to cut ties quickly.
• If you don’t get any response to your initial RFQ , move on.
• If they ask for money up front at this stage? It’s a firm no.
• They haven’t answered your questions? Skip them.
• If they appear to be dishonest in any way, move on.

Many of these red flags of course, depend on your own intuition and judgement. You might receive a canned response
that doesn’t answer your specific questions, but further personalized communication with them might resolve those
issues. Just remember, you never want to settle just because you want to get the ball rolling on your product launch.

Often, it’s best to go with the best quality product for the price quoted, and for the supplier that you trust the most to
do a good job. This makes good business sense and reduces the chances of headaches down the road.

What does a Supplier look for in a Buyer?

Remember that manufacturers are businesses too, they have costs and margins to meet just as much as you do. Finding
a business partner is a two-way street, and it’s equally important to take into consideration the point of view of your
supplier and the qualities they are looking for in you. They will be putting a significant amount of trust in you when
you place an order, as they will have to buy raw materials and have their warehouse staff work on manufacturing.

This two-way relationship needs to be mutually beneficial, and suppliers will be very grateful when you are able to
meet in the middle on each of your requirements.

The key elements to bear in mind will produce a business relationship built on trust and respect.

• Knowledge - they expect you to be an expert, so to speak, and to provide as much detail as possible in your
RFQ.
• Price - they expect negotiations, but also want you to be fair and not try to lowball their quotation.
• Order size - ultimately, your new business partner wants to be assured that your business will be ongoing and
that you will regularly place reorders, which leads to
• Long-term business potential. An ideal partnership isn’t a one-off order but rather one that grows over time.
• On-time payments - just like credit cards, your payment history will indicate whether you’re reliable or not.

When you are unable to find a common middle ground on price, payment terms, agreements or shipping arrangements,
it is likely not a good fit!

CONTENTS
 20 Jungle Scout

Samples

Based on the responses you receive from your initial outreach, you can form a shortlist of suppliers based on the
criteria above and start thinking about ordering samples. I suggest ordering samples from three to five suppliers,
depending on your product niche and business model. You should expect to pay a small amount for your samples and
shipping, roughly around $50-$100 for a sample and express air shipment if you’re in the $20-$50 retail price range
for your product.

Note: Most suppliers will let you pay via Paypal for small payments like this for your ease, more on payment
options later!

Once you have received all of the samples, it will be much easier to make tangible decisions going forward with a
product in hand! You’ll be able to see the difference in quality and tweak any of the details and features. Manufacturers
often need to create a few iterations of your product to get it right, which is something to always keep in mind as you
plan your budget.

In addition to your samples, you’ll also need to start thinking about any logo designs, packaging/fabric labels, or
inserts that would want to be included with your product. You can discuss these details later as we move into final
negotiations and select a supplier!

CONTENTS
 21 Jungle Scout

CHAPTER 4

Negotiation and Hiring

NEGOTIATION
So you finally have a sample product that meets all of your requirements! Now it’s time to start negotiating cost. This step is usually
where new sellers get a bit stuck, especially if you’re not confident with your negotiation skills.

Remember the goals we outlined at the very beginning - we want the highest quality and the best possible price. We also want both
parties to be satisfied by the final deal so that we can establish a mutually beneficial business relationship from the start. I try to put
myself in the shoes of the supplier and focus on long-term growth together.

One key thing to remember is that if you are ordering a small Minimum Order Quantity (MOQ), then you should not expect
to get the best possible price. Remember that manufacturers are purchasing raw materials and this comes at a cost—they need to
maximize their business too.

When sourcing on Alibaba.com, expect to see MOQs of 500 units or more. 1000-2000 units is actually more likely, depending
on the type of product and the factories you are speaking with. For new sellers, you may need to find a smaller manufacturer who
has been operating for 2-3 years and might be more flexible with MOQs and price than say a large factory that works with huge
orders on a daily basis.

Key tactics and tips

Having said this, there are some tactics that I have used in the past that can help you sweeten the deal:

• Ask for quotes for a variety of MOQs and/or different specs to see how pricing can fluctuate with quantity and quality.
• Explore your packaging options and try to have your packaging made using materials the supplier can work with—if they
have to outsource this you will feel the costs on your profit margins.
• Meet in the middle between price and MOQ. For example, ask for the price to be reduced by 20 cents per unit if you order
an extra 500 units.
• Conversely, if ordering small quantities is a must, you can offer to pay a little more per unit in order to get the factory to do
a smaller number than usual.
• Do ALL pricing negotiations before placing any orders, and have everything written down in a signed and stamped supplier
agreement (template below).
• Be honest with suppliers. If you really want to work with them, but they are the most expensive option, tell them this is the
case. They may try to meet you in the middle, or offer you some freebies (such as upgrading a product material).

CONTENTS
 22 Jungle Scout

If you are getting nowhere with a supplier, move on. Remember, we are being ruthless! Sometimes this means revisiting
the initial outreach stage, which can be frustrating, but it’s better to find the right supplier than settle for less.

It’s really important that you don’t negotiate too hard on price from the very beginning. It is more important to
build trust and confidence with the supplier, and once that is established then you can settle on an agreeable price
point.

Want to dig deeper into all of the costs associated with sourcing and launching a product?

Check out our profit calculator in our Fetcher app!

Supplier Agreements
Before you can place an order and move forward with production, you will need to create a supplier agreement. This
agreement will ensure that both parties are in total agreement of and accountable for the terms laid out. This also
ensures that no mishap will lead to loss of money or good faith in your business relationship.

Here are some of the things that I always include as standard:

• Full product specifications

• Product Costs
• Production time, agreed upon by both parties
• Packaging and labeling required
• Inspections and processes for defects. Agree that if an inspection does not pass, the supplier will amend the
goods at no extra cost
• A clause that states there will be a 5-10% discount incurred on inventory for every week that it is delayed in
production, as per the factories lead times
• Shipping agreement – who takes on responsibility at what point? More on this below.
• Add in a refund policy—if you get a high return rate on your products, ask for a rebate in your next order of
inventory
• Ensure all packaging and labeling requirements are predetermined
• Include a confidentiality agreement - a clause that the supplier can’t/won’t discuss the product, brand, or
business with others.
• You can request that photos are sent to you at every stage of production. Not only will you get to speak with the
supplier frequently and continue to build your relationship, but it also provides security and the reassurance that
your product is being manufactured to your exact specifications

Be prepared that some suppliers, especially large retailers, may require legal support for these agreements. As a
private label seller myself, I have always used my own template which my suppliers have agreed to use and it’s worked
out just fine. You can refer back to our prepared templates to use as a guide when submitting your first purchase order.

Above all, you want to put as much detail in writing as possible and create a high level of accountability for your
supplier every step of the way.

CONTENTS
23 Jungle Scout

Payment Options

As far as negotiating payment terms, it is in your best interest to pay as little money upfront as possible. This will reduce
your risk, and offer you some leverage to negotiate with the supplier in the future if for some reason you’re dissatisfied
with product quality or any delays throughout the process.

30/70 or 50/50 terms are most popular, which means you have to put down a deposit of 30% or 50% to start production.
The balance is normally paid once the inventory is ready to be shipped and has passed third party inspection.

Alibaba will monitor the step-by-step ordering and payment process and they will send email notifications to both buyer
and supplier at each stage, providing an extra layer of security.

Payment Methods
Let’s talk money. Paypal, Bank or Telegraphic Transfers (T/T), and AliPay through the Alibaba site are your main
payment options and each one comes with their own set of pros and cons.

Paypal
Paypal is most commonly used for ordering your samples, or any small associated cost less than $50. However,
Paypal is not very popular in China, and they may charge a 5% fee based on higher processing fees.

While you are communicating with suppliers regarding samples, it’s in your best interest to find out which payment
methods they accept before moving forward and paying for any samples. It should not be a deal-breaker if they do
not accept PayPal, but instead a bonus if it works.

Bank Transfer
Telegraphic Transfers, or T/T is the most economical payment option and a standard wire transfer with a $30-50
fee. But there is limited protection or recourse for paying with this method - once you send the money via T/T, it
would be very hard to recover it for any reason.

One important caveat when paying via T/T: make sure to check that the name on the bank account and the
company name are matching! If the supplier doesn’t receive the payment, and the names on the bank account and
company name don’t match, there is not much that you can do to recover the payment. That would be upsetting,
to say the least!

CONTENTS
24 Jungle Scout

Payoneer and World First

I want to mention that many international ecommerce businesses utilize payment services like Payoneer and
World First, which are the best at handling currency exchanges. If you come across a supplier that is on this type
of network, you can often make transfers without a fee; however, it appears to be less common to find Chinese
suppliers who use them right now.

Trade Assurance
As I mentioned earlier, this is a free service offered through Alibaba.com which provides a safe payment service
for all parties engaged in international trade. Offered only to Gold Suppliers, it allows a buyer to receive a refund
if the shipment is delayed beyond the specified shipping date and/or if the manufactured items aren’t compliant
with your specs and quality requirements.

The major pro for this payment option is that it works similar to an escrow service and provides more protection
for you. It holds buyers’ payments while orders are being processed and delivered.

It’s important to note that the actual payment method in order to use Trade Assurance is by credit card or T/T.
Talk with your supplier to process your order correctly through Trade Assurance and make sure your Supplier
Agreement is uploaded for Alibaba to track the terms of your agreement.

CONTENTS
 25 Jungle Scout

CHAPTER 5

Product Inspection, Shipping

and Inventory Management
This section is going to focus on the steps you are going to take once you have received notification from your supplier
that the manufacturing process has been completed on your product.

Inspection

I can’t stress enough the importance of product inspection, which you can check on at various states of the supply
chain, and I urge you to do so as often as necessary. From the moment you begin receiving samples and finalizing the
details on materials, features, functions, etc. you have the authority to ensure quality control.

Amazon sellers choose to do this in a few ways and I recommend taking the following measures:

Trade Assurance
To reiterate the convenience and protection of Trade Assurance, it will cover and protect the quality of your product
in the event the product(s) do not match the details outlined in your contract with the supplier. This may not be the
most nuanced inspection option, but it’s extra security which is always good to have!

Pre-Shipment Inspection
Before you pay the remaining balance on your goods and have them shipped, you can pay a professional third party
(unaffiliated with your supplier) to inspect your product and provide a neutral opinion on the suppliers compliance
with your product specs and quality standards.

For an extra few hundred dollars, this inspection will check a sample size of your quantity for all of the agreed upon
specifications, packaging, labeling, as well as verifying the total quantity. This will add more time to shipping, but it’s
in your best interest to catch any issues before your products leave the factory and gives your supplier the opportunity
to fix anything at their expense.

Note, you can add to your supplier agreement that final payment is contingent upon passing a pre-shipment inspection.
Reliable and professional suppliers should accept!

CONTENTS
 26 Jungle Scout

Shipping Your Product

Your products are finished and now it’s time to ship them out! There are a lot of steps that need to happen in order
to move your product from the manufacturer’s warehouse to the port, to the country of sale, through customs, and to
the Amazon FBA warehouse.

Overwhelmed by the thought of arranging all of that? To make this process as seamless as possible, I always recommend
using a reliable freight forwarder who will handle all of the logistics.

Freight forwarders are like travel agents for your product. They arrange the transportation, the
paperwork, the forms and whatever else you need to get your product from Point A to Point B.

It’s helpful to understand how it all works, but also know that you won’t have to get your hands too dirty!

I personally use Flexport as the freight forwarder for my own Amazon business and find them to be the best in the
business, extremely reliable and helpful! Make sure to do your research and find the right freight partner for you,
but you can also take advantage of our partnership with Flexport to score yourself a discount when you sign up here.

You can do a simple Google search to find freight forwarders or comparison sites such as Freightos, where you can
simply enter some key information about your shipment (ex. what your shipment is, the volume, weight, from and to
destinations) and get your hands on a range of different quotes that will make this part of the task much simpler and
quicker.

If you’re looking for an all-in-one type of service, Alibaba.com has you covered here too. They offer logistic solutions
and will coordinate the details with your supplier. You can reach out to their team for a quote during your shipping
research to compare all potential price points.

CONTENTS
 27 Jungle Scout

Shipping Process

To give you a quick overview on the shipping process, these are the general steps you’ll be taking:

1. Find a freight forwarder and get a quote for your first shipment
2. Ensure your shipment terms are included in your supplier agreement
3. Create a shipping plan in Seller Central on Amazon
4. Notify your freight forwarder of the approximate date the goods will be ready and get
a quote
5. The freight forwarder will then communicate with a representative at your supplier’s factory to get the goods
on the vessel/mode of transportation.
6. It takes a few weeks for the shipment to arrive via ocean freight, about a week for air freight.
7. Then your freight forwarder will unload the container and palletize your products for Amazon
8. A truck will pick up your pallets and take them to the Amazon distribution center.

With all of these moving parts, it is essential that you have a good relationship with your freight forwarder, communicate
frequently, and be flexible in case they need any information from you or your supplier.

When you’re creating your Supplier Agreement, including an agreement on shipping terms is crucial so that both
parties know at which point the freight forwarder will step in and take over.
You shouldn’t rely on your supplier or Alibaba for this part of the journey, and here’s why:

• Shipping, US customs, etc. is not their specialty, therefore service is poor.

• A lot of pricing you get from a supplier will change later (not transparent).
• If you need information it can take a long time to get updates.
• If your business is successful and starts scaling, your shipping risk also scales exponentially if you stay with your
supplier.

Incoterms

These are some things you need to negotiate with your supplier. The most common incoterms are FOB, EXW and
FCA. These are terms of sale that define who arranges the payment and handling of goods during shipping, from the
moment the goods leave the seller’s door and up until they arrive at the Amazon warehouse.

CONTENTS
 28 Jungle Scout

FOB (Free On Board) – the supplier is responsible for getting the goods from the factory to the port

EXW (Ex Works) – the freight forwarder is responsible for collecting goods from the factory and getting them
to the port

FCA – a middle ground between the above, the supplier will bring the goods to the port but then you will be
responsible for the rest (trucking etc.)

FOB is the preferred method in most cases; it may add to your cost per unit, but ultimately it will be cheaper than
paying your freight forwarder to pick up from the factory. Read more about Incoterms in this article.

Ocean or Air?

When choosing your mode of transportation, the two main factors to consider are volume and speed. How
much freight are you going to send and how quickly do you want it to get there? Depending on the size and your
desired timeline, air or ocean may be the most cost-effective.

Shipping via Ocean

Usually, you will want to ship by ocean as it’s much more cost effective. It does take longer, and it is more complicated,
but you don’t really need to worry about the finer details if you are working with a reliable freight forwarder like
Flexport. So don’t let the Incoterms scare you!

When you ship your inventory by ocean, it will be sent in a container. Depending on the size of your shipment, you
will use one of the following:

Less than Container Load (LCL): This is often what Amazon sellers use, as you can keep inventory low and ship
in smaller volumes to keep that inventory lean and avoid any storage fees in the future. Your product would be shipped
with goods from other businesses.

Full Container Load (FCL): This can be cheaper, and as the name suggests, you do not need to share a container
with goods from other businesses. You can also sometimes ship FCL directly to an Amazon warehouse without
unloading the container

Speak to your forwarder to find out whether you need to ship LCL or FCL for the amount of goods you are shipping.
You will need to relay this information to your supplier who will be the one who starts the shipping journey from their
warehouse to the port in China. Beware, changing your shipping terms after you have already made an agreement
with your supplier may result in additional fees.

CONTENTS
 29 Jungle Scout

Shipping via Air

This is the fastest and simplest option, however it’s also the most expensive. Airlines will determine the cost of your
shipment based on weight type.

Actual, Gross, or Total: the actual weight of your cargo, including packaging and pallets
Volumetric or Dimensional: the volume of your cargo,converted into a weight equivalent
Chargeable: whichever of the two above amounts is greater.

Shipping by air is usually reserved for small orders, or emergency situations, like being out of stock. But in those
circumstances it can be very useful, and provides a much faster, door to door service from your supplier to the Amazon
fulfillment center.

Shipment Plans in Seller Central

No matter how you decide you get your inventory to Amazon’s door, you will need to set up a shipment plan in your
Seller Central account. Watch this handy video guide to learn more about that process.

This was a brief guide on your shipping and delivery options. It’s important to have a general idea of how things
work at this stage, and we have several resources that dig into the details of your shipping options to make this step as
pain-free as possible.

CONTENTS
 30 Jungle Scout

Managing Your Inventory

Though it may seem far off at this point in the process, I want to go over a few rules and regulations to have in place for
inventory management. This is often an overlooked and challenging topic for Amazon sellers, but the most impactful
way to increase your cash flow and gain advantage over your competitors.

As your product takes off, you’ll need to have an effective system in place to keep that product in stock - you do not
want to see the dreaded Out Of Stock note on your product detail page! This will in turn affect your Best Seller Rank,
organic sales, and most importantly, your profits.

Predicting the unpredictable is almost an impossible task, but by figuring out a few key figures, you can find your
formula for demand forecasting and efficiently manage your inventory. I will walk you through the five questions to
ask yourself:

1. What is the lead time?

Lead time = the number of days it takes from the point of placing your order with your supplier to the point
where it’s ready for sale on Amazon. You have to take into consideration manufacturing time, packaging,
shipping time, customs and importing, domestic shipping to an Amazon warehouse, etc.

You need to consider delays at any of those points, as each one can impact the lead time. This will also be
specific to your supplier and their factory - their work hours, holidays, etc. It’s best to honestly assess each step
and calculate a conservative lead time.

2. What is your safety stock?

Safety stock = your “buffer” or insurance inventory against a stock out. Basically, it’s the extra inventory are you
willing to invest in and hold case of a surge demand to avoid missing out on sales.

You don’t want to overinvest and use capital that could be used elsewhere, on marketing or other products.
Ultimately, this is a best guess, but you can calculate your Safety Stock by using either days or a percentage of
your total inventory that fits your budget.

3. What is your sales velocity?

Sales velocity = how fast you sell your inventory. How many units do you sell per day/week/month/year? This
information will help you predict demand once you track it for a given period of time.

4. What is your current inventory?

Take a look in Seller Central periodically to see how much inventory you have left.

5. What is your reorder point (in number of units)?

Reorder point = assessing when you should reorder, based on how many units of inventory you have in stock.

CONTENTS
 31 Jungle Scout

In my experience, when you place your order is far more important than how much you order when managing
your inventory. Basically just figure out how many days of inventory you have in stock, and how long it takes you to
get inventory after you place an order, and convert that into actual units of inventory. You’ll be set to make the best
reordering decisions for your product!

Do you want even more advanced tips to stay ahead of the inventory management curve? Here are a few more things
to think about (and read even more here):

• Return on Investment – how many units are you investing in, and how much will you make on that in return?
What is the Return On Investment on your product? Instead of thinking about profit in absolute terms, think of
it as a percentage of your investment. It would be awesome to make $1000, but did you have to invest $20,000 to
make that, or $1,000? Clearly you want to maximize your return on investment as much as possible!

• Import Via Ocean or Air – Importing by sea or air is a constant question for sellers. Do you wish to get the
speed and flexibility of air, or the cost-savings of ocean freight? It depends on your needs at a given time, as each
has its pros and cons.

• Product Segmentation – once you’ve been selling a lot, it’s important to have safety stock for your best selling
products. Use a higher multiplier for your Safety Stock to ensure that you have your best selling products on hand.

• Plan Ahead – Think about your next order, not just today’s order. Pick suppliers that are good communicators,
so you can be able to understand what your lead time will be, as it can be often changing.

• Are there any holidays or seasonality issues that may affect the timeline? (Look at Google Trends to get an
idea.)

• Does production time change depending on how many units you order? What are the time and cost differences
between ocean freight (slowest and cheapest), air cargo (faster than ocean, a bit more expensive), and air
express (fastest and most expensive)?

Answering these questions up front could save you a huge headache down the road.

• Know Your Assumptions – Your calculations for inventory management rely on solid assumptions. Your lead
time, sales velocity, safety stock, etc. All of this can affect your decision on how much inventory to keep, and
therefore what your cash flow, growth rate, and profits can look like.

CONTENTS
 32 Jungle Scout

When you’re ready to begin implementing your own inventory management plan, jump on over to Forecastly - an
application that can assist you with inventory forecasting, product analytics, and inbound shipping management.

Forecastly keeps your cash flowing and your sales rocking by letting you know when to replenish your FBA inventory,
how much to order, and where your shipments are.

In my own experience as an Amazon seller, inventory forecasting has always given me a bit of a headache, and this
application will be a huge help to make better buying decisions.

CONTENTS
 33 Jungle Scout

CHAPTER 6

Forming and Maintaining

Business Relationships
Generally speaking, China is the dominant territory of product manufacturers, but you should be aware of all the
potential countries, cultures, and customs when sourcing your product. China provides a tremendous amount of
opportunities to build your business and I’ve always had a positive experience with my suppliers. They have always
been extremely eager to get new business, form professional partnerships, and are often highly knowledgeable about
their products.

Regardless of location, a good supplier will be responsive and happy to meet your business needs, but they will also
draw a line if meeting your requests becomes too costly or inefficient for them. By working together to resolve issues
and clearly communicating your business needs, you will be well on the way to a successful business partnership!

When you’re in the beginning stages of forming your relationship, it always helps to put in the extra effort. Using
China as an example, here are a few helpful tips to improve your communication and any potential language barriers:

• Address each person formally by their last time and a title until you’re told otherwise. It can sometimes be
considered offensive to use the first name.

• Try a bit of Chinese in your emails – for example “Ni Hao” – this shows that you are making an effort and taking
an interest and many sales reps like to see this.

• Always try to be mindful of holidays and local issues. Some holidays (like Chinese New Year) or local issues, can
have a huge impact on working with businesses in China.

• Appreciate gifts – it’s typical for Chinese suppliers to give gifts, so accept them and be grateful. It’s never a bribe
and it doesn’t mean you should go and place an order with them, it’s just a really friendly token of appreciation.

• Don’t bring up politics or criticize China – this one speaks for itself.

• Be on time for meetings, which is good manners for any business relationship.

In the past, I’ve recommended these resources to get up to speed on Chinese customs that will allow for smoother
communication transactions:

1. Global business tips from Alibaba.com

2. Chapter 4 This is China
3. Destination China: Entrepreneur’s Journey From Wall Street to Business in China
(fun and inspiring entrepreneurial success story)
4. smartchinasourcing.com – Free in depth articles from industry leaders

CONTENTS
 34 Jungle Scout

Communication via multiple channels

What is the best way to communicate?

Beyond your initial correspondence via email, Alibaba.com has integrated a communication platform and messaging
system into their website and mobile app. Conveniently you can handle all discussions in app with real-time translations
when you’re chatting with your suppliers!

WeChat is a very popular and helpful option for communicating with Chinese suppliers. As a messaging and social
app, it’s extremely useful for asking quick questions, sending pictures, and videos. Additionally, if there are any
problems
with a product, WeChat allows for easy video calls to review a product or even do product inspections.

Skype and WhatsApp are also comparable messaging platforms and perfectly viable solutions for this as well. It’s up
to you and your supplier to choose your preferred mode of communication, and to set up a few expectations.

Let them know to expect a phone call if something is urgent, an email for formal requests, and instant messaging for
all other day-to-day communication, etc. Just make sure to make yourself available to chat with your representative
when it’s required!

CONTENTS
 35 Jungle Scout

Conclusion

My goal for this ebook was to equip you with enough tips and templates that you can now easily replicate the methods
I have used to find suppliers that are manufacturing my most successful products.

The key is to be organized, ruthless, and place a strong emphasis on quality and strong supplier relationships.

Let us know your thoughts, questions, or share your experiences with finding manufacturers and suppliers!

CONTENTS
 36 Jungle Scout

Glossary
Assessed Supplier: Facilities are assessed by a third party inspection company and an Assessment Report is available
to download.

EXW (Ex Works) – When the freight forwarder is responsible for collecting goods from the factory and getting them
to the port.

FCA – The middle ground between FOB and EXW, when the supplier will bring the goods to the port but then you
will be responsible for the rest (trucking etc.).

FOB (Free On Board) – When the supplier is responsible for getting the goods from the factory to the port.

Gold Supplier: A premium membership for suppliers for a fee which includes onsite check
and promotional opportunities to improve their appearance in search results.

Lead Time: The number of days it takes from the point of placing your order with your supplier to the point where
it’s ready for sale.

Manufacturer: A supplier that manufactures products in their own factories. Typically products are of the same
niche/category/material.

Minimum Order Quantity (MOQ): Refers to the minimum amount that can be ordered from a supplier. This
number may be negotiable based on other factors - future orders, past business and reliability, etc.

Onsite Checked: Onsite operations are checked by Alibaba and the existence of the
production location is confirmed by a third-party verification company.

Reorder Point: Assessing when you should reorder, based on how many units of inventory you have in stock.

Request for Quotation (RFQ): A document that a business submits to one or more potential suppliers to solicit
pricing for a product or service.

Safety Stock: Surplus of product that is held as extra insurance inventory against a stock out.

CONTENTS
 37 Jungle Scout

Sales Velocity: How fast you sell your inventory, based on how many units you sell per day/week/month/year.

Trade Assurance: A free service that protects your orders from payment to delivery. If you have a dispute with your
supplier, you can submit a claim to Alibaba to review.

Trade Capacity: On a supplier’s profile page, this will show the breakdown of the countries and marketplaces they
export to.

Trading Company: A supplier that acts as a middleman, and will source products from manufacturers and then
sell them to you.

CONTENTS