Reading a quotation from a Chinese manufacturer
The unit price is the least informative number on the page. What to look for in tooling, MOQ, payment terms and the lines that are missing.
A client forwards three quotations from factories in Guangdong and asks which one is cheapest. The unit prices differ by thirty percent. After an hour with the documents, the cheapest quote is the most expensive one. This happens often enough that it is worth explaining how to read these documents.
Start with what the quote assumes
A quotation is an answer to a question, and the question is the RFQ package you sent. If the package had no tolerance drawing, no finish specification and no packaging spec, each factory answered a different question. Before comparing numbers, check whether the quotes are for the same product.
The quickest check: ask each supplier what they assumed for the three things you did not specify. The answers tell you more about the supplier than the price does.
Tooling
Tooling is usually the largest single number and the least comparable one.
Look for the steel grade, the number of cavities, the guaranteed shot life and who owns the mould. A tool quoted at half the price of another is often a single-cavity tool in softer steel with a shorter life. That is a fine choice for a pilot run and a bad one for a product that should sell for five years.
Ask whether the tooling price includes the first trial shots (T1, T2), texturing and any sliders or lifters the design needs. These are frequently quoted later as extras.
Minimum order quantity
MOQ is a negotiation, not a fact. A factory quotes a high MOQ to make the unit price look good. Ask for the unit price at the quantity you will actually order in the first year, and at the quantity you might order in the third. The slope between those numbers tells you how the factory thinks about your business.
Payment terms
Thirty percent deposit, seventy percent before shipment is the default. Everything else is negotiable once there is trust, and nothing is negotiable before. What matters more than the split is what triggers each payment. "Before shipment" should mean after your inspection, not after the factory's.
The lines that are missing
Most problems hide in what the quote does not mention:
- Secondary operations: painting, printing, assembly of purchased parts, ultrasonic welding.
- Packaging: inner box, master carton, pallets, labels.
- Inspection: who does it, against which standard, who pays for the time.
- Certification samples: how many, who ships them to the test house.
- Spare parts and the first set of replacement components.
- Incoterms: EXW and FOB are very different numbers once freight is added.
Ask for each one explicitly. A supplier who adds them without complaint is a supplier you can work with.
Lead times
A quoted lead time without a start condition is meaningless. "45 days" from what? From deposit, from approved samples, from the arrival of your purchased components? Write the start condition into the order.
What we do
Our Shanghai team visits before we send an RFQ, so we know whether the factory in the quote is the factory that will make the parts. We send one RFQ package with a tolerance drawing, a finish specification and a packaging spec, so the quotes compare. And we read the quotes the way described above before we tell a client which one is cheapest.
Usually, it is not the one with the lowest unit price.