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What B2B Sourcing Means in Practice
Guide · Reading time about 7 minutes
Sourcing is the work a company does before it ever places an order: deciding exactly what it needs, finding firms able to make it, proving they can, and agreeing terms that survive contact with reality. This is a plain-language guide to that process and to the vocabulary buyers meet along the way.
What makes it business-to-business
In consumer trade the price is on the label and the terms are fixed. In B2B trade almost nothing is fixed. Quantity, specification, packaging, lead time, payment terms and delivery terms are all negotiated together, and moving one of them moves the others. A quotation that looks cheap at ten thousand units may be unavailable at one thousand; a shorter lead time is usually bought with a higher price or a worse payment term. Treating the unit price as the deal is the most common and most expensive beginner's mistake.
The sequence a purchase normally follows
- Specification. Write down what the product must be: dimensions, materials, tolerances, finish, packaging, labelling, applicable standards and any certification the destination market requires. An unwritten specification is not a specification; it is a disagreement waiting to happen.
- Supplier discovery. Build a longlist from trade fairs, directories, industry associations and referrals. Distinguish manufacturers from trading companies — both are legitimate, but they carry different margins, different flexibility on specification and different quality control.
- Qualification. Check that the counterparty exists, is registered, has the equipment for the job and has exported to your region before. Ask for business licence, export history, factory audit reports and references.
- Request for quotation. Send the same written specification to every candidate so the answers are comparable, and ask each quote to name a delivery term and a validity period.
- Samples. First a stock sample to judge general capability, then a pre-production sample made to your specification. Approve it in writing; it becomes the reference against which the production run is judged.
- Production and inspection. Agree in advance who inspects, when, against what standard, and what happens if the goods fail.
- Shipping and documents. The paperwork is part of the product: an error in the commercial invoice or the origin declaration can hold a container at the border long after the goods themselves are fine.
- After-sales. Record defect rates, late deliveries and disputes against each supplier. The record is what turns a lucky first order into a reliable second one.
Landed cost, not unit price
The number that decides whether a purchase made money is the landed cost: everything paid to get one saleable unit into your warehouse. It is built from far more than the quotation.
- Tooling and moulds — often a one-off charge that only pays back across several orders, and a reason suppliers are hard to switch later.
- Minimum order quantity — the smallest run a factory will accept; it sets how much capital the order ties up.
- Inspection and testing — third-party inspection days, laboratory tests, certification fees.
- Freight and handling — carriage, terminal charges, local delivery, demurrage if a container is not collected in time.
- Duty and import taxes — driven by the tariff code and the origin of the goods, not by what the seller calls them.
- Financing and currency — the cost of money tied up between payment and sale, plus the exchange-rate movement in between.
- Rework, scrap and returns — the part of the cost that only appears after the goods arrive.
Quality control in four stages
| Stage | When | What it catches |
|---|---|---|
| Pre-production | Before the line starts | Wrong materials or components delivered to the factory |
| During production | Around 20–60% complete | A systematic fault, while there is still time to correct it |
| Pre-shipment | Goods finished and packed | Defect rate, quantity, labelling and packaging against the approved sample |
| Container loading | At loading | That what was inspected is what actually goes into the container |
Vocabulary worth knowing
- RFI / RFQ — request for information, request for quotation: the two formal steps before an order.
- MOQ — minimum order quantity.
- OEM / ODM — a factory building to your design, versus a factory offering its own design for you to brand.
- Lead time — from confirmed order to goods ready; it does not include shipping unless the quote says so.
- SKU — one distinct sellable variant; colour and size each make a new one, which is how a simple order becomes a complicated one.
- AQL — the sampling standard used to decide whether a finished lot passes or fails inspection.
Where deals usually go wrong
- Negotiating price before the specification is written.
- Approving a sample verbally, or approving a sample the factory chose.
- Leaving the delivery term vague, so nobody knows who pays for what and from which point the risk has passed. The Incoterms rules exist precisely to close that gap.
- Paying in full in advance to a counterparty that has not been verified.
- Ordering a full container of a product nobody has yet sold a single unit of.
This page is general information about how sourcing works, published by Line Markt LLC while its platform is in preparation. It is not procurement, legal or customs advice, and it does not describe a service currently on sale.