The Ultimate Glossary of Sourcing Terms Every Shenzhen Trading Company Client Should Know
International sourcing comes with its own specialized vocabulary. A Shenzhen trading company uses these terms daily, and understanding them helps you communicate more effectively. This ultimate glossary of sourcing terms covers the essential terminology every Shenzhen trading company client should know, organized by category for easy reference.
General Sourcing Terms
Sourcing and Procurement
Sourcing: The process of finding, evaluating, and engaging suppliers for products or components. A Shenzhen trading company provides end-to-end sourcing services.
Procurement: The broader process of acquiring goods or services, including sourcing, purchasing, and logistics management.
RFQ (Request for Quote) : A formal document requesting pricing and terms from potential suppliers. Your Shenzhen trading company manages RFQs on your behalf.
BOM (Bill of Materials) : A complete list of raw materials, components, and assemblies required to manufacture a product.
OEM (Original Equipment Manufacturer) : A factory that manufactures products according to your specifications and branding.
ODM (Original Design Manufacturer) : A factory that designs and manufactures products that you can brand and sell as your own.
| Term | Definition | Why It Matters |
|---|---|---|
| Sourcing | Finding and vetting suppliers | Foundation of import success |
| RFQ | Request for pricing and terms | Standard process for obtaining quotes |
| BOM | Complete parts list | Essential for accurate pricing |
| OEM | Custom manufacturing per your specs | Your product, your brand |
| ODM | Factory-designed products you brand | Faster product development |
Quality Control Terms
AQL (Acceptable Quality Limit) : The maximum number of defective units allowed in a batch, expressed as a percentage. Standard AQL is 2.5% for major defects, 4.0% for minor defects.
QC (Quality Control) : The process of inspecting products to ensure they meet specifications. A Shenzhen trading company provides QC at multiple production stages.
QA (Quality Assurance) : The broader system of processes and standards designed to ensure consistent quality.
PPI (Pre-Production Inspection) : Inspection of raw materials and components before production begins.
DUPRO (During Production Inspection) : Inspection conducted during manufacturing to catch issues early.
PSI (Pre-Shipment Inspection) : Final inspection before goods are shipped.
FAI (First Article Inspection) : Inspection of the first production unit to verify it matches the approved sample.
| QC Term | When It Happens | What It Checks | Cost Impact |
|---|---|---|---|
| PPI | Before production | Raw materials, components | Prevents material issues |
| DUPRO | During production | Workmanship, process compliance | Early problem detection |
| PSI | Before shipment | Final quality, packaging, labeling | Last chance to catch issues |
| FAI | First production run | Sample vs. production match | Prevents mass production errors |
Manufacturing Terms
MOQ (Minimum Order Quantity) : The smallest quantity a factory will produce per order. Common MOQs range from 500 to 5,000 units depending on product complexity.
Lead time: The total time from order placement to delivery, including production time, quality control, and shipping. Typical lead times from China: 4-12 weeks for production plus 4-8 weeks for shipping.
Tooling: The molds, dies, and fixtures required to manufacture custom products. Tooling costs range from $2,000 to $50,000+ depending on complexity.
Sample: A physical example of a product made to verify design, quality, and specifications before mass production.
Specification (Spec) : A detailed document describing product requirements including dimensions, materials, finishes, and performance criteria.
Tolerance: The allowable variation from specified dimensions, expressed as ± value. Tighter tolerances increase manufacturing cost.
| Manufacturing Term | Typical Range | Negotiable? |
|---|---|---|
| MOQ | 500-5,000 units | Yes (with price adjustment) |
| Lead time | 8-20 weeks total | Somewhat |
| Tooling cost | $2,000-50,000+ | Yes |
| Tolerance | ±0.1mm to ±5mm | Depends on process |
Shipping and Logistics Terms
Incoterms: Standardized international trade terms defining buyer and seller responsibilities. Common Incoterms: EXW, FOB, CIF, DDP.
FOB (Free on Board) : Seller delivers goods to the port and loads them onto the vessel. Buyer takes responsibility from that point.
CIF (Cost, Insurance, and Freight) : Seller covers shipping and insurance to the destination port.
DDP (Delivered Duty Paid) : Seller handles everything including shipping, duties, and delivery to your door.
LCL (Less than Container Load) : A shipping method where multiple shipments share a container. More expensive per unit than FCL.
FCL (Full Container Load) : A dedicated container for your shipment. Most cost-effective for large orders.
B/L (Bill of Lading) : The official document confirming shipment and serving as a title document for the goods.
HS Code (Harmonized System Code) : A standardized numerical coding system for classifying products for customs purposes.
Customs clearance: The process of obtaining permission from customs authorities to import or export goods.
For logistics terminology support, Hong Kong Trading Company Services provides cross-border shipping expertise. Additionally, China Sourcing Agent Services manages end-to-end logistics coordination.
Payment and Financial Terms
T/T (Telegraphic Transfer) : Electronic transfer of funds between bank accounts. The most common payment method for China sourcing.
L/C (Letter of Credit) : A bank guarantee that payment will be made when specified conditions are met. Provides security for both buyer and seller.
Deposit: An upfront payment (typically 30%) made when the order is placed. Balance is paid after inspection or before shipment.
Balance payment: The remaining payment (typically 70%) due after production is complete and quality is verified.
Payment terms: The agreed schedule and method of payment. Common terms: 30% deposit, 70% before shipment (T/T), or L/C at sight.
Transfer pricing: The price at which related-party transactions are recorded for tax purposes.
DDP pricing: All-in pricing including product, shipping, duties, and delivery.
Contract and Legal Terms
NDA (Non-Disclosure Agreement) : A legal contract protecting confidential information shared during business negotiations.
Purchase Order (PO) : A formal document authorizing a supplier to produce and ship specified goods at agreed terms.
Service Level Agreement (SLA) : A contract defining the scope, quality, and performance standards for services provided.
Force Majeure: A contract clause excusing performance when circumstances beyond control prevent fulfillment.
Arbitration: A method of dispute resolution outside of court, commonly used in international trade contracts.
Frequently Asked Questions (FAQ)
Q1: Do I need to know all these terms to work with a Shenzhen trading company?
No, but understanding the key terms helps you communicate more effectively. Your Shenzhen trading company will explain any unfamiliar terms when they arise. Start with the most common terms (AQL, MOQ, FOB, Lead Time, PSI) and build your vocabulary as you gain experience.
Q2: Where can I find more detailed definitions?
Many trade organizations provide detailed glossaries. The International Chamber of Commerce (ICC) publishes the official Incoterms rules. Your Shenzhen trading company should provide explanations for any terms used in your agreements and communications.
Q3: Do these terms vary between different trading companies?
The core terms are standard across the industry. Some trading companies may use slightly different terminology or acronyms. If you’re unsure about any term, ask your trading company for clarification. Good communication is essential for successful partnerships.
Q4: Are there industry-specific terms I should know?
Yes. Each industry has specialized terminology. Electronics sourcing has terms like SMT, PCBA, ESD, and RoHS. Apparel has terms like GSM, cut and sew, and grading. Your Shenzhen trading company should be familiar with the terminology relevant to your product category.
Q5: How do I keep track of all these terms?
Create your own reference document. As you encounter new terms, add them with definitions. Your Shenzhen trading company can help build this glossary for your specific industry and products. The glossary in this article is a starting point—customize it as you learn.
Conclusion
Understanding the language of international sourcing is essential for effective communication with your Shenzhen trading company and Chinese suppliers. This glossary covers the most important terms across sourcing, quality control, manufacturing, shipping, payment, and legal categories. Keep this guide handy as you navigate your sourcing journey. As you gain experience, these terms will become second nature, and you’ll communicate with your trading company with increasing confidence and precision.
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