The purchase order and deposit terms

The purchase order (PO) is the contract your production runs on. A good PO is short and total: style numbers and quantities per variant, the tech pack revision and golden sample it must match, unit price and total, packaging spec, the agreed ship date, payment schedule, and defect terms. If a detail was negotiated, it is on the PO or it does not exist — factory group chats are full of “but we agreed” pointing at messages nobody can find.

Standard payment rhythm for overseas production is a deposit to start (commonly around 30%), with the balance after inspection passes and before shipment releases. Understand what each side is buying: the deposit buys materials and a slot on the line; holding the balance until inspection is your only leverage that arrives before your goods do. Terms that ask for most or all of the money before a PP sample exists are asking you to fund someone else's business at your risk — decline, however friendly the chat.

Protect the wire. Pay the company named on the business license and the PO, to the account on the factory's official invoice — and when any payment detail changes by message, verify it by a second channel (a call to a number you already have) before sending. Payment-detail fraud targets exactly this moment, exactly this industry, and it succeeds because the request looks like every other message in the thread.

Put the calendar in writing too: PP approval date, materials-in date, production window, inspection date, ship date — each with an owner. Lead times are real (four to eight weeks of production is unremarkable for soft goods) and they start at approval, not at your first message. The launch date in your brief survives only if these dates were written down while slipping was still avoidable.

QC: inspections that catch what photos hide

Quality control is not a vibe at the end; it is three checkpoints you schedule when the PO is signed. Inline inspection — during production, someone checks the first units off the line against the golden sample, while the line can still be corrected. Pre-shipment inspection (PSI) — when goods are finished and packed, a sample of cartons is opened and units are measured, inspected, and tested against the pack before your balance releases the shipment. Arrival check — your own count and spot-check on delivery, while claims windows are open.

Inspections sample statistically, not exhaustively — the industry standard is AQL (acceptable quality limit) sampling, where a defined number of units is drawn and the lot passes or fails on how many defects appear, classed as critical, major, or minor. You do not need the full standard memorized; you need three things agreed in advance: who inspects (your own eyes for small runs, a third-party inspection company for serious ones — a few hundred dollars a visit), what they check (your critical specs, measurements, artwork, packaging, count), and what happens on a fail (rework, re-inspect, or reject — written on the PO, per Module 5 Lesson 1).

Why photos cannot substitute: a production video shows the best angle of the best unit at the best moment, and it cannot be measured. Defects hide in distribution — the bottom cartons, the last hour of the run, the size nobody photographed. Random sampling exists precisely because defects do. Every founder who skipped inspection has a story that ends with opening cartons at home; the inspection fee is the tuition for not telling it.

Keep the inspection report with the development file, pass or fail. It is your evidence in any dispute, your baseline for the reorder conversation (“last run: 2% cuff-width majors — watch it this time”), and over several runs, the truest record of whether your factory is getting better or quietly worse.

• Inline check scheduled: first units off the line compared to the golden sample
• Pre-shipment inspection booked; inspector has the tech pack and critical specs
• Inspector checks measurements, artwork placement, packaging, and carton counts
• Fail terms (rework / re-inspect / reject) written on the PO before production
• Balance payment released only after the inspection passes
• Arrival spot-check done and the report filed with the development file

Freight, duties, and Incoterms in plain English

Scenario: two quotes land for shipping your order. One is $1,900, the other $640 — same goods, same destination. The cheap one is not a bargain and the dear one is not a scam; they are probably pricing different slices of the journey. Freight confusion costs founders more than freight itself, and it dissolves once you know the vocabulary.

Incoterms are three-letter codes that state where the seller's job ends and yours begins. EXW (ex works): the price covers goods at the factory door — every truck, form, and fee after that is yours. FOB (free on board, named port): the factory delivers goods onto the ship; you pay ocean freight, insurance, and everything from the destination port home. DDP (delivered duty paid): the seller handles the whole journey including duties, to your door — simplest, least visible, and the one where you must confirm duties and taxes were genuinely paid, because the importer of record questions land on the goods' owner.

Duties and taxes are set by your product's tariff classification (its HS code) and its origin — for many textile goods entering the US, duties in the teens of percent are normal, which is why Module 1's calculator carries a duty line. A freight forwarder is the professional who moves goods across these borders for you: they book the freight, file the customs entries, and translate this whole lesson into one invoice. For a first import, a forwarder is not an extravagance; they are the difference between a shipment and a storage-fee saga at a port warehouse.

Choose the shipping method by margin and calendar, not habit: air for samples and small, urgent, high-margin runs (fast, priced by weight and volume); sea for bulk (slow — weeks — and dramatically cheaper per unit). Get freight quotes on the actual packed dimensions and weight from the factory, because a quote on guesses produces a surprise with your goods held as its hostage.

True landed cost and the reorder system

Landed cost is the only cost that matters, and it is a sum with no hiding places: unit price, plus packaging if it was separate, plus freight to your door, plus duties and brokerage, plus inspection, divided by the units that arrived sellable. Compute it the week the goods land, while the invoices are warm, and write it into the development file next to Module 1's estimate. The gap between the two numbers is your real education — every founder's first landed cost teaches one line they underestimated, and the lesson is only wasted if it is not recorded.

Price and plan from the landed number, not the factory number. If landed came in at $6.40 against a $6.00 ceiling, the product is not doomed — but the margin story you tell yourself must use $6.40, and the fixes queue for the reorder: freight consolidation, a packaging change, a quantity step that earns the next price break. Margin is managed across orders, and the landed-cost sheet is where that management lives.

Which brings us to the quiet prize of this whole course: the reorder is a system, not a project. Your tech pack is current, your golden sample is sealed, your supplier is scored, your PO is a template, your inspection checklist exists, your landed math is a spreadsheet with last run's real numbers in it. Reordering is: update quantities, confirm any revision, sign, deposit, inspect, ship. Founders without the file re-run the education every season at full price.

Keep the file alive. Every run, append: final landed cost, defect notes from inspection and from customers, sell-through by variant, and the one change you will make next run. That page — your product's memory — is worth more than any single negotiation you will ever win, because it compounds. You started with an idea. You now have inventory, documents, and a system that makes the second product faster than the first. That is the whole business.