Why Turn to China Sourcing Agents for Your Procurement Needs?
Not only does sourcing goods and materials from international markets help to increase profits, but it also helps to diversify in terms of what you offer. Sourcing from low-cost markets like China has helped many companies overcome the issues of low-profit margins on goods that cost more in their local market than they do abroad.
What is Global or International Sourcing?
The concept of sourcing from other countries came about with the need to achieve a competitive advantage by marginalizing costs, which involve economies of scale, i.e. using the benefits of low cost outside manufacturing and resources to push profits higher without compromising on quality. China makes the top of the list for a plethora of reasons, from its investor-friendly policies, low costs, and large domestic markets to its well-established manufacturing capabilities. Preservation of local resources, prioritizing relocation activities and the investing side of it all makes it difficult for companies to have a physical presence in China, which gave birth to the concept of sourcing directly and eliminating the need to set up base there.
A sourcing agent in China works directly with the investing company and helps to hunt and negotiate terms with Chinese suppliers, besides aiding in the basic ground work which involves quality control, market research, pre-shipment scrutiny, customs go-ahead and supplier development.
Benefits of Sourcing Products from China There are plenty of benefits to be considered when it comes to sourcing internationally, but the end game is all about profits. When it comes to sourcing agents China can add value to the supply chain, as quality and service can be found at considerably low prices, with just a little research and patience.
Let’s say an Indian company decides to work with sourcing agents in China. The following are the major benefits it is looking at:
- Minimizes Costs – China sourcing agents help to find the necessary suppliers; this reduces and controls operating costs that would have been extremely high if the operations were to be carried out in India.
- World Class Capabilities – Hiring a China sourcing agent in India helps companies gain access to world-class capabilities that are offered by Chinese manufacturers, without the cost and effort of outsourcing to developed markets.
- Increased Internal Focus – The Indian company can increase its focus on internal matters and business operations, as the China sourcing agent is handling its ground level activities, leaving its internal resources free for other matters.
- Balancing Risk – Working alongside expert China sourcing agents allows the Indian company to balance its risk, since outsourcing certain components shift the responsibilities to the outsourced vendor.
How to Find the Perfect Sourcing Agent?
It’s common knowledge that China is known for manufacturing on a large scale, which automatically puts it in the limelight for global sourcing. That said, choosing the ideal China product sourcing agent becomes a daunting task, especially with an abundance of suppliers and vendors targeting the Indian market.
Types of Sourcing Agents
Considering the large-scale availability of suppliers, manufacturing hubs and companies looking to link up to materialize gains for expansion, there is a large number of sourcing agents available and willing to help get the job done. The first step is knowing about the types of sourcing agents and how they work.
They are broadly categorized as:
These agents typically charge a fixed 5-10% commission, i.e. a percentage of FOB price, to locate suppliers, place orders and follow up on them. The crucial consideration here is to find someone who is completely trustworthy and has extensive experience at procurement, especially large orders. Some agents may receive commissions from suppliers as well as buyers, which means that it’s often in their interests to ensure your orders go only to a certain vendor regardless of whether others offer better quality and/or price, or to try and cover up any mistakes the supplier makes.
For infrequent or smaller orders, a trading company can help with your procurement needs. These companies are typically adept at locating small-scale suppliers or factories that don’t normally do exports on their own, helping you get a better price over larger suppliers and handling every detail of production. This helps in some ways, since many companies might want to avoid the hassle of looking for smaller manufacturers as well as large ones. Trading companies normally add their margin to the supplier’s quoted price, but you will not be able to contact the manufacturer or supplier yourself, whether for queries or quality checks.
Third Party Service Providers
These are the most popular choice for companies that place large orders or frequently require sourcing services. A third party service provider acts as your local representation in the market you’re buying from, and their charges are often adapted as per the services you require. In addition to the benefits of proper supplier screening and identification, using a third party service company allows for lower involvement on your part. These agents will take care of every step in the procurement process, from negotiating prices to handling shipping and customs, while keeping you informed at each stage.
What Should You Check while Hiring a Sourcing Agent?
- Certain prerequisites and credentials are necessary when picking an agent, to help consider whether the person/company fits with the company’s vision, like:
- The agent must possess a minimum of 5 years of experience in sourcing operations, in order to have the best possible network and connections.
- They must be a working team of over 20 individuals working closely to evade possible risk of failure.
- A physical presence in China can be very helpful, since sourcing agents based there can act as the company’s local representation.
- The agent must be well integrated with the company’s requirements, and possess experience in the industry or sector that they serve.
It’s imperative to find a sourcing agent China who understands the audit, logistics and sourcing process, and has the know-how of managing Chinese suppliers. Proper knowledge of culture and language, as well as business capabilities and coordination skills are some areas where hiring an experienced sourcing specialist plays a huge role.