International trade players or entrepreneurs with big ideas in mind, you want to import from China but you ask yourself the following question:
Do I need to work with a sourcing agent to manage my procurement from China?
It is true that doing things by yourself generally allows you to derive maximum benefit, both in terms of profitability and knowledge. However, you must have all the elements favorable to the steps you are taking for this to be truly beneficial, otherwise these steps could turn out to be very detrimental for your company. Sourcing in China is not different, as it requires not only some solid knowledge, but also in-depth experience of the country and its customs, which have a key place in business. So, perhaps you are better off working with a sourcing agent, due to a lack of time, knowledge and expertise.
In this article, I wanted to provide you with some answers by presenting the main advantages and disadvantages of working with a sourcing agent, in order to help you make the right decision.
What are the benefits of working with a sourcing agent?
First, if you don't have the time or inclination to take care of your sourcing operations. Indeed, the sourcing process is very long and is conducted through several steps. All these steps are as decisive as each other. In this case, it is wise to work with a professional, who will do what is necessary to provide you with an effective solution that meets your needs. Working with a sourcing agent will allow you to optimize your time and focus on other aspects of your business: communication, marketing, or business development. The sourcing agent will take care of the supply autonomously, without neglecting communication with your company. He will visit several factories to identify or design samples according to your needs. You could then confirm that the product is indeed in line with your expectations. Obviously, all of these steps take time, so working with an agent will save you a lot of time.
Then, the agent will take care of the consolidation. After negotiations with different factories that may be in different provinces, the agent's role will also be to optimize the transportation cost. Consolidating the goods to one place will allow the quality control of the goods to be carried out more efficiently and less expensively. This is an essential step to avoid major risks and major financial damage, which requires time and a great organizational capacity. By working with a sourcing agent, your time will be optimized, your margins will be secured, and the risks will be minimized.
Finally, you can benefit from the experience and expertise of your sourcing agent. Agents have sourcing techniques that they continually improve, and they know the mistakes to avoid. Most of them have developed a large portfolio of manufacturers and have privileged relationships with them. Working with a sourcing agent can therefore make you benefit from the privileged relationships.
What are the disadvantages of working with a sourcing agent?
First, you lose control over the most important aspect of sourcing, namely the relationship with the supplier. Your agent will become the guarantor of the relationship with your supplier, and you will somehow lose total control over your supplies. The agent will be able to obtain better rates by dealing directly with the supplier and will be able to be informed of the latest product innovations. The supplier may also reveal certain valuable information about your market and the competition to your agent, without the latter sharing this information with you. Maintaining a direct relationship with your supplier will therefore be very important for your business. The notion of "guanxi" (relationship) has a completely different importance in China. Thus, it is strongly recommended to maintain a relationship with your interlocutors in order to obtain long-term business opportunities. In China, the supplier can even become a friend with whom one can maintain a privileged relationship. This is why it is important to choose your sourcing agent carefully, so that the latter is a full-fledged collaborator with your company.
Then, you risk being entirely dependent on the schedule of your sourcing agent. If, for example, you need urgent information regarding production progress, your agent may not be able to get back to you in time. Before choosing a sourcing agent, make sure they are available and willing to proactively communicate with you.
Finally, working with a sourcing agent limits your control and visibility over the supplier. A dishonest agent could decide to work with another cheaper factory in order to increase their margins at the expense of the quality of your products. This depends on how you pay your agent, but the risk exists. You will therefore have to ensure transparency in the supply chain, which depends on a good choice of the sourcing agent with whom you decide to work. The goal is to create a virtuous circle between each member of the supply chain, without your business being at fault.
In conclusion, working with a sourcing agent for your procurement from China can be the solution to benefit from compliant and quality products at an attractive price, while allowing you to manage the other aspects of your business. Nevertheless, it is important to maintain some control over your supplies.
But don't forget, your margins are in China with your supplier and nowhere else! So make the right choice, find a reliable and honest collaborator, who will help you take advantage of the opportunities offered by the sourcing in China.
Comments