There are a lot of moving parts when it comes to sourcing from China. The right sourcing agent will cover all your needs on the supply side.
China possibly sells more manufactured goods than any other country in the world. Often called the ‘World’s Factory,’ the manufacturing sector drives the nation’s economy.
China is one of the most important manufacturers of industrial products due to its low cost. If you want your business to be cost-effective, sourcing from China can be an excellent decision. However, language barriers and mixed business practices can prove to be a hurdle for many foreign buyers, not to mention the huge variety of products available. Here is when a sourcing agent can greatly benefit you.
If the concept of sourcing agents is new to you, let us help you. The simplest definition of a sourcing agent is a third-party that helps you find the right suppliers in a particular country. Generally, sourcing agents are familiar with the business practices and customs of that country and may also speak the local language.
A simple internet search can throw up a huge list of sourcing agents. How do you know which is the right one for you?
When selecting a sourcing agent in China, there are a few things that you need to bear in mind to make the right choice.
When you go through the Google list of sourcing agents in China, look for the location of the sourcing agent. Are they Chinese, or are they a foreign company with an office in China? Doing business with a foreign company is much easier than a native Chinese one. China has strict internet policies that can make checking the credentials of your Chinese sourcing agent difficult.
When you choose a foreign sourcing agent, ensure that they have a well-staffed office in China. Be sure to check out how long the office has been operational in China. Choose a sourcing agent that has a proven track record.
There is a huge difference in the way Chinese businesses and businesses in the west operate. The differences can be largely attributed to the differences in culture, customs, and mindset. It is wise to choose a sourcing agent that has several years of experience in China. A sourcing agent that has extensive experience of working in China will have a large network of reliable contacts vital to your business.
Select a sourcing agent that can give you authentic references from other businesses. Make sure you take the time to talk to these references and also check their websites. Find out how long they have been working with the sourcing agent and the quality they provide. Ask them if they would recommend the sourcing agent.
Your sourcing agent should be able to provide you with relevant documentation for your sourcing and shipping process. The language on the documents will give you a fair idea of how well-versed the agent is with the entire process. The documents that sourcing agents typically provide are Certificate of Origin, Bill of Lading, Fumigation Certificate, and a detailed packing list.
When sourcing products from a foreign country, the quality of the products is of utmost importance. Check with the sourcing agent what measures they have in place to deal with quality issues. Make it clear from the very beginning that you will not accept products of sub-standard quality.
All businesses in China need to have a license to trade. Chinese law is very strict, and you can only conduct a particular type of business on a specific license. Before you start working with the sourcing agent, don’t forget to check their license.
An ideal sourcing agent should be proficient in both English and Mandarin. Make sure that your primary point of contact has both good written and spoken English abilities. It is preferable if the staff in the Chinese office are also proficient in English, as you may need to speak to them directly at times.
Different sourcing agents have different areas of expertise. You must check if your sourcing agent has prior experience in sourcing products that you are interested in. You may ask your agent for records of previous orders, or you may ask for buyer references. You may not find a sourcing agent that deals with only one type of product. Hence, ask for buyer references in the same industry as yours.
We have heard of several sourcing agents who take kickbacks from suppliers. Such agents may help you find a supplier quicker, but the quality of the products may be doubtful. Make sure you only say yes to a supplier that meets your quality and certification norms.
Now that you have narrowed down your list, we have put together a helpful checklist to find the right one for your business.
Create a document that lists your requirements from your sourcing agent as well as your supplier. Take your time to ensure that you have listed all your requirements. Remember that business practices differ in each country. Don’t assume that something is understood just because it is a standard in your country.
For your sourcing agent, you must include the scope of services, level of experience, location, language proficiency, and payment structure. Make sure you also define the requirements for the supplier-working conditions, material types, quality, and delivery times.
Your budget is an important factor in choosing the right sourcing agent for your business. Remember to be flexible with your budget as unexpected expenses may crop up anytime. Be certain you are sure about the number of units that you wish to produce. Also, determine the price you want to pay for your products and how much you are willing to pay the sourcing agent. Be realistic.
Sourcing agents can be classified into three main categories:
1. Single sourcing agents: These agents work on their own. The advantage is that they do not work with too many clients at a time and hence may be able to create a personal relationship with your business. The disadvantage is that a single person may also have limited connections. It will be difficult to verify the credentials of a lone individual, which amplifies the risks.
2. Sourcing agencies: These are sourcing companies that employ several sourcing agents, each with their area of expertise. These companies have more resources, and thus, larger supplier networks. The downside is that these companies tend to be more expensive than individual sourcing agents.
3. Sourcing and logistics companies: These are usually larger companies with sourcing as one of the many divisions. These companies, typically, also offer logistics and quality inspection services. The biggest upside is that all your tasks - from finding a supplier to delivering your product to your warehouse - can be done by a single company. The downside is that they can be very expensive. Also, depending on one company for all your needs, especially logistics, comes with its own set of risks.
Since each type of sourcing agency comes with their own pros and cons, you need to decide which one works the best for your business.
When researching your sourcing agent, don’t limit yourself to Google. Most of us tend to use the first result that pops up on Google. Instead, do a deep dive using other platforms. You should read about the reviews from other sellers and buyers. You should be able to narrow down your choices based on the reviews and testimonials.
You should also speak to their references to find out more about their service and product quality.
For getting the best deals, it is wise to shortlist a couple of sourcing agents. Request a quotation from each of them, including the price for each service, the way the price is calculated, and the different payment structures that they offer.
Don’t forget to ask for a copy of their business license too. Now choose the offer that best suits your requirements and budget.
Once you have shortlisted an offer, try negotiating the price. Larger companies generally have fixed prices. However, they sometimes have some margin for discounts, which can sweeten the deal. Negotiations can go better with independent sourcing agents because they are more flexible with their payments
You may also want to find out if the price would go down if you place repeat orders.
To avoid disagreements in the future, make sure that you document everything that you agree upon. Log important factors like what happens if the product received is of inferior quality or if the consignment is delayed.
Confirm the payment structure, including the amount and type of payment by both parties. Documentation always helps if things don’t go the way you expected.
Many businesses hesitate from using sourcing agents for fear of unprofessionalism and unethical behavior. However, when you use the right sourcing agent, the benefits far outweigh the risks.
Here are a few benefits of using a sourcing agent:
With a reliable sourcing agent, you save a lot of time as you do not need to scour through pages of suppliers trying to find the right one. You also save a considerable amount of time that you would have otherwise spent on vetting the suppliers and undergoing long negotiations. Your sourcing agent will handle all of this to save you valuable time.
When selecting a supplier, you will need to provide a briefing of the product that you need. Your sourcing agent can help you put down the exact details, taking into consideration there is a language barrier between you and the supplier.
When sourcing from China, the idea is to get a lower price than you normally would domestically. However, when the price is too low, the product quality may become questionable. This is where a good sourcing agent can strike a balance. They can get you a good deal, but not so low that it affects product quality.
Negotiations become easier when you have a sourcing agent since they speak the local language. They are aware of Chinese culture and customs. Hence, negotiations with sourcing agents are quicker and more efficient.
It is a good idea to check the credentials of your manufacturer before you start doing business with them. Be forewarned that when you ask for them, all of their credentials and licenses are bound to be in Mandarin. If you need to verify them, you will first need to pay a professional translator to translate these documents. That in itself would be quite expensive. There is also a risk that the manufacturer might just hand over a bunch of fake documents.
When you hire a sourcing agent, they know exactly how original certificates look. They are aware of the inspection bodies and the requirements that the manufacturer must meet. With a sourcing agent, you drastically reduce the chances of being duped by a supplier.
More than their services, you pay a sourcing agent for their experience and a large network of connections. Since they have worked with multiple suppliers, they know exactly which one is right for you.
If you are thinking about sourcing products from China, finding the right China sourcing agent is a crucial step. Getting great quality products, at the right price and on time, can help your business grow by leaps and bounds. Take time to choose the right sourcing agent. The future of your business depends on it.
Sourcing Allies is a team of expert China sourcing agents that has helped western customers manufacture and source products from low-cost regions since 2006.
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