Sourcing support services are best found with a sourcing company. Look for one with a proven track record and that has many years of experience. Here are the top benefits.
When it comes to the supply chain, sourcing of products and services is essential. You need to find a way to strike the balance between the raw materials and products you’re getting and how affordable they are.
Importing from China for your business is a smart decision to be making today. More businesses today are setting their eyes on China due to the many benefits of sourcing support services from China. But as with most ventures, there are also potential risks associated when importing.
Often, you may find that you have ended up looking to a trading company for sourcing services instead of a sourcing company. A trading company and sourcing companies aren’t the same. When it comes to sourcing support services, it is important to make sure you’ve signed up with a sourcing company and not a trading company.
Support services from the right sourcing company will help to add stability to your business and facilitate effective cost management while minimizing the risk of business operations.
Sourcing support services can make or break the success of your sourcing initiative. You will want to make sure you pair with a sourcing company to benefit from their services instead of a trading company.
In this guide, we’ll help you understand the difference between trading and sourcing companies and go over why a sourcing company offers better sourcing support services for you to consider.
A trading company is one that partners some factories and develops a close business relationship with producers. The business relationship can reach a point where it seems that the traders are functioning on behalf of the production company itself. Sometimes, traders will serve as de facto extensions of the foreign trading department of the factory. Cooperation with reliable factories is important for traders because only then can it be convenient to place orders with them. With a good relationship, it will become easier to discuss favorable prices, quality, as well as lead time so that the necessary support may be provided.
A sourcing company will provide sourcing services on behalf of your business. This could be with regard to imports from China or other countries where there is a need for arranging a stable production process or meeting sourcing needs. A sourcing company will be able to help your business by:
You now know what the basic meaning of a trading and sourcing company is. Now it’s time to go over the services offered by both and why a sourcing company is the better option when it comes to offering sourcing support services.
Sourcing companies specialize in various business processes like:
They have a greater span of knowledge about processes involved in different industries and how they make up a smoothly operating supply chain. This ultimately determines the success or failure of a project.
Trading companies on the other hand specialize in a particular product or industry. They have greater depth of knowledge with regard to specific products within their industry. Trading companies are not specialists in the underlying business processes as such. The scope of their knowledge is limited to the particular product or industry that they operate in.
While you may want to contact a trading company when you’re looking for a specific product, only a sourcing company will be able to assist you when it comes to business processes. They will also help you with how these processes contribute to the overall growth of your business.
Sourcing companies and trading companies also differ to the extent that they make use of product catalogues. A trading company will usually have its own product catalogue which lists a variety of products in their range along with clearly established price lists of the products listed.
A sourcing company typically does not carry its own product catalogue for distribution. It tends to source products based on the specifications provided by the client. They can however, take advantage of the existing factory relationships and their former engagements to source products and raw materials for their new clients. This makes choosing a sourcing company the smarter decision. Here, products can be sourced and arranged as per the unique specifications and requirements of each client that the company engages with.
When you choose a sourcing company, you will benefit from expert assistance from start to finish with regard to business processes that are just right for your operations. Whether it is logistics, shipment, or any other aspect of business, you will be covered with the help of expert knowledge from a sourcing company. Such expert assistance is crucial in minimizing delays and lowering the risk of complications in carrying out the project.
With trading companies, you won’t benefit from such assistance. You will get to know all that you can about a specific product from the industry. But when it comes to underlying business processes and technology, trading companies can’t offer you much assistance.
Sourcing companies also have a network of supporting industries that makes it possible for them to provide specialized knowledge. Trading companies have a strong network for parts and their compatible accessories but not for supporting industries as such.
Running a business can be risky and there is a high likelihood of disputes arising. Choosing a sourcing company can give you a strategic advantage when it comes to minimizing your risks and protecting your interests.
A sourcing company is bound to protect the client and serves as an on ground representative of the client. The priority for a sourcing company is fulfilling the order of the client. If a particular contract isn’t held up from the supplier’s end, the sourcing company will be able to apply pressure on the supplier and ensure smooth implementation of the contract. They may even change the supplier if there are issues with meeting the requirements of the client. In case of disputes, sourcing companies will always represent the client and work hard to resolve any issues that may arise. They will carry out negotiations and enforce the contract to ensure that the client does not lose any money in the transaction.
With trading companies, the priorities are a little different. They have to strike a balance between the interests of the manufacturer as well as the interests of the client. Traders maintain business relationships with several manufacturers and these relationships are crucial to serve clients effectively. In case a dispute arises, a trader’s priority will be protecting the interests of the manufacturer to ensure long term continuity of the business relationship. They aren’t likely to risk ruining a relationship with a manufacturer for the sake of one client.
Because of this, your business will be more protected when you choose a sourcing agency for your needs. The risk will be minimized and you can enjoy greater peace of mind.
The strategic objectives of trading and sourcing companies also differ. Sourcing companies aim to reduce costs, minimize risks, and ensure quality control for their clients. They employ their available knowledge, systems, resources, and processes to achieve the desired results.
Trading companies however, aim to increase their sales figures and maximize the production lines of their manufacturers. With higher margins, they aim to scale operations and improve earnings from sales. This places the priorities of the manufacturer above that of the client for trading companies, which puts you at a greater risk of loss when working with these trading companies.
There are several value added sourcing support services that you can benefit from with a sourcing company that would not be possible with a trading company. These include value added services such as:
This makes a sourcing company something of an extension of the international purchasing office of the client.
These benefits are not offered by a trading company. The only value added services a trading company can provide relate to providing suggestions with regard to existing products or the industry. In some cases, customization of the existing products to suit the needs of the client is also carried out by the trading company.
As you can see, when it comes to overall support required for sourcing services, you stand to gain more by signing up with a legitimate sourcing company instead of a trading company.
Now that you know the difference between what a trading company and sourcing company can do for you, don’t fall into the trap of thinking both are the same. You will only get the benefit of valuable sourcing support services if you choose a sourcing company.
Sourcing can be tricky and it involves several nuances to be carefully attended to. Sourcing support services form a key part of the sourcing initiative. Without efficient sourcing support services, your business could be at the receiving end of a lot of trouble.
The good news is that sourcing support services are easily available when you choose the right sourcing company for your needs. So make sure there is no confusion about whether the company you’re choosing is a trading company or a sourcing company.
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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