3 Reasons Why Your Business Needs a Sourcing Agent

As a successful business owner, you are good at what you do. You know your market, you know your customers. But like thousands of businesses in the West, what happens when you decide to opt for product sourcing from China or other low-cost regions of the world because that helps you stay competitive? In such a case you will need sourcing agents.

Or what do you do when you want to scale up your business and have found that sourcing products from China are the most efficient way of going about it?

why sourcing agents

You are suddenly faced with a big unknown in a country you may have never even visited before. You have to find suppliers, assess whether they can manufacture your product, verify whether they are indeed who they say they are – established manufacturers and not traders, middlemen, or fly-by-night operators. You also have to evaluate quotes, check samples, ensure quality control, manage lead times and ensure that the product reaches you on time.

It’s almost like starting your business from scratch. The only difference is that you will have to do this in another country, thousands of miles away. And the people you will be dealing with there speak a different language and are in a different time zone.

You have two choices before you.

  1. You can look for a suitable supplier yourself, OR,
  2. You can delegate this work to people who are good at this job while you focus on what you are good at your business.

This is where a sourcing agent or sourcing specialist comes in. These are people on the ground who work as your representatives in low-cost regions such as China and look after your interests. They will help you find a reliable supplier, negotiate the best price, take care of documentation, oversee the production process, inspect factories, fire-fight problems that crop up in the factory during production, review quality control, and see to it that your products are shipped to you within the promised lead time.

Here are three reasons your business needs a sourcing agent.

1. Sourcing agents help find reliable suppliers and help get you the best price

Looking for a good manufacturer in China is looking for a needle in a haystack. This is because China is so huge that it should be considered in several regions instead of one. A good sourcing agent will know exactly which province specializes in the product you are looking to manufacture.

While it is possible to do the preliminary search on the internet – via B2B platforms such as Alibaba, Global Sources, Made in China, and TradeKey – it is often difficult to ascertain whether the suppliers you have found on these sites are actual manufacturers, who will offer the most competitive prices, or just middlemen or even frauds pretending to be suppliers so that they can relieve you of some of your money.

To verify whether the supplier is genuine, a factory visit is recommended. Alternatively, a good sourcing agent will already have a list of reliable suppliers you can approach. Even if they do not know a factory that can manufacture the product you want to be made, it won’t take them much time to find someone reliable and suitable because they are present on the ground and have networks they can tap.

They will also be able to negotiate to get you the best price than when you negotiate for it yourself.

2. Sourcing agents help bridge the communication and culture gap:

A lot has already been written about the language and cultural differences between China and the West. To put it simply, there is often a misalignment between what the buyer says and what the supplier understands. This is never deliberate –differences in language and cultural factors are responsible for this.

It is therefore very important for the buyer to be very clear while communicating with the supplier. You must write everything down and leave no room for assumptions so that your supplier knows exactly what you want and there is no mismatch in expectations. For instance, you must ensure that measurements and other specifications are written in units that are recognized in China. Even then, it is necessary for you or your representatives to monitor the production process to ensure nothing has been lost in translation.

A sourcing agent is an expert in product sourcing, so they do this for you. Sourcing agents are your boots on the ground. They are your eyes on the production line, looking out for your interests always, while you take care of your business. They are usually proficient in the language and help you navigate cultural differences between the West and China. They basically ensure that you or members of your team will not have to make long and costly trips to China, or your company will not have to spend time and money setting up an office in China from scratch.

Here is one example of how a sourcing agent can help you navigate factors unique to China.

A good agent will be aware of the fact that Chinese New Year – China’s most important festival – can disrupt production in factories because workers go home to celebrate with their families. Though the festival lasts a week, factories can remain closed for at least a month.

A good agent will plan production accordingly so that your product is shipped well before the start of the holiday, which usually falls in the last week of January or in February. Depending on what the requirements of your inventory are, a good sourcing agent will also advise you to increase your order in the months preceding the festival so that you do not fall short of inventory till production restarts again.

A seasoned agent will also know that factories often see huge changes in the composition of the workforce after this holiday. This may affect quality as the workers who made the previous batches of your product may no longer be working at that factory. A good agent anticipates all this, taking the pressure off you.

3. Sourcing agents reduce your overall risk

In 2019, the decision to outsource manufacturing to China is never an easy one because this is a time sentiment against such outsourcing is building up – at least in the US. But as long as China remains more competitive than the US or other western countries, most businesses will choose to continue to outsource the manufacturing of their products. After all, competitiveness means profits. And profits are what pays salaries and help businesses grow.

This is all the more reason business owners will want their decision to outsource to be successful. Besides reducing your costs, successes in outsourcing help motivate the team and may convince the few naysayers in the company to agree that the decision to outsource was the right one.

Hiring a sourcing agent will ensure that your decision to outsource meets with success.

In fact, if you have a sourcing agent, you won’t even know if you are dealing with a factory in China because the agent handles everything.

They save you the headache and expense of hiring and training new staff in the overseas market. They ensure that you do not have to make regular time consuming and expensive trips to the factory to monitor production. They help reduce the time taken to identify a supplier, ensure you submit the right design documents to enable production, help with communicating your needs to the supplier, monitor quality control and ensure that your product reaches you within the desired lead time.

They are aware of the legalities of importing and exporting and ensure that your documentation, licenses, and other paperwork are in place. They anticipate mistakes that can lead to delays. For instance, something as basic as printing an incorrect HS code on your goods can slow down or delay your consignment at customs, delaying delivery. An experienced sourcing agent will ensure that will not happen, reducing risk at every step of the way.

Finally, here are a few tips on how you can identify a good agent.

Ask the following questions when you’re looking for a sourcing specialist:

  1. Do they have a presence on the ground, an office in China? For how long? How many employees do they have?
  2. Experience: How long have they been working in China? Who are their past clients? Have they worked with western clients before? Can they provide references?
  3. Area of expertise: What are the products that they specialise in sourcing – such as die casting, injection molds etc? Are these the products that you are also looking to manufacture in China?
  4. Legal issues: Do they have a license to operate from China? Ensure that they are a legitimate business as sometimes payments to suppliers go through the agents, so you need to verify that the agent is a genuine one.
  5. Language skills and availability: Are they proficient in English? This is very important as you are most likely to communicate with them in English. What is their response time? Are they quick to respond to queries?

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan