I want to have a China based sourcing agency look after my orders. I buy different types of consumer goods. What are my options for agents?
Finding the right agency will depend on your order size, desired level of support/expertise and product categories. But here are the general options.
Option one: Engage a Large Sourcing Agency. They focus on medium-large clients and charge a flat rate and/or small performance based commission for sourcing services. Here is an example.
Option two: Hire a Small Sourcing Agency (you can get introductions here) which focuses on small to medium sized clients and charges a slightly higher % of PO value (because the order sizes are smaller). Sometimes they charge an upfront fee to get you incorporated into their buying platform.
When the orders are small (because there is a minimum monthly retainers for the Large Agency) the costs can be prohibitive. But when the orders are large, the buyer will end up spending less on a percentage basis going with the Large Agency option.
As a rule of thumb, when orders are over a few 100,000 USD per year, most clients gravitate to Option 1. But if the order size is less than 5000 USD per year, even the small sourcing agencies may not be interested. That leaves the following options:
Option three is to engage freelance sourcing advisors (often westerners living in China) to walk you thru the key steps. But they don’t handle communications or negotiations with the sellers. Type 3 is a good fit when the client is willing to do the “heavy lifting” of project management, but wants a seasoned China advisor to offer advice and counsel throughout the project. These freelancers generally make themselves available for a quick phone call at a set time each week, but they don’t get involved in actually managing the vendors for you. They charge a few 100 USD per month. I have a few of them in my network and would be happy to make introductions.
Option four: DIY. On one hand, external costs are reduced because a sourcing agency or advisor is not engaged, but internal cost may increase because you need to spend your own time managing the supply chain. Plus the risk of having a problem on the China side increases dramatically if you don’t have expertise in-house.
But if for economic reasons you are forced into option 4, then consider purchasing my book “The Essential Reference Guide to China Sourcing” so you will have a solid understanding of the opportunities and challenges facing a China supply chain. Also available on Amazon. Actually, it’s probably a good idea to buy the book even if you engage a sourcing agency, because it can’t hurt to have a deeper understanding of China sourcing dangers and best practices.
DIY-ers should also sign up for the free newsletter on my blog at www.ChinaSourcingInfo.org and RSS to Global Source’s www.SmartChinaSourcing.com. And at some point if you need support in specific areas like contract law, audits, inspections, engineering, logistics…you can hire reputable service providers to support your supply chain at www.SourcingServiceCenter.com.
One last tip, before engaging a supplier, make sure they are not listed at www.SupplierBlackList.com!
Let me know which option is a good fit for your particular needs and I will be happy to make some introductions if you like.
Question answered by Mike Bellamy.
Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). Author of “The Essential Reference Guide to China Sourcing” and founder of PassageMaker Sourcing Solutions.