Is it standard for sourcing companies to ask for an upfront fee to deliver bids? One company I found asks for a fee. I have another company stateside that is doing it for no charge.
There is no standard across the industry. Different agents work in different ways servicing clients. In my experience when a company does the supplier identification and management for free, they are really building in a margin somewhere else which is much higher than the upfront fees you pay for an agent that does things in a transparent fashion. Check out this article to explain more: http://chinasourcinginfo.org/2010/06/02/avoiding-middlemen-in-china/
The key point is that if the intermediary is not transparent about where their margin lies, then most likely the actual value for their inspection or project management service has been greatly inflated. Before you sign up with an intermediary simply ask that they separate the costs for their “service” from the “production costs”. If they fight this, then you know their actual value to you is minimal. If you are paying the agent to be your representative, you also need to make sure they are not getting a commission from the factory because that would be a big conflict of interest.
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.