Many overseas companies choose to source products from countries like China, Vietnam, Philippines, and India. This is because they can keep labor costs low, which increases their profit margins. It offers a huge competitive advantage in the global market.
Many companies take benefits of global sourcing, but it is a complicated process. There are challenges associated with global sourcing like foreign countries’ legal protocols, political instability, bureaucratic red tape, and cultural differences. These realities seem double taxing when you consider overseeing quality control, shipping, and foreign team management.
Low manufacturing cost is appealing to importers but establishing itself as a consumer brand or an entrepreneur on Amazon needs plenty of expertise and effort. Fortunately, with a sourcing agency, you can navigate the outsourcing process efficiently.
It offers you freedom to pursue your core business activities and benefit from the knowledge of global sourcing agents. If you are unaware of the duties and how sourcing agents work then let’s get to know their professional role in sourcing products from overseas.
What’s a sourcing agent?
They are regional representatives of your business engaged to protect your interest abroad as well as offer an array of services. It ranges from choosing a suitable manufacturer/supplier to quality control to warehousing & logistics.
It allows importers to enjoy multiple advantages of outsourcing their product manufacturing jobs to a low-cost country without encountering the associated risks and challenges.
Why is sourcing agent a lucrative option?
It is sensible to hire a global sourcing agent because of several awesome reasons.
Without sourcing agents identifying and vetting suppliers online is time-consuming. Besides, if the supplier has limited English understanding or speaking ability then the process is harder. Engaging a reliable sourcing agent helps to avoid spending hours. Saving time helps to spend in expanding your business.
A reputable sourcing agency offers you several quotations from manufacturers that suit your business requirements. With several quotes, you gain an in-depth understanding of pricing.
It means you are averted from paying more. Sourcing agents are better negotiators. They ensure not to cross the pricing edge, which can force the supplier to cut corners in materials to accommodate the discount request.
It is common for low-cost countries’ manufacturers to substitute poor quality materials down the road without your knowledge [called quality fade]. The sourcing agent communicates clearly and smartly with the manufacturer. He acknowledges their situation, which helps to avoid quality fade. The sourcing agent will ensure to connect their clients with professional manufacturers with a record of supplying quality goods without any delays. It saves you from losses due to product recalls, delays, and brand image damage.
Help in license verification
For example, if you plan to partner with a China OEM manufacturer then you need to make sure they have valid certification and license. Imagine paying significantly to a Chinese supplier only to hear the factory was closed for local law violations. Getting your funds back is a complicated process but not impossible.
You can ask for the license directly but it will be in the local language, which means you need to spend on translation fees. So, it is sensible to engage a reliable sourcing agent in China. The knowledge of global sourcing agents can distinguish the suppliers with the needed requirements, which eliminates the concern.
Leveraging their knowledge and expertise
Experienced sourcing agents have spent years in the industry, so they will instantly know the kind of manufacturer suitable for your project. They can rapidly leverage their sourcing network and navigate through red tape, especially shipping and logistics.
They even help you get better priority in production at better prices. In countries where corruption is ingrained in the culture, the knowledge of global sourcing agent is a blessing because they help to navigate smoothly.
Better production control
The importer's interest is comprehensively endorsed in a controlled manner when they partner with a reliable sourcing agent. With a local business representative, the buyer will have better production, delivery, as well as post-sale control. They are ensured that all follow-up details are accurate.
The sourcing agent helps to find a suitable manufacturer to customize product in China as per your specifications. If you are looking for a specific product, they can help with that. This means the agent will find a manufacturer and a product that brings in revenue. An experienced sourcing agent means accurate descriptions and claims.
Genuine assessment & audit
Importers will receive complete information in writing about the factory-like registration details, the latest photos, and official documents. Information can include production lines, quality control, lab equipment, warehouses, etc. They are capable of assessing the supplier’s credibility, competence, production capability, and technical expertise.
The potential manufacturer you plan to outsource to can easily falsify claims about their overall job suitability and production capabilities without a sourcing agent working in your interest.
The global sourcing agent is fluent in several languages. They have technical knowledge about your product, so are aware of what is needed from the potential manufacturer. Besides, they are helpful in product customization.
Language and distance barriers are not good, but the sourcing agent resolves these obstacles. They are fluent in the local language and well-versed in handling local suppliers.
This knowledge allows you to precisely get what you want from product customization with minimal risks.
If you are still skeptical about hiring a sourcing agent but want to outsource product manufacturing to a low-cost country. You can hire a complete team and fly them to the desired low-cost manufacturing country to:
Physically meet with potential manufacturers.
Learn about the local business environment.
Negotiate the logistic contracts.
Execute China quality control.
In theory, it sounds simple but the team is not familiar with the legal system and culture. Besides, you need to think about the upfront costs and possible challenges. It may force you to drop the idea of outsourcing to a foreign land.
On the other hand, working with sourcing agents for your product manufacturing process in a foreign country seems easy. They have a wide knowledge of global sourcing, industry standards in low-cost countries associated with manufacturing, quality control, and logistics coordination.
They have a good relationship with potential manufacturers and knowledge to navigate the legal system and shipping regulations of the country.
The sourcing agent ensures that your company isn’t wasting resources and time or getting ripped off. They do all the legwork in setting a cohesive supply chain like handling export/import duties, taxes, and tariffs. Companies unfamiliar with the norms of the specific nation can find handling these challenges.
The knowledge of global sourcing agent can avoid expenses and move goods through consignment more quickly without the concerns about stickup at some point in the supply chain. A local sourcing agency in corrupt regions can smooth business negotiations as they are familiar with the local community and traditions.
While choosing a sourcing agent, consider below points:
In case, you are looking for a general consumer goods manufacturer then you don’t need to hire a specializing sourcing agent. On the other hand, for an industry-specific manufacturer, you will need to work with a sourcing agent knowledgeable in your niche.
Niche-specific sourcing agents have updated information about top niche manufacturers, current supply & demand situations, special packaging & shipping requirements, definite product quality standards, as well as costs of retail and wholesale manufacturing.
Experience is vital when you search for a suitable global sourcing agent. The more experience the better, so look for a sourcing agent with more than a decade or a minimum of 4-to-5-year experience. Ensure to look at their client’s list and revenue growth.
If the potential souring agent willingly shows the client’s list and revenue growth then it reveals their excellent work ethic and experience. Contact their clients to find out more about their working style and commitment. If the sourcing agent does not share the client's list, then move to interview a new sourcing agent.
Sourcing agent’s fee pattern
To ensure that you pay the correct price to the sourcing agent, it is essential to comprehend how pricing works. The fee pattern can be any one of the following:
Fixed fee – It is a common pricing method, where the sourcing agents charge fixed weekly or monthly fees. The agent connects you with manufacturers in this kind of arrangement. You can build a relationship directly with the suppliers. It is cheap and carries a lot of risks.
You can even engage a full-time sourcing agent on fixed monthly charges for the project duration. Fortunately, they will help in overseeing your product manufacturing, inspection, and communication right from the start to the end of the project.
Percentage service charges on total order cost – There is no standard because the percentage depends on order size and product type. For bigger orders the sourcing agent can work at a 5% commission, so double-check the agent’s profile because a low percentage means product quality compromise.
Price difference – In this pricing model, importers are connected with suppliers offering competitive rates. The fees are charged on price difference, but hiring cheap supplier is not a good idea.
The right global sourcing agent is helpful in the success of your outsourcing manufacturing needs.