China leads globally in selling manufactured goods. Manufacturing plays a huge role in the country’s economy. It boosts domestic spending and creates job opportunities.
The manufacturing cost in China is low, so it is leading to industrialization. Its manufacturing sector has escalated 18 times in the last 30 years and added US$2.2 trillion in value. The labor cost is low for China companies, its average hourly cost is approximately 80% to 85% less than in the US. Other than that, its engineering talent is consistently increasing.
If you desire a cost-effective business, then choose China for product procurement. Nevertheless, you will need to consider language barriers as well as business practices from several foreign buyers. Besides, you will feel overwhelmed by the variety of products and manufacturers to choose from. So, it is necessary to hire a procurement agent for the sourcing process in China.
A procurement agent, also named as a sourcing agent, is skilled in finding product made in China. The professionals are familiar with the local language, local customs, and genuine business practices. When you search on the internet for sourcing agents in China, you will feel overwhelmed to identify the right one.
Determine the sourcing agent types
Chinese sourcing agents are divided into 3 key categories –
Freelancer agent
Freelancing agents work independently. They are a one-man army, so will not be involved in working with many clients at the same time. It helps to develop a good business relationship. The drawback is the networking of a freelancer will be limited, so verifying credentials will be hard, it is risky to rely on a freelancer agent.
Sourcing agency
The sourcing agency employs a small team of agents specialized in their specific area. A sourcing agency has more resources and a large supplier network. The downside is sourcing agency is slightly more costly than the freelancer agent, but it is worth the money as it provides better assurance in quality control and service.
Sourcing companies
Sourcing companies are usually large, and purchasing is one of their many departments. They offer complete services including China inspection as well as logistics services. The key advantage is that every task ranging from finding reliable suppliers to shipping arrangements is performed by a single entity, so the work quality is better assured. With all this convenience, you have to pay a high price.
Every procurement agent type has its ups and downs, so determine the one suitable for your business.
How to verify China’s sourcing agent?
Here is a checklist of what to seek in China’s sourcing agent.
Business License
It is essential to look for a licensed or registered sourcing agency in China because they have the legal authority to operate as a sourcing agency. Ask for their license number to check their track record and find out if they are experiencing legal problems.
Experience & specialization
Besides license, it is essential to consider professional sourcing experience in your niche. The more experience they have the more efficiently and quickly the entire sourcing process can progress. You can expect mutually beneficial negotiations, high-quality products, and responsive services.
Reviews & testimonials
Impressive reviews and positive testimonials from existing or past client’s matter a lot. Recommendations and referrals from colleagues have trusted ways of finding sourcing agencies in China. There is a need to find experts that are collaborative and agile.
Language
As the sourcing process will involve you, the purchasing agent, and the Chinese manufacturer, it is essential to find one fluent in the local language, English as well as your niche dialect.
Location & flexibility
Chinese sourcing agencies work from the ground and are not far away from industrial factories, sites, and warehouses. Strategic location helps to save on travel costs. The sourcing agent is capable of instantly updating on the progress of your project.
Supplier network
The Chinese sourcing agency will help you gain access to a wide network of local suppliers. Ensure that they have a broad list of professional contractors and accredited manufacturers.
Transparency
No one desires to handle misunderstandings across working relationships in terms of production, cost, etc. Professionals need to be completely transparent with their clients.
What are the warning signals to watch out for?
When you are shopping around for a reliable sourcing agent, here are some red flags to consider.
Paid by factory
When a purchasing agent contacts you via the factory’s reference, then decline the offer. The factories pay purchase agents, so they will not consider the buyer’s interests and objectives. To mitigate the commission paid to the purchase agents, the suppliers may cut corners and compromise the product quality.
Unlicensed
A government license is essential for operating a legal business. Therefore, it is necessary to look for a sourcing agency legally licensed to offer services to an international clientele.
Takes a long to find suitable suppliers
A good sourcing agency will ensure to find suitable manufacturers as quickly as they can. Time is valuable and things need to be completed efficiently. If the sourcing agency is not available instantly, your business operations can get paralyzed. A professional agency has a huge manufacturer network and great experience, so it will never take months or weeks to find a suitable manufacturer.
Poor language skills
The sourcing agency is the mediator or communicator and your main aim in hiring was to avoid miscommunications between you and the Chinese supplier. If the sourcing agent seems to have poor language skills, then it is a red flag.
It is essential to find a reliable sourcing agency because they efficiently manage your supply chain. A professional sourcing agency helps to receive competitive rates and handle the other essential sourcing process.
If you are still concerned about hiring a Chinese sourcing agency due to unethical or unprofessional behavior. Here are some benefits to consider when you take help from a reliable sourcing agency.
Benefits of hiring a reliable Chinese sourcing agency
Saves time
You can save time as you will not have to delve across tons of supplier pages for seeking out a suitable one. Vetting suppliers and the negotiation process are also time-consuming. The purchasing agency will deal with all these and save your precious time.
Communication link
While choosing a manufacturer, you will have to offer an accurate description of the item, you want them to create. Unfortunately, the language barrier limits your communication clarity. The Chinese purchasing agency is the correct link that fills the gap between you and the supplier.
Helps in negotiation
The aim of choosing China for sourcing is to tap low rates. Nevertheless, when the price is very low, product quality can be questioned. It is where a reliable sourcing agency helps to strike a balance. You can receive a good deal without product quality sacrifice because the purchase agents speak the local language and are great negotiators.
Verify manufacturer’s credentials
Before you get into an agreement with the Chinese supplier, it is essential to verify their credentials. The licenses and certificates are in Mandarin, so you need to pay a professional translator to verify them.
The purchasing agency is familiar with what an original certificate looks like. Besides, they even know the protocols associated with inspection agencies that the supplier must fulfill. Partnering with a reliable sourcing company means your possibility of getting cheated decreases.
Extensive connection
You pay the purchasing agency for their experience as well as their vast connection network. They have worked with many suppliers and are aware of which is the suitable one for your project.
Cost of Chinese sourcing agency
The sourcing agency earns in different ways including hourly charges, flat fees, or commissions. Many companies are transparent about their charging process but there are a few who aren’t. Therefore, comparing service rates is a daunting task. Product price is the benchmark of a sourcing agency’s charging rates.
Commission
Chinese sourcing agents that work on commission generally range from 2% to 10%.
A low percentage means few services but if wide services are offered at a very low margin, then be cautious as it is too good to be true.
Highly professional sourcing companies charge 10%. They are those that cannot afford to sacrifice product quality. Their rates define their quality, transparency and honesty.
Flat fee
Some sourcing agencies don’t work on a flat fee. However, a flat fee is charged for other services like quality inspection, normally it ranges from $150 to $300 per manday.
Hourly rate
There are a few agents that specialize in product development, negotiations, quality control, factory management, and logistics. It is an arrangement suitable for importers that don’t need full-time support but occasionally someone working on the ground.
Even if you feel the Chinese sourcing agent is transparent in his fee structure ensure to verify their credibility first.
Above is the complete insight on China sourcing process, hope it helps you on your business venture of sourcing from China.