Sourcing Cost Benefits with China Sourcing Agent

2021-05-19

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Costs Involved for Sourcing from China

International businesses often source products from China as it is considered a vital measure for reducing cost. This has helped China become the second-largest economy in the world. In the past few years, China has become the largest existing manufacturer and the most influential manufacturing country. 

The economy of the country is rapidly increasing. Needless to say, sourcing products from China will be a good step for you as a business owner. Most multinational corporations are already familiar with the capabilities of a Chinese sourcing agent. That is why they are committed to establishing a buying-selling relationship for them to flourish in the market. Enlisting China Sourcing Consultants can ensure that you have ideal suppliers who can provide you the required products.

Direct sourcing

As a business owner, you should know that it is the cost that drives the market. The two things that customers always look for in a product are its quality and value for money. To excel in the market, you need a product that satisfies both these requirements. If you want to maintain your profit margins while keeping the cost of merchandise at the minimum price is by buying products from a chain as it involves minimum middlemen. This is where Chinese sourcing agents come into play. 

Your China sourcing consultant will deal with your business directly, eliminating the need for middlemen involvement. There are no standard China sourcing agent fees. You might have to pay somewhere between 5 to 10% of your order cost as China sourcing charges of the agent. The percentage of the China sourcing commissions will depend on how big your order is and what type of product you are sourcing. A China sourcing consultant work for as low as 3% of China sourcing commissions; not all, but some.

You won’t have to pay fourth-party members, only the China sourcing agent fees. Sourcing your products from China will allow you a friendly and harmonious rapport between the seller and the buyer. 

Cost of material acquisition

This is one of the crucial components of the total supply-chain management costs in a company. Here is what the cost is comprised of:

Commodity planning and management

This is the cost associated with sourcing the supplier, contract qualification and negotiation, and placement, preparation, and tracking the purchase order, including the cost related to planners/buyers.

Supplier Quality Engineering

This covers the costs of determining, developing, and monitoring the capabilities of the suppliers so that it satisfies the regulatory requirements and applicable quality.

Inbound duties and freight

The freight costs involve the one associated with moving the material from the vendor to a buyer as well as administrative tasks. The cost of inbound duties covers the taxes and fees levied by the government to move the purchased material across borders. You also have to consider the customs broker fees.

Receiving and storing the product

This includes all the costs related to the possession and storing of the material. The carrying cost is not involved with the acquisition.

Incoming inspection

This covers the cost of testing the received materials and inspection for verifying that it complies with the specifications.

Component engineering and material process

These are the costs incurred in the document and communicating component specifications and review that improves the purchased item’s manufacturability.

Tooling

This cost covers the design, depreciation, and development of tools needed for producing the purchased item. You will have to pay this cost only if you have paid for the equipment and maintenance for the manufacturer that makes the product. An example of this is when the contract manufacturer has to upgrade their equipment to a new level as required by your company. In such cases, you will pay for maintenance and upgrades to ensure that the product is of high quality.

Apart from this, you also have to consider the China sourcing agent fees. You will have to pay a small percentage of your order cost as China sourcing charges.

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Benefits of sourcing from China

Speed

The internet and eCommerce industry are accelerating at a pace where trends appear and vanish within days. Also, the rate at which the products are copied has made speed-to-market a priority. You can use the integrated supply chains of China as an advantage for fast-tracking your supply chain. The country's production ecosystem has an unmatched concentration of assembly factories, input suppliers, service providers, and skilled workers - all available at a massive scale. 

You can use these supply chains to get a wide range of high-tech, mid-tech, and low-tech products at an affordable price. Also, since China had a little dependency on imported inputs, the production of goods that require several components like electrical ones has stayed in China.

Reactivity

If you are just sourcing the wrong goods at high speed, the speed component won’t be desirable anymore. To unlock high profits, what you need to do is react to the preferences of consumers quickly. The manufacturing maturity of the country makes it easier than other low-cost countries to find the right suppliers who are offering smaller batch sizes and agile production setups. 

Another option that you have for unlocking agility is nearshoring, where you bring the production closer to the end consumers. Up until now, this meant moving the production out of China and near the US and Europe. However, the consumption epicenter of the world is shifting East. So, you can see China as a near-shoring location instead of an off-shoring location.

Sustainability

The demand for ethically made goods is growing by the day. Combining this with the power of the Internet to break or make the reputation of the brand overnight has transformed this environmental and social responsibility as a must for sourcing teams. 

The mature export industry of China has made it easier to find suppliers that are experienced in meeting the standard of international compliance and inspection agencies to verify that. However, the country is still dealing with corruption in factories and among inspectors. And China has seen limited improvements in terms of social responsibility. Unlike some other countries like Indonesia and Vietnam, Chinese workers don’t have collective bargaining rights or collecting bargaining power to negotiate for a better working environment and higher wages. 

However, the country has been making headway on the environment front. The anti-pollution crackdown initiative from the government has increased investment in green technology. It has driven thousands of polluting players out of the market. Beijing alone has relocated or shut down about 2,500 manufacturers. Even though this green shift has caused disruptions in the supply chain, it has also transformed China into a destination for sustainable sourcing and production.

Cost-value

Even though other considerations are gaining relevance, the sourcing priority is still finding good value products at a reasonable price. Today, China is at the stage where the rising quality gains and productivity are high enough that it can offset the effects of rising property, compliance, and labor costs. The key driver behind the rising productivity of China is fast-paced automation. In 2011, the US carmakers were deploying industrial robots three times faster than the Chinese factors. China was able to reach parity in only five years. 

The government-led investment in infrastructure, industrial upgrading, and skills has helped the efficiency gains of China. There are some coastal regions where the improvements are concentrated, but this is changing. The government is investing billions of dollars into utilities and transportation in western provinces that are bound to incentivize the industries. About ten years ago, China was the go-to place for sourcing products for companies that wanted to buy cheap. But today, it has managed to provide opportunities for people who want to buy well.   

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Finding the right supplier for your business

There is no shortage of wholesale distribution companies in the world. That is why it is crucial that you take your time and research your options to find the supplier that fits your budget as well as needs. Many companies even display their inventory at annual wholesale conventions. If you are one of the many sellers looking to source products through China at affordable prices. 

You can use B2B platforms like Alibaba, Global Sources, and Made-in-China.com for searching these suppliers. There are thousands of suppliers on these platforms. You will have to filter your options for finding the ones that are verified and accredited. Or you can hire a China sourcing consultant to do the job for you. Let’s discuss a few options for starting your search so that you get the supplier that matches the current needs of your shop perfectly:

  • The Internet is the best place to start finding a supplier specific to your industry. You can narrow down the search by-products that you are selling in your shop. Also, you can look for suppliers who can work as dropshipping suppliers. Depending on whether you are looking for international or local suppliers, a simple search will give you all the options you need.

  • Another option you have is browning through supplier directories that can help you find the right supplier for you in a small amount of time.

  • Read trade magazines and focus on the ads and classifieds for suppliers in your industry. This is an old-school method that can yield good results.

  • You can attend a trade show where a lot of suppliers look for businessmen like you who can purchase their products. If all goes well, you will be able to make a deal at the show itself. If not, you can note down a few options, do your research later, and contact them.

  • If you want to sell branded items in your shop, you can contact the manufacturer of the product to ask whether they sell wholesale or not. This might be exactly what you need for getting the lowest possible prices. If they can’t sell directly to you, you can get one of their distributors who can work with you.

You need to have a sophisticated supplier selection system as it will ensure that you pick good partners. Depending on the quality and delivery performance that you need, you need to find a large, medium, or small supplier. However, it is equally important to have a supplier who can accommodate new products and designs for you. 

Getting your supplier involved in the engineering and design process can lead to huge dividends for you. They know the product well and can help come up with ideas that improve quality and cost. Then can even design new parts with better functionality. The more ideas you have, the better it will be for the company.

Your company needs to have a reward program benefitting the suppliers that are helping you succeed. This is so much more than buying products as it involves partnering with them and using them as a trusted adviser who can help with quality improvement and cost savings in the business. What you need to do is ensure that you have an honest and open relationship with your supplier. That is why it is crucial to select the right supplier. Here are a few aspects that are important to consider while finding a supplier:

  • Cost

  • Quality

  • Delivery

  • Service

  • Safety

  • Social responsibility

  • Risk mitigation

Apart from the above-mentioned factors, you also have to ensure that your supplier is capable of the following:

  • R&D that understands the specifics of your product as well as how their product is integrated with your product.Strong process control to implement cost savings and quality improvement measures.

  • Open and honest quality and cost charts.

  • Strong change management culture.

  • Ability to make design, material, or engineering changes that helps with profitability and quality.

  • Openness to change and willingness to make improvements by getting their operation analyzed.

  • Ability to help you with the design phase.

  • Willingness to use engineers and operators for making changes.

What your company needs is a close relationship with your key supplier so that they are willing to improve their operations and cut costs.

Once you find the right supplier for your business, you can move on to the next phase. To be sure that you have made the right decision, you have to ask them for references. Do some additional online research to check if they have any complaints or reviews from other business owners. Online forums for business owners are the perfect place for getting advice from other owners. You can ask questions and learn from different businesses in these online communities. 

If you are talking to a business owner who has worked with the supplier before, make sure that you ask a lot of questions. This is done to make sure that you know exactly who you are getting in bed with. You should ask questions about their order processing times, discounts based on volume, and return policies. Another way to make sure that everything is of high quality is by ordering sample items of exactly what the customers will receive.

Before signing, negotiate the terms of contact. Important details like delivery schedule, pricing terms, and minimum order quantity should be discussed. Also, make sure that your lawyer reviews the contract before signing so that you don’t miss anything.

Stay away from the fake supplier

There are several fake suppliers in the market who will appear as legitimate suppliers. When you are searching for a supplier online, you might run into a middleman. They can be a scammer who will get in between the real supplier and your business and cheat you of your money. They might mark up your items’ price after taking the order and forward the order to the real supplier. This way, you might end up paying more than you have to and reduce your profit margins. Here are a few signs that will help you determine whether your supplier is legitimate or not.

  • The supplier wants you to pay a sign-up fee or a monthly fee.

  • They didn’t ask for the sales tax ID.

  • The website of the supplier doesn’t provide the complete contact information.

  • The supplier offers you a deal that is too good to be true.

  • They try selling you additional services.

  • You get claims from the supplier regarding how much money you can make with their services.

The best part about selling your product online is that when the time is right, you can expand into the international market. Apart from finding the right supplier, you can also find reputable and reliable dropshipping suppliers from all over the world who can fulfill your international orders timely. Once your product starts to sell, you can have your profits transferred into your bank account. When you are working with an overseas supplier like Chinese, you need to use a risk management tool for protecting your business against currency fluctuations.

When you are working with suppliers, it is important to be savvy. When you have the right strategy, locating the ideal supplier who can source you wholesale products at a low price is easy. Some companies work with multiple suppliers so that in case one of them goes out of business or raises its price, their business is covered. 

If you plan to work with more than one supplier, you have to make sure that you collaborate with all of them. This way, you can ensure that all your customers get consistent quality, regardless of the product they ordered or where it is coming from. The ultimate goal for any business is to increase its sales and revenue, and partnering with the right supplier will ensure that your business is set up for success.

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