What Are The Proven Benefits of Product Sourcing?

2021-09-23

插图1.jpgIntroduction

Nowadays, in the developed countries, most business owners are trying to seek various ways to reduce their financial burden as much as possible. For emerging organizations of the world, various expenses related to infrastructure, labour, raw material resources, and also overheads are the big challenges. 

As a result, most of them are now turning towards certain proven product sourcing solutions from any profitable low-cost marketplaces available in the developing world. Such practice of sourcing is something most businesses have been doing earlier too for several decades. 

However, still, many business owners from western countries are hesitant to source their key production activities to emerging markets like India, China, Vietnam, and Brazil. There are a few practical benefits of these proven sourcing solutions that are difficult to ignore that we will discuss in this blog.

The truth about business growth

In today's scenario, no business can be profitable unless it can find a stable, reliable quality material source at a reasonable price. Therefore, the priority should always remain focused on finding proven sourcing solutions either within the country or go out of the boundary of the country to find the source.

Many developing countries in the world are proving to be offering reliant sourcing solutions and many companies of the western countries could create a success story by collaborating with them. Although, the product quality was a matter of concern, earlier, however, most of these sources have now evolved themselves and improved their products and services.

Trends in sourcing and procurement

These days trends of most businesses are focused on proven product sourcing solutions and therefore the following activities have become very important for every successful business company in the world.

1. Global sourcing

These days, all businesses are exploring proven sourcing solutions so that they can reduce their input cost to improve their profitability. Therefore, most business companies are trying to look at many third-world countries and trying to develop the supplier of raw materials and parts for their products. 

2. Sourcing partners 

One best way of creating reliant sourcing solutions can be by creating global sourcing partners from the countries where labour cost is not as high as any developed country. The best way to achieve that can be through transfer of technology and offering the necessary training.

There are huge trained manpower resources available in countries like India and China and by partnering with them, it is possible to create one of the best quality of proven sourcing solutions for any manufacturing company.

3. Green logistics

These days, there is a lot of emphasis on green logistics and now it has become a worldwide trend to prefer green logistics. 

4. Global quality standards

Global quality standards are also improving tremendously which was witnessed during the latest global pandemic situation, where various medicines and face masks were procured from countries like India and China.

Tips for global sourcing

In the present scenario of the business environment, global sourcing is the key to increase your profitability and achieve success in any kind of business. Fortunately, now there is massive industrialization in many third-world countries and that has created many new sources to develop many different products.

The following are a few simple steps that you must take to create the global source of your raw material or component needed for your products.

· Identification of product class for sourcing

Since now we are living in a digital world, hence it is not very difficult to research to identify the product category that can be imported from some other source. 

· Finalizing product qualifications and quality parameters 

Now it is possible to finalize the specifications for the product and also their quality standards through email communication too.

· Identification of sourcing partner organization in a suitable country

Just by doing a Google search, now you can get the list of companies all over the world, who may be manufacturing a certain product needed by you. 

· Review of general quality standards available in the country

It is possible to review the quality standard of any product by obtaining a few samples of the product and conducting various tests on your production facility. 

· Due diligence and license/registration verification of sourcing partner

It is not too difficult nowadays to find out the license or registration status of any company through Google search or by taking support from the embassy. 

· Factory visit

After going through all the above steps, it will be useful to visit the factory and see the company so that you can eliminate any chance of scam. 

· Preparation of draft contract agreement and sample production

Visiting the company will be the perfect opportunity to draft your contract for agreement of doing business and order the company to produce samples as per your specification.

· Product sample verification

After you receive the sample then, you can test them as per your standards to verify whether they can meet all your stringent conditions as needed by the quality standard of your product. 

· Final contract agreement

If all goes well then you can sign your contract agreement. 

Advantages of a global sourcing strategy

Ø Low cost

Running any business can always be a very costly proposition if any business has to depend on their basic material and components from the locations like the USA and EU. Now, teams of agents and experts for sourcing companies for proven sourcing solutions in China can offer great value to any business.

The good news is that for many other developing countries which are low-cost marketplaces, this is also true. Your company can witness a drastic saving in its labour, production, energy, and raw material expenses by following the right sourcing strategy. 

Now, there is absolutely no need to pay premium rates for the production of components, parts, and finished products in first-world country native markets.

Ø Increased production output

Often most business organizations may tend to struggle when any customer demands them to increase their production volumes. Especially for any emerging business having limited financial resources, and such a situation can always be very difficult to handle.

Therefore, the obvious way out will be to seek sourcing solutions from certain low-cost markets. The proven sourcing solutions in China and India which are low-cost countries and product sourcing from them is quite simple because their individual unit production costs will enable you to increase production outputs very easily.

Ø Access to highly cost-effective markets

Various businesses in the western world must now look eastwards and try to open their eyes and see how much profitability that they can obtain. Few developing countries such as India, Bangladesh, Cambodia, Vietnam, South Africa, Brazil, and also many more can contain supply bases, which can generate a remarkable source for boosting profitability. 

Various suppliers in these developing countries are ready to pave their way to profitability for various companies in the USA and other EU countries.

Ø Favourable long term results 

In the coming years, if you are trying to plan to achieve a significant amount of business growth, then going for proven sourcing solutions will be the best option. Since the overall production costs will decrease and all your activities will be shipped out to certain cheap foreign markets.

Then your expertise can always be lent to them towards further enhancing their product offerings. Thus by sourcing through a few reliable suppliers can always help your company to take really a giant leap forward.

Ø Benefits over key competitors 

Various common objectives shared by business organizations all across industry verticals are now surpassing the competition. By utilizing the connections and expertise of any reliable sourcing agent can always help you to improve your bottom line.

Therefore, now you can plan on the diversification of your range of solutions. As an example, if your company is now using a China or Vietnam purchasing agent, then it will be bound to see an improvement in revenue and efficiency.

IST_24519_62069 2.jpgSome tips for country selection

When you are sourcing your materials from any different countries from third-world or any other developing countries then you must use the following few tips.  

· Political stability

It is always better to consider a country where there is a stable government and no political unrest or military rule exists. Choosing any politically unstable country can always result in disruption of supply and your production schedule can often go haywire in such a situation.

Therefore, you must always avoid such a country where political stability is always under question, however attractive the offer can be.

· Geographical advantage

The next important thing to consider is the infrastructure facility and the location of the country. If your chosen country is located in such a place where traveling and transportation always remain an issue then it is better to avoid doing any business with them.

· Adherence to global quality standards

Prefer to choose those countries that follow the international standards of quality so that you can rely on their products and supplies. Ensure that the companies are ISO certified so that you can have confidence in their manufacturing system. 

Challenges in global sourcing

Global sourcing can be a nice idea no doubt, however, creating a good quality source to develop a long-term business relationship can be full of challenges. Let us try to see what are the various challenges that you may face so that you can be proactive enough to develop a proper strategy while going for global sourcing. 

· Dealing with unknown territories

When you are dealing with any third-world countries, then there can be many unknown factors that you will encounter. There are lots of differences in their way of doing business and also the infrastructural facilities available in these countries may not be as good as what any advanced countries have. 

Therefore, unless you have enough experience in doing business with these countries, you may face many surprises that can often disturb your production plan.  

· Barriers in language and communication

One of the biggest problems that people of western countries may face is the cultural and language barrier. Although many countries like India or Bangladesh, people understand English, however, in countries like China only a handful of people can understand English. 

Therefore, you will need proper support to have better communication so that confusion can be eliminated that can often make or break your business deal.

· Risk of scam

Often you can become a victim of a certain scam, while sourcing products from countries like China without visiting the country. As an example, the suppliers that you have selected to work with, possibly may not have any factory in reality, but they may portray themselves as very credible wholesalers. 

You have to conduct plenty of due diligence to eliminate such risks. 

· Higher minimum order quantity

Most Chinese suppliers usually aim for big profits, hence they may not take much interest in those buyers who will order less than ten pieces for a sample of certain expensive products or less than hundred pieces for any low-priced items. 

Therefore, often you may have to consider dealing with a higher number of minimums, which may be often out of your budget. Only frequent visits to their production facility will be the key to convince them to reduce this minimum order quantity threshold limit.

Solutions for tackling global sourcing barriers

The following are a few solutions to tackle all these problems.

Ø Background research

Before you deal with any foreign company, it is important to do background research about the company. You may also take the help of the foreign embassy of that country to collect a few important information about the company.

Ø In-person visit

The best option will be to make a direct visit to that country and inspect the production facilities of the company. A personal visit will enable you to know about the country much better than reading the books or internet. 

Ø Sourcing agent

By partnering with any reliable sourcing agent of the country can help you in many ways to deal with any company. You can save the cost of your visit and also these sourcing companies are quite experienced in handling the quality of products and maintaining better communications.

插图3 copy.jpgBenefits of having a sourcing agent

Sourcing from China may not be as easy and there can always be a risk of losing your money and also deals going bad. Fortunately, you can find a sourcing company, also called a sourcing agent. These agents will be a third party that can help companies to acquire products from different suppliers. 

These companies will work on behalf of your company to help you acquire supplies for your business. Today, China has emerged as the world's leading host for sourcing agents. Various businesses from all over the world now prefer to source goods from China because of the benefits of sourcing from that country.

By appointing an experienced sourcing agent you can get the following benefits:

1. Cost-efficiency

Choosing any sourcing agents means you are choosing to work with Chinese suppliers. This will mean that you need not spend as much currency on products. These companies will lower their service costs to stand out from the competition and will try to attract more clients.

2. Experience

Another very important reason why these Chinese sourcing agents have become popular is that all these agents are highly experienced. As stated before, China has now emerged as a leading host for various manufacturing companies. This would mean that most sourcing agents of Chinese companies have had the opportunity to work with many. 

All these companies also must have worked with many other companies from many other parts of the world and offered sourcing services. Hence, you will find all these Chinese sourcing agents with a lot of experience. Having tied up with such companies, you need not have to ever worry about the service quality or the quality of products that you will acquire with their help.

3. Communications and relationships

These sourcing agents from China will be able to communicate better and relate with your suppliers. This can save you from all the trouble of translating all their communications and also avoiding misunderstandings that can be caused by language barriers. 

As a result, the process of procuring any products from any Chinese manufacturers becomes more effortless. As all these agents share the same language and nationality as most Chinese manufacturers, and hence it becomes easier for them to create healthy business relationships. 

You must note today China has become the leading source of manufacturers and also global sourcing companies. Therefore, it is important that you must take some time while selecting the best sourcing company from China. You need to consider a few elements e.g. cost of their services, dependability, licensing, and trustworthiness.

China - the perfect sourcing destination

These days almost every company in the supply chain happens to be a certain Chinese company. China has tremendously increased its production capacity. A few years back the quality of Chinese products was always questionable, however, with experience a lot of improvements have been noticed recently. 

The presence of any sourcing agent can always ensure the quality of products and services and also help in developing a better professional relationship with Chinese companies to have long-term business relationships.  

Recent Blogs
Want to speak with our key account manager?
We speak your language.

Our Features