Procurement outsourcing is the transfer of procurement activities to an offshore provider. Many enterprises use offshore resources as developing an in-house procurement department can be difficult and costly. Importers and Amazon sellers can also build a successful business on the back of a smart procurement outsourcing strategy.
Which procurement activities should you consider outsourcing? While this assessment mainly applies to enterprises that have large purchasing requirements and work with multiple suppliers, Amazon sellers can also benefit from understanding which offshore resources can support their business and how.
Sourcing is a key procurement activity that can be offloaded to a qualified third-party. For Amazon seller, sourcing is a key process. Rather than directly sourcing from a supplier, the company or entrepreneur (such as an Amazon seller) goes through a sourcing agent to find and contract with a supplier. In doing so, the business is able to reduce overall costs and increase bottom-line savings.
It is easier to work remotely with a China sourcing agent than a China supplier. A big reason is that sourcing agents speak in fluent English and have experience catering to Western importers. Another is the opportunity to utilise their existing supplier network to bring products to market rapidly.
Why outsource procurement activities? Sellers' decision to outsource procurement is based on the set of benefits explained below.
Although online supplier directories have made it easier than ever before to find foreign suppliers and work with them directly, the actual process of finding a trusted party in a foreign land, and managing your order as well as relationship with the supplier is no easy feat. It can demand a great deal of time and effort, even burning you out and affecting your business.
Procurement services bring a significant amount of expertise, in terms of geography, industry and category. They support and work like an extension of your business.
Amazon sellers often encounter this problem and find that they have to overcome many challenges in their path to getting their product made to the quality they desire, at a price that increases their profit potential. Perhaps the biggest challenge lies in building a rapport with the supplier and ensuring a smooth path from order placing to receiving notifications about the on-time arrival of shipment to an Amazon warehouse. A sourcing agent located in the particular SEZ is in a better position to monitor your order and keep you updated on its status.
Want custom manufacturing? Working with a manufacturer that has relevant industry experience ensures that they will understand your needs and make products to your satisfaction. But how do you distinguish between wholesalers calling themselves suppliers and actual factories? Also, how can you verify that the supplier indeed has the capability to customize your product exactly how you want? This is where an outsourcing provider comes to the rescue.
Example: Say you're looking to manufacture toasters in China for cheap, but the product needs to have an accurate timer-based function and has to be made from cool-reach stainless steel as it is geared towards families with young children. When you search for a manufacturer that specializes in small household appliances, you want to make sure they can make your toaster to your requirements.
A sourcing agent has many contacts in the industrial areas(s) in which they operate, not to mention a network of vetted suppliers. The procurement outsourcing service can quickly match you to a supplier that can get the job done. You can save time and gain a lead over emerging competitors who're yet to find a compatible China supplier for their needs, and effectively challenge established sellers.
To make the most of China's enormous manufacturing capability, you need a trusted procurement outsourcing service that has boots on the ground and understands your industry and category. Maple Sourcing specialises in consumer electronics, beauty and healthcare, daily hardgoods, promotional items, household utensils, and tools and hardware. If you're interested in affordable, high-quality custom manufacturing in any of these categories, we can help you with a number of procurement outsourcing services.
There's a lot to manage when you're an Amazon seller. Amazon makes some things easy for you, such as providing the option of Fulfillment by Amazon for fast, accurate fulfillment. The rest - such as inventory management, customer service and performance monitoring - you have to do on your own. That's on top of monitoring your order, ensuring its quality and managing your supplier. Handling all of it can feel like constantly keeping your eyes on moving targets, without missing! If you struggle to juggle many things at once, operational efficiency and profits can take a hit.
Outsourcing procurement services allow you to focus on other areas of your business. The companies have a dedicated, trained processing team to manage various aspects of procurement, including:
·Accessing and selecting vendors
·Negotiating price and terms
·Inspecting goods during production and prior to delivery
While they keep a tab on your order and shipment delivery, you get more time to devote to other aspects of maintaining and improving business operations.
Example: Amazon is no doubt a competitive selling space. Product visibility and price can make a big difference to the success of your business. While the procurement outsourcing company takes care of getting your product made to an acceptable quality without any delivery delays, you can focus on enhancing product visibility through various tactics such as advertising, optimising your listings, working with influencers, and so on.
The need for procurement outsourcing amplifies for businesses that have a Professional Seller Account on Amazon. When you start selling a larger number of products, inventory and order management will require more focus. As your business grows and you expand to more categories, your current supplier may no longer be able to fulfil all your requirements. Managing the operational needs of your growing Amazon business can get tougher, and during such times, the support of a procurement outsourcing service can be especially invaluable.
When you start out on Amazon, you're no doubt looking to keep cost as low as reasonably possible. Yet, working alone can lead you to make costly mistakes that eat into profits. Historically, outsourcing has been a way for enterprises to reduce labor costs and overheads to a significant extent. Amazon sellers can improve profits by outsourcing their procurement function.
The costs of bringing on a partner or an employee can be substantial. You'll have to pay for a hiring search, wages, payroll taxes and healthcare and other benefits. Even if the individual is a seasoned procurement manager with connections in China and can speak the language, or has other qualifications that make him/her uniquely suited to the role, you still miss out on the advantages that a local presence can bring, while adding a cost item to your P&L sheet.
When you use a procurement outsourcing service, you get a team that acts as an extension of your business minus the costs of hiring labour. Even if your Amazon business grows to the point when you can afford to build a team or hire freelancers, outsourcing procurement can end up being more cost-effective in the long-run. There's another important way in which this route can save money: assuring competitive pricing through volume purchasing.
There's always a risk of leaving money on the table when you negotiate prices with a Chinese supplier who doesn't speak your language. Sure, you can do your research on the average quote and quantity for your item, how low suppliers are generally willing to go, what can convince them to give you a better deal, how to negotiate effectively and so on. But when it comes to communicating and convincing, the language barrier often tends to play spoilsport and gets in the way of negotiating as effectively as you might with a supplier in your own country.
On the other hand, a China-based procurement agent can assist with negotiations and increase your chances of getting a better price from a manufacturer that specialises in your product. As the sourcing agent will only connect you to a factory capable of making your product, you can place bulk orders with peace of mind and get competitive pricing too. You may also be able to get short lead times on requests and have your product out quickly, delighting your customers. Switching suppliers is another cost-saving tactic that you can execute rapidly with the help of a sourcing agent. And you can do this at any point without letting inventory or sales suffer.
What do Amazon customers want? They want a decent product at a price they can live with and receive the product on time. They want sellers to respond to their inquiries and to be informed of anything that might impact their order. To win points with your customers, you have to take responsibility for delivering what you have promised them. Not meeting their expectations leads to the inevitable: bad reviews, no repeat purchases and the worst of all but quite possible - criticism on social media.
How effectively you manage procurement is linked to your customer satisfaction rate. A basic mistake is to simply choose the wrong supplier that leaves you with sub-standard products to sell on Amazon. Another is a lack of efficient order monitoring, which causes your order to slip through the cracks and not go out to customers on time. Procurement outsourcing improves customer satisfaction in these ways:
The company's account manager tracks your order once it is in their computer system. A dedicated account manager reaches out to the factory to inquire about status or personally visits the workshop to confirm whether work on your order has started. The account manager updates you on progress and you can use accurate data for managing inventory, estimating correct delivery times or reaching out to customers, if needed.
Sourcing companies typically offer quality inspection as a part of their overall service. They have a team of QC inspectors who perform routine in-process and post-production checks to determine if the factory has adhered to your specifications. Any issues with quality can be resolved soon after they're discovered. Most importantly, defective products don't go out to some customers. You're spared the hassle of refunds and awkward conversations with the supplier about what went wrong.
When the full procurement cycle is handled by an experienced offshore service, you get more time to focus on the more enjoyable and creative aspects of your role. For example, if you like and have experience in advertising or business development, you can devote more hours per week on the things you like rather than writing emails to your supplier at 12 a.m. your time with the hope that it will bubble up to their inbox the first thing in the morning.
A stable procurement process helps increase sales revenue and decrease the cost of doing business. Early efforts in building a strong procurement function pays off when your Amazon business expands. Outsourcing procurement to the experts helps develop a robust procurement function from the start and build long-term relationships with the right suppliers. As your business scales, so can your order size and coupling with your supplier, making you eligible for discounts, special terms and other advantages.
China offers pretty much everything an importer can ask for, such as a super-fast supply chain, advanced manufacturing capabilities, good transport infrastructure and lower-cost labor than in Western countries. But the success of China sourcing depends on how efficiently you're able to manage procurement, quality and deliveries.
When outsourcing procurement services, evaluate the services you're paying for. For example, if the company offers a quality inspection service, they should have a few QC inspectors on their payroll to manage the requirements of their various customers. And if they advertise as helping you buy custom products, you want to go through their customer stories and reviews to make informed decisions.