In the age of Alibaba and DIY eCommerce, why would anyone need a sourcing agent? Those branded coffee mugs you want to sell are just a click away and will arrive on your doorstep (exactly to your specifications – of course) in a matter of weeks. Too easy.
But is it really that simple? If you’re looking to source products from a low-cost region like China, flying solo is certainly possible and might even be the best option for you. But, I’m here to say, there is another way. A sourcing agent can elevate your operation to pro status and I’m here to tell you how.
I know what you’re thinking… “wait a minute, you’re a sourcing agent, of course you think I should use your services!” True. I’m biased, but if you give me a chance, I’ll walk you through some of the most important benefits. I was born in Ningbo, China, which is one of the busiest ports in the world. I’ve seen first hand the trials and tribulations of doing business in China and have built a business around helping entrepreneurs and startups navigate this tricky landscape. Ultimately, a top sourcing agent streamlines the sourcing process from start to finish, reducing the hassle, the cost, and the risk.
In this in-depth review, we’ll cover the scope of the Sourcing Agent role, the top 7 advantages of using a sourcing agent, and some tips on how to find a top sourcing agent.
So, let’s break it down and find out if a sourcing agent is right for you.
What does a sourcing agent do?
First let’s define the role of a sourcing agent (also known as a buying agent, import agent, or sourcing broker). The scope of the role is broad, but a sourcing agent’s job is to guide you through any or every stage of sourcing products from another country. From product development and prototyping to supplier prospecting, contract negotiation, quality control, and everything in between; they are your right-hand man/ woman. If travel is too costly, or too difficult (thanks 2020), a sourcing agent is your eyes and ears on the ground, ensuring that everything runs effectively and efficiently.
In my work as a sourcing agent in New Zealand, I help local businesses source from all over China. Clients that I work with have a wide range of requests, from having potential suppliers independently verified, to conducting quality control before products ship. It’s a very diverse role and my effectiveness rests heavily on my ability to understand the plethora of moving pieces involved in the process. What a sourcing agent is trying to do is help you fill a knowledge gap. Instead of researching for hours and hours trying to find the right supplier, a top sourcing agent can tap into their established network of quality suppliers and manufacturers instantly. The point is, they have a breadth of skills and experience to support you at any stage in the procurement process. So, let’s dive into the main advantages.
Expert support when you need it most
Engaging the services of a professional isn’t just about outsourcing the job to reduce the hassle (although that’s a big benefit), it’s also about tapping into expertise that will ensure you’re doing things professionally without making costly mistakes. Don’t just source, source like a pro.
For example, as we touched on above, a sourcing agent will have a network of verified suppliers and manufacturers to put you in touch with. Another example relates to contract negotiation. If you’re not experienced in the art, you probably won’t be negotiating the best price or terms of trade. It’s a learned skill and one that benefits greatly from experience (and an understanding of the business culture – more on that below). This is where a sourcing agent’s expertise can really shine. Need to understand Incoterms for your dumbbell order? Step up the mighty sourcing agent.
Save time and money
Engaging the services of a sourcing agent might seem like an extravagance your business just can’t afford. But, if your agent isn’t saving you money they’re not doing their job properly. Firstly, a top sourcing agent should be a master negotiator, ensuring that you get terms that work for you. They will have a good understanding of the market and know when pricing is too high, or too low (in which case you will probably be sacrificing quality).
From a time-saving perspective, having someone handle any or all aspects of your sourcing operation is a clear advantage. Ultimately, as any good business owner understands, it’s about knowing when your time could be better spent elsewhere. Can you afford to spend 10 hours compiling a list of potential suppliers, making contact, and negotiating contract terms? Maybe, or maybe not.
A note on fees:
Sourcing agents usually operate on a commission basis (between 5-10% depending on the quantity and frequency of orders) and there are advantages and disadvantages to this. Conflicts of interest can arise, particularly where a sourcing agent has an existing relationship with a supplier or manufacturer. This is difficult to spot so it pays to use a sourcing agent that puts a premium on transparency. One that doesn’t withhold information and includes you in correspondence with your partners. As with any relationship, make sure you understand exactly where their margin lies. Their commission or fee should be clearly separated from that of the supplier or manufacturer. Any push back against operating like this is not a good sign.
Reduce the risk
With the rise of B2B sites like Alibaba, it has never been easier to find top-rated, trustworthy suppliers or manufacturers in low-cost regions like China. Unfortunately, businesses still get caught out by substandard or fraudulent suppliers. For those embarking on the procurement process for the first time, due diligence can be a daunting process. Top sourcing agents will conduct thorough due diligence for you, helping you minimise the risks and source with confidence.
If engaging the services of a sourcing agent is not for you, it still pays to be thorough during this crucial step of the process. Alibaba now has a tool for generating Supplier Reports, and while it offers only basic information, it is a useful place to start. This easy to interpret report gives you useful information like the date of incorporation, registered capital, and certification. If you’re looking for thorough 3rd party verification, many sourcing agents and agencies now offer one-off verification reports. This is a service we offer at Epic Sourcing and it’s gaining in popularity with small businesses embarking on the sourcing journey.
Find the best suppliers and manufacturers
Supplier or manufacturer prospecting might be the most important decision you make in the sourcing process. So, it pays to do it right. Building a mutually beneficial relationship with a trustworthy and high-quality supplier will help establish the right foundation moving forward. Sourcing agents worth their salt will have a network of top-rated suppliers and manufacturers to call on. It is also in their interest to connect you with reliable suppliers that can deliver the product you need, to a high standard, and on time.
Many companies are now looking to partner with suppliers and manufacturers that adhere to responsible, sustainable, and socially aware business practices. They want to know how products are made, and how the people making them are being treated. It can be difficult to ascertain exactly what international standards a factory adheres to, but a sourcing agent should be able to verify this for you. You can learn more about ethical sourcing and our commitment to it here.
Skip the middleman/ women
Anyone familiar with B2B sites like Alibaba has probably been warned about the dreaded ‘middleman’. Although perhaps not the boogieman they are made out to be, ideally you want to avoid them if possible. But wait, isn’t a sourcing agent a middleman? Well, sort of. Except a sourcing agent is your middleman.
Transparency is the key here and you want to establish clear lines of communication with the manufacturer or supplier. This will allow you to negotiate better pricing and terms, properly assess a manufacturer’s capabilities, improve your ability to remedy issues, and help you establish long-term relationships. A sourcing agent can help you identify and avoid the middleman.
Bridge the cultural divide
The prospect of conducting business in a foreign country is both exciting and a little daunting. The cultural divide can be a small gap or a grand canyon, and sometimes you need a little help getting from one side to the other. Much of the charm of traveling the world comes from being befuddled by a foreign culture, but from a business perspective, these misunderstandings can slow down a venture or worse, derail it. A top sourcing agent will help you navigate the business culture of the country you are looking to source from.
When conducting business in China, for example, it pays to understand the mindset of the people you are working with. Most suppliers are looking to build long-term, mutually beneficial relationships, and this of course starts with trust. Understanding culture is one of the keys to building that trust. As a sourcing agent, I have helped many New Zealand businesses get off on the right foot with suppliers or business partners in China.
If you’re looking for a good read on conducting business in China, pick up a copy of Age of Ambition by Evan Osnos. It’s not a dense business etiquette book, but an interesting and illuminating read.
Hurdle the language gap
“You can’t do business in China if you don’t speak the language”. Clearly, that’s not the case in 2020. If you’ve ever made contact with a supplier on a B2B site like Alibaba, you’ll know that it’s usually not difficult to communicate. Most suppliers or manufacturers will have someone on staff that has at least a basic grasp of English. So, what’s the big advantage then?
Effective communication is the key to successfully sourcing. Having a native speaker on your team can save you A LOT of time and reduce the likelihood of mishaps that result from misunderstandings. For example, if you need to make a change to your product before it ships, having someone that can clearly articulate what you need is a big bonus.
A less obvious benefit relates to the fact that language is inextricably connected to culture. It’s not just about what you say, but how you say it. The benefits of having someone on your team that knows how to communicate can’t be overstated. Having someone that speaks the local language can go a long way in convincing suppliers that you’re interested in the collaboration for more than just cutting costs. From there you can start building better relationships with your suppliers.
A sourcing agent is your eyes and ears on the ground
Having someone on the ground when you can’t be is another big plus. The reality of sourcing from a low-cost region like China is that you can almost guarantee there will be hurdles. Problems arise and fast solutions are needed. A sourcing agent gets you support on the ground when you need it.
Although it can be tricky to find, the optimal setup is to have a sourcing agent or agency with teams at home and abroad. If you can get a sourcing agent that has an office in your home country, and in the country you are sourcing from; that is the golden ticket. Having the ability to call on the services of a sourcing agent at the drop of a hat can be a game-changer. It will enable you to arrange things like factory visits and quality control checks without having to fly around the world. A top sourcing agent is your eyes and ears on the ground.
How to find the right sourcing agent
We are obviously fans of the sourcing agent model. But sadly, not all sourcing agents are created equal and it can be difficult to find the right one for your business. Here are some tips on finding the right one:
- Contact a few and get a feel for the service they provide.
- Ideally, sit down with prospective sourcing agents (or meet ‘face to face’ online) to get a better feel for how they operate.
- Test the waters by setting a trial period (or task) to evaluate their performance. For example, you might enlist their services to help you find the right supplier or manufacturer.
- Look for a specialist in your industry. If you’re importing fabrics, for example, look for an agent that has experience importing the types of products you need and understands the market.
- Ask for references from previous or existing clients.
- Look for a proven track record. How long have they been operating as an agent? Can they provide case studies? Anyone can call themselves a sourcing agent, so find out as much as you can before you enter into an agreement.
- Look for a sourcing agent that puts a premium on transparency, and is clear upfront about how they price their services.
Well, there you have it. If you’re a small business or entrepreneur looking to source from a low-cost region like China, a sourcing agent could be worth considering. For some, going it alone is the way to go, and as a small business owner myself I love that gung-ho attitude. Hopefully the above has provided some clarity on how sourcing agents operate and armed you with some useful information to help you separate top sourcing agents from the rabble should you decide to take that route. If you have any questions or need some advice, swing by the Epic Sourcing website and say hi. We offer a completely FREE initial consultation with me, TK!
Better sourcing everybody.