The Sourcing Agent often plays a very important role in International Trade. It is an indispensable partner for customers in purchasing.
A purchasing agent is an individual or company that can provide business procurement services to customers, such as sourcing good suppliers, good products, ordering contracts, product inspection, logistics, business financing, etc…
The purchasing agent can be a third party, as a bridge between the customer and the supplier.
Also, they can place orders directly to the supplier.
An excellent agent is supposed to provide professional services and solve a variety of troubles.
Many people are willing to choose a purchasing agent to serve them in international trade. Large enterprises work with large purchasing companies, especially those in Hong Kong. Small businesses prefer to work with small purchasing agents or professional individuals.
In International Trade, The professional agent can provide a complete set of perfect service solutions.
It includes:
- Market research
- Product and supplier sourcing
- Supplier qualification investigation
- Business negotiation
- Price negotiation
- Quality control
- Order Operation Management
- Freight Logistics Coordination
- Customs Declaration
- Document making and so on
Here the research means the sourcing agent should do the market research on the supply side.
For example, if you are looking for a kind of product.
First, you should find out the production base of this product.
Second, you should know which parts of the base are located in China.
The third is what are the characteristics of the product in each region?
Then what is the price, and how about the quality?
What are the advantages of this product in the region?
Where are the raw materials supplied?
How many workers are there in the factory?
Which countries or regions are the products of the region sold to?
The last is which well-known brand name suppliers?
Sourcing is looking for the most suitable products or suppliers for customer requirements. Then conduct systematic screening of suppliers.
And choose the best suitable one according to the customer’s request. These requests include quality rules, price needs, sample development ability, and production ability.
The next step is to assess the factory scale, Worker’s welfare, output, etc…
After the screening, the factory will enter into the list of potential suppliers.
The sourcing agent will arrange a meeting with customers and suppliers. And as a bridge to communicate between the factory and customers. All the customer`s requirements are supervised by the agent.
And then the agent will make an audit of the selected potential suppliers. They will determine the authenticity of the plant and workshop environment. They even ask for reviews from clients they’ve worked with before.
Negotiation
The purchasing agent is on the same side as the buyer. They will help to negotiate the price before placing an order.
And conduct quality control and management at all times during production. The agent should control the pre-production of raw materials to the quality of ready products. Because they will respond a part of the economic loss if any issues with selling at the customer`s side.
We can see from the above, that a good purchasing agent can solve a lot of trivial matters for customers.
The customer focus on design, sales, and marketing. The various procurement issues can be handled by the agent. Thus, it can save a lot of time and money for the customer, to improve the efficiency of procurement.
Many of the world’s leading enterprises cooperate with sourcing agents.
And we know a leading sourcing agent named Li & Fung Group. Li & Fung Group is a world-renowned agent. It provides the perfect supply chain services to customers.
Li & Fung offers services in product design and development, raw materials and factory sourcing and capacity building, vendor compliance, and distribution.
It has over 250 offices in 40 markets, connecting some 15,000 suppliers with 8,000 customers through its services.
Historically, buyers have either purchased fully developed products from domestic importers or overseas traders (Principal Traders) or through their own in-house sourcing teams. Today, buyers source their products via all these channels through the company’s trading network either through agency-based sourcing or product-focused services across a wide range of product categories.
In a typical agency-based sourcing arrangement, a sourcing agent oversees product development, negotiation of price, the locating of factories, procurement of raw materials and components, quality control, factory compliance, order processing, and manufacturing control and logistics. In a typical product-focused agreement, a buyer is presented with a collection of product samples for the customer’s target market designed and developed by the Principal Agent. The buyer selects a range of samples and negotiates the price with the Principal Trader. Once the order is finalized, the Principal Trader works with its vendor base to produce and deliver the products. [1]
Global Brands with which Li & FUNG has worked include Wal-Mart, Macy’s, Kothi, JEEP, KINDS, and NEW BALANCE KINDS.
If a purchasing agent is so important to a large company, then is it necessary for a small company?
In fact, the risk is very high in International Procurement.
Large enterprises have a professional legal team. They can prevent various risks and adverse factors in purchasing. And also have enough procurement experience to solve the problems.
A small company does not have professional procurement departments. Because of the lack of financial and human resources to build it. So they do have not a full-time legal team to prevent and solve the potential risks.
The most important role of a qualified purchasing agent for a small company is not only to save time and money but also to help you prevent being cheated.
Because if you’re unlucky enough to find a fraud company, you’re likely to end up with nothing.
Some examples of unscrupulous suppliers in China duped foreign buyers.
The fake company got a deposit and disappeared.
I got cheated by a chines factory they got USD and no shipping any goods and they eat money. where is the legal step we can do with them. we have all swifts of USD we sent to them [2]
I am seeking help and advice in recovering my money from a cheating company. We have been scammed of $8400 in a cash deposit just before the Chinese Holidays when visited China and meet the seller for a second time.[3]
The company doesn`t want to refund after canceled order
Dear Sir, How are You? Hope you are fine by the grace of God.
We purchased Steel Pipes from Cangzhou Ouxiline Pipe Company from Cangzhou.
I want to inform you that we have sent the 20% advance payment of USD 7125 and after a long time the order was canceled by them and now they are not sending our money back.
We have already engaged a Lawyer in china regarding this matter and we also want to inform you this is a fraud company please take action regarding this company and help us if you can. I have attached the TT copy and Invoice in the attached file. please check that and take action. I shall be very thankful to you.[4]
Payout and get rubbish back
We had placed our order for 06-Containers for importing A4 Size Copy Paper of 70 GSM and 80 GSM – 03 Containers each on 23.03.2013 with our “OEM” printing of ream and carton cover packing on the subject Chinese Company.
We also paid them in advance and made the balance payment by T/T as mutually agreed upon between us. The Chinese Company arranged the Shipment of all ordered 06-Containers thru’ a Shipping Company by the name M/s Mitrans Container Line Co; Ltd. From Qingdao Port, China to Nhava Sheva Port, India accordingly.[5]
CHINESE “SUPPLIERS” SHIPPED WATER WHILE YOU BOUGHT SUNFLOWER OIL
A buyer from Poland(Oil Refinery Plant) approached Chinawhy to source crude rapeseed and sunflower oil for them, which they will use to produce biodiesel. The order is mega-size, as the buyer said that they were planning to buy 6000 tons per month from China.
So we started the sourcing: First of all, due to the project size, we tried to identify top rapeseed oil suppliers in China. We contacted China Customs to purchase the top 50 exporter list for this product, were told there was no data on the customs system for rapeseed exporters. That was weird. Every time, when we come across big projects, we always turn to customs to buy the top export list(to identify top manufacturers or exporters). This was the first time they told us there was no data on their system.[6]
Mass production at low quality than Sample
This Bad Supplier was listed as a Gold Supplier at Alibaba.com.
We purchased 2 pieces of equipment plus accessories based on multiple emails and telephone exchanges. They sent us videos to show how the equipment was supposed to work. Many details were provided.
However, it turned out that the equipment they shipped us was so subpar and haphazardly made that they could not work at all. They were supposed to be stainless steel and food-grade but they were rusted and could not be used for candy processing.
We went back and filed a dispute via Alibaba.com but as you could already imagine, nothing was done to make this Supplier refund us our money or expel them from the platform. It cost us around $9000 for this transaction but even after all the equipment failed to meet the very basic standards of operating, the Supplier offered to reimburse only $300. Yes, $300, I did not miss a zero there.[7]
Delay reply, bad communication, delay producing, delay shipping
Unfortunately, I have faced several delays with the factory in China and the communication has been very difficult with misinformation.? The factory claimed to be very experienced with producing [this buyer’s product], but they have apparently had a lot of difficulties producing good quality samples with any consistency. The factory is listed with Alibaba.com as a gold supplier, but that doesn’t appear to mean much.? I also tried to check references for the factory in advance but was told that the customers’ contact information is confidential.[8]
Let me share with you a story.
At a recent trade show, I met a new-to-China buyer who purchases generic electronics from across China. He looked very nervous when he came to me for help. He said: “2 months ago I gave a 20% deposit to a supplier of 10K US Dollars along with the PO. The goods were to ship out today. I emailed and called them a few weeks ago for an update but didn’t hear any news back. I called again a few days ago and now the phone line is not working. They did reply to my email and said there has been a delay (no explanation) and that I shouldn’t worry.”[9]
Most of these defrauded foreign buyers are individuals. Some are small companies. Some contacted suppliers on-online, and place orders online. A small part of them have met with suppliers, and others only have mail or telephone contact.
But they all have the same problem the lack of supervision. They drop off all works at the factory from the beginning of contact until the shipment. Nobody tracks the factory production, nobody makes the quality control. And even don`t check the shipping arrangements.
The unscrupulous suppliers will be cheating on workmanship and materials without supervision.
But if you have a local purchasing agent, they can assist you to do the jobs.
For example, investigating the supplier’s qualifications. Make sure it is a true company when you contact the supplier for the first time. Identify the true bank account before you pay the supplier. Keep tracking of production progress after the order. Inform your order status the first time. Before shipment, they can help you to check the loading situation. You can get a real-time reply to the loading status. Thus you can avoid deceiving yourself completely.
So, you should hire a Chinese purchasing agent if you’re getting ready to import from China.
Or if you’re buying too many products that suck too much time and effort, then you need an agent.
Here are seven reasons.
1. Purchasing agent familiar with the situation in China.
They familiar with the production base and sales market. They can find out the market or origin of your products quickly, saving your time and cost on sourcing.
For instance, the factories of consumer electronics products are in Shenzhen.
The toys factories are in Chenghai, Dongguan and Yiwu.
Most of the garment factories are in Guangdong, Zhejiang, Jiangsu, and Fujian Provinces.
Leather factories are located in Haining and Guangzhou.
Machinery factories are located in Zhejiang, Fujian, Guangdong, and other regions.
2. The Purchasing agents communicate with Chinese suppliers better than foreigners.
There is no cultural diversity between them. It will save time cost of communication.
Many factories in China do not have their own foreign trade departments.
No one knows English or other foreign languages. Communication between foreign buyers and factories is very difficult. Even if some have their own foreign trade salesman, they can not get the requirements of buyers. This is due to cultural differences or Language levels.
One of my customers once sent me an email complaining that the salesman ignored his request.
While I appreciate his expertise and suggestions, do you see how I continue to ask and he continues to avoid the question of ****mold price? He then tries to sell us on a higher mold cost. Maybe he’s not capable of producing *** molds, maybe he wants to earn higher margins. We can’t be sure because he avoids the direct question. We both know *** molds of this size are approx 500-800 USD so we can only speculate his intentions. Either way, we are getting nowhere with this guy after 2 days and several emails later so I’m forced to suspend negotiations.
I am much too busy to go round and round with a supplier.
3. The purchasing agent can handle many orders at one time. And they can coordinate the orders status with different suppliers in time.
The order production process has a lot of tedious things to confirm and deal with.
It is more convenient and fast for the supplier contact to the agent. Because no time difference between them. Any problems can be timely communicated and resolved.
But between the factory and the customer often has a very big time difference. Production issues are always delayed to solve. It wastes too much time.
4. Purchasing agents can help customers select suppliers and Control Risks.
As we mentioned above, the buyers’ source suppliers in China in two ways.
One is online sourcing(B2B platforms such as Alibaba, made-in-china).
Another one is trade fairs such as Canton Fair, Yiwu Fair, or others.
Is he a real factory or a trader?
What is the quality of his product?
Can you deliver the goods on time?
How big is the company and how much is the monthly output?
Where is the company registered?
Have you had any export experience?
Foreign buyers can`t find out for themselves, while it’s a piece of cake for a local procurement agent.
5. The buying agent can watch the production status of the order at all times.
They can check the production process, and ease the management of the purchasing progress. And finally, reassure the customer.
There is a lot of work that must constant attention to after orders are placed and deposits are paid.
For example, is the factory buy raw materials on schedule?
Will the factory cut corners and replace the raw materials with cheaper ones?
Is there any problem with the order production process?
Can we fix it if there’s a problem?
If can not solve, will affect the product quality and sales?
Is the factory complete production on schedule?
Are they loaded containers?
These problems need to be monitored by the customers, in case some of the bad suppliers will cheat.
6. The purchasing agent can supervise the product quality effectively.
Product Quality Supervision can be divided into pre-production, inline-production, and after-production control.
Pre-production quality control can guarantee the quality at the beginning of the order. Such as if the raw materials are under the sample requirements. Whether the product size and scale are under the contract requirements. Are the hardness and gloss, Waterproof, and so on according to industry standards?
These quality-related problems can be identified for the first time.
7. As a local guide, a purchasing agent can help you find the nice restaurant, interesting places.
You can drop a series of things to your agent, such as Booking the hotel, shopping, entertainment, tour guide…
Because of the local procurement agent, is familiar with the local customs and local conditions.
Which hotels are more cost-effective, better service?
Where is a good place for shopping?
How to get the Fun, beautiful attractions, and entertainment?
The agent can get it for you in the fastest time. They will get you to travel with peace of mind.
Your sourcing agent is your personal tour guide on your business trip.
Conclusion:
Sourcing Agent plays an important role in international procurement activities. Whether it is a large group or small company, or individuals purchasing, there is a lot of business to deal with.
Thus, hiring a qualified sourcing agent is much helpful to your business.
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China Sourcing Agent
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