When we purchase from China, there is 1 way that we discussed in our previous post “How to Buy from China“, which is “with the help of a sourcing agent”, there is a certain volume of purchasing transactions accomplished with the engagement of sourcing agents, not only small companies or start-ups using sourcing agents but also famous big ones. In this article, we will talk about sourcing agents.
1. What is a sourcing agent?
According to the definition on Wikipedia, A sourcing agent is a regional representative who performs outsourcing activities on behalf of the employer. The employer refers to the buyer. I think this definition is clear enough and much better than others. If we have no idea of a sourcing agent at all, just think that they are the representatives of the buyers, they do on behalf of what the buyers should do. In most cases, a sourcing agent is located in the region of the buyers’ target purchasing area, for some reason, the buyers are not convenient to buy directly, like purchasing between different countries, language issues, verification on qualification of suppliers, etc. Therefore, a sourcing agent can be helpful, they assist with the purchase for buyers and make a profit from their service.
2. What does a sourcing agent do?
Since a sourcing agent plays the role of a representative of buyers, they do what a buyer does. After getting the idea of the buyer’s intent, they start to work in this typical way.
2.1 Search and vet qualified suppliers
They start to search online and also in the local markets, after the initial selection, they begin the next step to vet the qualified ones, and then select the right supplier. It usually takes a short time for them to finish this work.
2.2 Price and terms negotiation
Supplier confirmation is the first step and the most important one, then they communicate and negotiate the price. Customizing the product happens a lot of times, the sourcing agent will also handle this and get a quotation.
2.3 Place an order
After everything is settled down, they place the order with the manufacturer.
2.4 Follow up on the order
The sourcing agent follows up on the order and solves any problems that occurred unexpectedly.
2.5 Quality inspection before shipment
Before sending the products out, they can do a quality inspection to check if there is any difference in the agreement.
2.6 Arrange shipment
They help with the paperwork for the shipment and arrange a forwarder to send out the cargo.
3. Why do we use a sourcing agent?
Before we answer this question, let’s take a look at a real case from an international work marketplace platform.
“I would like the cards to be manufactured in China; I already have contact 4 very good manufactures that have experience in similar projects that I would like to get samples of my cards made.
However, I am finding the language barrier difficult to clearly explain what I would like and need in the cards and as a result it impacts the quality and final product costing time and money.”
I quoted what she described as her trouble, and we can see that a sourcing agent is needed here to assist her in coordinating the products she is going to manufacture.
3.1 Save money
We pay sourcing agents for their service, but if we do the job ourselves directly with factories, there may occur misunderstandings during the communication, which will lead to the wrong products, if this happens, all products have to be reworked, and this will cause an additional fee. Compared to the unexpected fee, it saves money by using a sourcing agent although we pay them for their service.
3.2 Save time
Usually, sourcing agents specialize in specific industries and are familiar with local wholesale markets. They have accumulated rich resources during their past years of work, and they are also good at using online platforms. They can get a list of qualified suppliers in a short time, and they communicate with manufacturers more efficiently and in a professional way, which saves time for buyers.
4. What’s the difference between a sourcing agent and a trading company?
A sourcing agent is a representative or assistant for buyers, while a trading company is doing business with buyers directly. We can find a soucing agent and work with them to finish the purchase, in this way we may need to contact the manufacturer for some cases such as pay the suppliers. If we are doing business with a trading company, we only contact them because they are our suppliers, we don’t know who the factory is.
5. What’s the cost of using a sourcing agent?
There is no definite amount of the service cost due to different order values, workload, difficulty, and some other specific requirements of the procurement. Sourcing agents in China usually charge their service by the following 4 types.
5.1 Charge a certain percentage of the order value
This type is adopted most of the time, for example, if the order amount is US$5000, they may charge 7% for their service, the rate is not fixed, the higher the order amount, the lower the percentage for calculating the service. We can negotiate this cost before we confirm working with a sourcing agent, after everything is settled down, then we go to the next step.
5.2 Charge a certain amount
It is suitable for small or easy projects which do not require much involvement in communication and negotiation with suppliers, and small order amounts as well like US$1000. They may charge US$100 for their whole service. We should also ask the sourcing agent before action.
5.3 Charge by project
This is a results-oriented charging model, we may have a budget in advance for the project. We can ask the sourcing agent if they agree to be paid a fixed amount for the whole project, or if they can give their offer. It seems easy for this type of cost charging, but it needs a lot of calculating work on cost control.
5.4 Charge by time
This type suits both short-time and long-time projects. For a short time project, we may pay the sourcing agent by the day or even by the hour. As for a long-time project, we can hire the sourcing agent to work full-time and pay them on a weekly or monthly basis, like a company pays their employees’ salary.
6. How to find a sourcing agent?
By the following methods, we can find a sourcing agent.
6.1 Search on Google
We can say that most of us can do this when we need to find out something. By putting the keywords “sourcing agent China”, there will be a list of results, and we can compare, evaluate and select the qualified one to work with.
6.2 By using online work marketplaces
Another way is to search on Fiverr and Upwork like what we do on Google, there are also many results, the difference is that we can check the freelancer or the sourcing agent’s profile including customer feedback. The other way is to post a job recruit, there will be a lot of applicants bidding for it, just choose the qualified one.
6.3 Through online Ads or friends referral and other SNS channels.
It is common for us to see some sourcing agents’ advertising campaigns when we browse the internet, we can verify if they are qualified or not. Another traditional way to get a buying agent is by friends’ referral, it is the most effective way because of our friends’ endorsements. this way also belongs to one of the SNS channels, like Facebook, Linkedin, Twitter, and Youtube.
In this post, we talked about 6 frequently asked questions about Sourcing Agents, there are definitely some other questions that are not covered, if you get any, please feel free to get in touch with us, and we will reply shortly.
