China Sourcing 101: A Guide to Sourcing Products from China

Thousands of businesses start sourcing their products from China each year. If you plan to do the same, your biggest problem could be that you don’t really know the first thing about the process. This lack of knowledge leaves you open to such mistakes as skipping several critical safety measures. Following are some basic information and tips that should guide you through the product sourcing process.

Go DIY or Hire a China Sourcing Company?

One of the first things you need to ask yourself when you choose to source your products from China is whether it would be best to hire a China sourcing company or do the sourcing on your own. There are, of course, advantages and disadvantages to both approaches and neither of them can be considered the best approach for all types of business. Your choice will therefore depend on the special circumstances surrounding your business.

Depending on the circumstances surrounding your business, you could choose to do your own product sourcing or hire someone else to do it for you. Flickr.com photo by Matt Hampel

Let’s say, for example, that you are just starting out in a highly competitive industry and budget is a bit tight. In that case, it may be more practical to do the sourcing yourself. It may require a bit more work, but it should allow you to keep the outflow of cash at a minimum while you’re still growing the business. As your business grows and you start seeing the need to start ordering products in bulk, that’s the time when it may be a good idea to hire someone else to do the sourcing for you. That should allow you to focus on other aspects of the business, which would understandably become more complicated as your business gets bigger.

Types of Sourcing Companies

If you do decide to hire a China sourcing agent, you’ll have to choose from among three different types of agent:

A trading company in China may be the ideal partner for you if you plan to place small orders; just be sure to negotiate for the best price. Flickr.com photo by Jed Sullivan

• Commissioned Agents – This type of agent is paid a fixed percentage of the amount you pay suppliers for orders the agent follows. The problem with this set-up is that most commissioned agents are actually paid by the suppliers and will defend them in case you have issues against the supplier. The only way this can be an effective option is if you’re lucky enough to find a trustworthy agent with years of experience in the sourcing industry.
• Trading Companies – Working with a trading company may be a good idea for small orders of certain products. Trading companies typically earn their keep by adding their own margin to the manufacturer’s price. If you learn how to negotiate, you could actually get better prices than what you’d otherwise get when you order direct from a large factory. Perhaps the biggest disadvantage of this option is that the supply chain remains hidden, which makes it imperative for you to check product quality at all times.
• Third-party Service Providers – This may be the best option for large orders because it typically involves low service fees. You also get the benefit of complete information as regards the supply chain as well as a professional supplier identification and screening process. Asian ProSource is one very good example of this type of China sourcing company.

Knowing what to do and finding a trustworthy partner are the key ingredients to making sourcing the ideal business solution.