Sourcing Company Profile—Benefiting from Product Sourcing

With countless developments all over the globe, the world has indeed become a smaller place. In many cases these days, businesses based in high-cost countries like the United States strive to gain considerable advantage over competitors by purchasing products, components, or materials from low-cost countries like China. If you wish to take advantage of the same strategy, but you don’t want the hassle of setting up a procurement office in China, then you may want to consider hiring the services of a sourcing company.

Simply put, a sourcing company is a business entity that assists you in looking for, choosing, and negotiating with manufacturers of either the product/s you plan to sell or components of your products. The company helps ensure that you get these products/components at the lowest possible price without sacrificing quality so you can maximize your profits. The sourcing company also often assists with shipping and logistics as well as all the legal issues involved in sourcing goods from an overseas location.

Among the biggest advantages of hiring a sourcing company lies in the fact that this type of company typically has a local office in the country where the goods are sourced. This means they have people on their team who know the language and culture of the country where your suppliers are based. This helps you build a strong business relationship with the manufacturers you partner with. It also helps ensure that all your transactions in the said country are completed in accordance with their laws.

One of the biggest advantages of hiring a sourcing company with a local team in the country where the goods will be sourced is that they are familiar with the language and culture of the place. Flickr.com photo by Daniel Dionne

Additionally, getting the assistance of a sourcing company saves you from having to screen several suppliers on your own and dealing separately with two or more suppliers in case you need several different products, components, and/or materials for your business. Imagine the amount of stress taken off your shoulders! Sourcing companies already have connections with a good number of suppliers in various industries, which means they can negotiate with reliable manufacturers regardless of what product or component you may need.

Now, you may worry about the fees charged by the sourcing company. This is understandable, since sourcing services naturally don’t come for free. The terms of payment or structure of fees can vary from one sourcing company to the next. The most common structure, however, is commission-based, with the amount depending on the free on board (FOB) cost of the sourced products. FOB refers to the cost of manufacturing and delivery of the sourced products to the freighter.

There are also companies that offer an alternative basis known as landed duty paid (LDP), which is the cost of manufacturing and actual delivery of the products to you. Whether you use FOB or LDP as basis, the fee can range between 1% and 20%, depending on the number of specific services provided, the quality of the sourcing company’s work, and the complexity of the product or component you are sourcing. Aside from the commission-based fee structure, some companies adopt the annual retainer fee structure with performance bonus or bonus based on the savings you get as a result of the sourcing company’s efforts.

The payment terms and fees structure can vary from one sourcing company to another. Flickr.com photo by quaziefoto

Choosing the Right Sourcing Company
The easiest and perhaps the least costly way to look for a reliable sourcing company is by conducting an online search. Check the website and sourcing company profile of the ones that appear on the first page of search results and then list down the ones that you feel may be a good fit with your business and may help you achieve your product sourcing goals. As soon as you have your list, streamline it by checking reviews about each company on your list; if there are more than two bad reviews for a particular company, scratch it off your list. Those bad reviews may or may not reflect the true quality of the company’s work, but it’s always better to err on the side of caution.

Among the best places to find feedback for sourcing agencies are social networking sites. People on social media tend to be more candid when they share their experiences with businesses, so you can easily get a feel for whether a particular company is the right one for you or not. Note as well that not all sourcing companies have a strong social media presence. It may be a good idea for you to scratch any company that doesn’t interact with followers on social media off your list. Although social media presence isn’t necessarily a solid gauge of the quality of their services, it does tell you that a company has open communication lines, which can be very important in any business transaction.

It is also advisable for you to attend trade shows and interact with sourcing agency representative there. No matter how much you read about them online, nothing beats being able to converse with them face-to-face. And no matter how good their online portfolio and reputation is, a face-to-face conversation is still provides a more accurate way for you to measure how well a particular company’s business ethics fit with yours.

If you choose to source your products from China, you may want to attend trade shows in China (the Canton Fair and the East China Fair are the two most prominent). But if you don’t want to deal with the hassle of international travel, you’d be glad to know there are also trade shows in the US with significant Chinese presence. Of course, you don’t necessarily have to hire a Chinese sourcing company. There are US-based companies like AsianProSource that have a local team in China.

The biggest advantage of hiring a US sourcing company with a strong presence in China is that you get the best of both worlds. You’ll have no problem communicating with their US representatives and you are assured that all your business transactions in China are handled by individuals who are familiar with the language and culture of the place, thereby ensuring that every step of the sourcing process goes as smoothly as possible.