Finding a Good Sourcing Agent When Outsourcing Manufacturing

Finding a good China sourcing agent can be the difference between success and failure.

If you are asking yourself the following questions, you’ll want to read this article:

• How to find a trade agent in China?
• What does a China sourcing agent do?
• Where can I find a good sourcing agent?
• Why do people need an import/export agent?
• How to source and get products from China to US?

Hong Kong used to hold a large concentration of agents due to the thousands of Shenzhen factories opening in the late nineties and early 2000s. Soon thereafter the trend continued throughout the Guangdong province and now extends to Beijing.

Many small businesses with limited budgets, resources, and local knowledge use China sourcing companies to find new suppliers, perform factory audits and oversee quality control. Determining how to select a reputable sourcing agent is the key to successfully importing from China for companies that don’t have the budget to support dedicated personnel and travel.  Here are the keys to selecting an agent that is the best fit for your business.

Experience

Just as you would thoroughly interview a potential employee to understand their experience levels, so should you require the same level of detail when vetting a prospective sourcing agent.  Not only are years or time in the field important but also their knowledge and practical experience with your types of products.

An agent who has worked in the electronics industry doesn’t necessarily make them the best choice for working with high tolerance automotive or steel parts or vice versa. A sourcing agent who has only worked with industrial products may not be a good fit for seasonal products such as gifts or Christmas trees. For one the finished goods requirements aren’t the same nor is the timing. A sourcing agent with a specialty in only a few products won’t be as effective at finding or have access to the right suppliers. Lastly, be sure your sourcing agent lives locally for a myriad of reasons such as local knowledge, the ability to quickly be in the factories and Guanxi or relationships with the factory owners.

Compensation

It is critical to understand how the agent you select is compensated. Many agents simply charge a percentage of the commercial value of the goods being shipped. While this fixed number may seem a fair on the front end there is no incentive for them to contain costs. Also, an agent that is being paid on orders shipping out the door may not have your company’s best interest in mind when it comes to quality control.

Ask your agent whether they are being compensated by the factory or whether they are willing to be paid by you once goods are received and passed inspection. Also, inquire about how they have helped to solve a past quality issue with a factory and how it was ultimately handled.

Sourcing Services

In addition to finding and working with a factory, there are other important factors when importing from China such as factory audits, in line inspections, pre-shipment inspections, and logistics. Find out how they notify their customers whether production is on schedule.

Determine what their process is for inspecting finished goods. Ask whether they have been able to get good payment terms for their clients.

NOTE: Often a China supplier will require final payment up front at the time the products are being shipped from the factory to the port. This can put a strain on cashflow. It can usually take a solid year, a good working relationship and substantial business before a factory will extend favorable payment terms.

References

One of the most often overlooked step when selecting an agent is asking for references. As long as you aren’t in direct competition with the agent’s clients (and would you really want an agent representing you if you were?) they should have no problem providing two or three references of companies and individuals they are currently serving.

To find a good agent one of the best places to look is on LinkedIn.  There are numerous groups dedicated to China business and International trade as well as those specific to your product category. Reach out in the discussion forums and you should get pretty immediate results. Reach out in the discussion forums and you should get pretty immediate results. Most importantly, make sure your values are aligned and you are working with someone who is as invested in your success as you.