Today the supply chain has been compressed. You can potentially find anything on internet. There are plenty of market place and b2b platform giving direct access to potential of suppliers and factory. So why paying some sourcing companies or sourcing agent to source goods ?
There are a few reasons why a substantial number of compagnies still use and pay for sourcing services.
Here a list of the reasons :
In this current world time is money. This is not just an expression but a reality. It is very easy to understand it when you start employing people: you have the expenses (salary, taxes, other expenses) on one side, and you have the time they work for you on the other side. It gives you an hourly rate and this is how you realize that time is money: how much do they produce and contribute to your company for how much money you spent on it.
To optimize a company run you have to make the maximum of output from those employees with the minimum time required for them to output it because remember you employees have an hourly rate.
So let’s say you need to source a Chinese supplier to supply your inventory. If you employ someone unqualified it may takes double, triple or even more time than having someone experience in doing it. At equal rate,the unskilled resource will cost two or three time more than the skilled one.
Not only it will cost more but also it will take more time to source the product and to feed your supply chain with it, which means you are late on the time to market and your competitor is taking the market before you, hence you are virtually loosing sales, hence generating loss.
2./ Experience and risk management
Time of execution is related to experience. If your employee is only 2 years experience with sourcing suppliers in China, there is likely a chance that someone having 5 or 7 years experience may do the job faster and with better efficiency. So in the end calculating the global cost of sourcing a product make you make understand why it can be advantageous to have experienced people to perform the task.
Moreover, with the internet and all those b2b platform, sourcing may sounds easy but there are still plenty of risk and potential source of wasting your time. There are so many suppliers online that the process of refinement of your selection is crucial to elect the one you are going to work with. Remember you will place order to only one supplier and it should be the right one; the one who is stable financially, capable, competitive, the most transparent possible, willing to work with you…
When you have a list of 100 suppliers coming out from the internet, you still need to sort them out to choose the right one. The resources who have experience can sort much more quickly and more efficiently than the resource who doesn’t have experience. And again time is money…
There are plenty of topic on internet showing how a b2b platform can not guarantee a vendor to be reliable. There are tons of complain of buyers being scammed by potential vendors. So sorting out the suppliers properly is essential
If you are buying important quantities of products and are setting as a wholesaler in the supply chain = you put your name on it, then you likely want to make sure your name will not be getting dirty with potential quality problems. In my opinion controlling quality means controlling the supply chain as much as possible (ideally wholly) because quality of a product mostly rely on three things : design/engineering, materials and process used for shaping part, and workmanship. If you want to keep control you have to have access to all of this : you need to make sure which raw materials and components are used to manufacture your product and how those materials are processed, you need to understand the design and engineering of your product because 80% of quality into manufacturing comes from design, and you need to control workmanship because it is the last entity that touch the product before shipping so it play a kind of filter role of accepting and rejecting defective and proper goods.
Keeping in mind this transparency need and understanding that online platform are not only filled with manufacturer but also with middle men then you may understand why sourcing properly is challenging.
Some sourcing or buying agent in China source for free for their clients: they source suppliers “capable” to produce the desired product, they send back a quotation to their client and then in turn will take a opaque comission during the order. Since they take comission and since nobody like to disclose margin to avoid the “squizzing price effect” from the buyer, the agent will have to hide the supply chain later to the buyer to go in direct or to avoid the buyer to disclose the margin of the agent. On this base the supply chain is hidden and this is not a situation where the supply chain is under control, on this base the quality can not be managed properly.
I write this to let you know how important it is to work in transparency if you use an agent to source your product, and why it is worth paying for service upfront to be able to prevent problem later by controling fully the supply chain. Of course, some buyers will reply me: “anyway if the agent doesn’t supply good quality product, i will just change to another one”. Yes, but how much does it cost you to make this change : you need to find another agent, you need to educate him to your product, you need to block your supply for a while etc…
I personnally consider the relationship agent buyer should be a team work/partner relationship and not a commercial one (supplier / client). If you work on a commercial relationship, everybody want to pull the blanket his side and suspicion about how much the other make is constant. If you work in a transparent relationship, considering that buyer is willing to let the agent to breath, then the agent will consider the relationship as a partner and team relationship.
So, think it twice on a long term perspective, is it better to save penny by using a sourcing agent sourcing for free or is it better worth paying upfront but have access everything to be able to control the whole supply chain and stay under control whatever it happens. Remember, this is your image which is at risk.
What is your opinion about it?