Author: 露露

China Sourcing Agent

Elksourcing：Do’s and Don’ts in Evaluating China Sourcing Agent

Mar 30, 2021 , by 露露

Importers who do not have the expertise, manpower or the time to procure and manage supplies from China will often turn to the services of a China sourcing agent. However, it is not that easy to find a sourcing agent you can trust, and trust is very important in this kind of requirement. You need someone who is trustworthy and not someone who works for hidden commissions. Below are some do’s and don’ts to help you in evaluating sourcing agents in China:

Do clarify the sourcing agent’s tasks and responsibilities. This is very important when using third-party service providers. Do you want them to handle everything from procurement to quality control? Or do you only require them to perform tasks that you cannot handle? You have to be clear with their responsibilities so you will know who should be accountable in case of problems.

Don’t forget to consider the sourcing agent’s geographical presence. If the products you want to purchase are from Shenzhen, then looking for a sourcing agent or company at Shenzhen would make a lot of sense than using an agent from the opposite end. The China sourcing agent will be working closely with suppliers. Thus, you need him or her to be near the location of your suppliers.

Do be realistic with your expectations. Remember that you are working with people and not robots. Even the best sourcing agents have their flaws. They cannot guarantee you low prices, and on-time shipments all the time. Thus, you have to know what is most important for you so you know in which areas you cannot compromise. Ideally, you want someone who is competent and reliable. However, it is better to work with someone with average skills but is hardworking and reliable than someone who is smart but untrustworthy.

Don’t micromanage the production yourself. You asked for the help of a sourcing agent, so let him/her do the job you paid him to do. You want to work closely with the agent, but you can do so without interfering with his work. You want to have control over your business processes, so you show the supplier who is the boss. As a result, the suppliers won’t listen to your sourcing agents anymore and you won’t be able to maximize the benefits of using their services. This doesn’t mean you have to rely completely on a third party sourcing service either. If they go out of business, you will want to be able to continue doing business with your good suppliers.

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Elksourcing：Why Product Sourcing China Is Recommended?

Mar 30, 2021 by 露露

China is considered as the second biggest economy in the world. It is not surprising that many companies want to make business with Chinese firms and suppliers.  Despite misconceptions by the general public about the quality of products from China, seasoned capitalists continue to source products from the country because of specific reasons. Product sourcing China is buoyed by the country’s expansive supplier base, sophisticated manufacturing and competitive costs.

Rich supplier base
To say that China’s supplier base is rich is an understatement. It is estimated that one-fifth of the world’s manufacturing is done in China. Here, almost everything imaginable is manufactured- from appliances, food, textiles, furniture, consumer electronics, cars, toys, household items to apparels.  Although many of the sub-components and materials are exported from other countries, assembly work is performed in countless factories across China.

Factories are also surrounded by supporting plants where materials are sourced or sub-assembly is made. The sheer amount of manufacturing plants in the country further lowers the cost of production in China, as manufacturers offer the cheapest prices possible in order to compete with the market.  Add to this the well-developed infrastructure which supports the efficient transportation of goods and commodities.

Sophisticated Manufacturing
Product sourcing China is boosted by the sophisticated manufacturing plants in the country. The biggest economy in Asia is also home to factories with world-class manufacturing capabilities. In China, factories engage robotics-based automation to ensure superior quality of the products. Factories in this East Asian nation also provide topnotch efficiency, quick turnaround time and excellent customer service.  

Competitive costs
But arguably the biggest reason why companies continue to source their products from China is the low cost. The labor force in the country remains as one of the most competitive in the world. While labor expenditures in China have steadily climbed annually by 15% since 2008 when a labor contract law was passed, the wages of Chinese laborers remain lower compared to their counterparts out west.  Cheap labor costs in the country are also a result of the massive workforce in China. The world’s most population nation with more than 1.3 billion people offers a large manpower complement to support the huge production demand for manufacturing and related industries.

Product sourcing China makes a lot of sense from a business point of view.  Corporations can make maximize their earning potential by ordering superior quality but cheap goods or products from China. 

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Elksourcing：Considerations When Using Global Sourcing Services

Mar 30, 2021 , by 露露

The primary goal of companies when employing global sourcing strategies is to reduce cost. Sourcing companies will take charge of identifying and screening of suppliers, management of supplier relationships and other important tasks. But before you make use of global sourcing companies or services, there are some important factors to consider.

Lead Time

While importing products from other countries may help cut costs, you also have to consider the lead time for global purchases. Global purchases generally have longer lead time compared to domestic purchases. You have to consider sea freight, air freight, and not to mention the time it takes to get clearance from customs. This is why using local sourcing services familiar with the nation’s customs and regulations will be essential to reduce the risk of unnecessary delays.

Transportation

Related to lead time is transportation. Global sourcing will most likely require you to use different modes of transportation. You may have to combine air, water and land transportation to get the goods from the supplier to your delivery points at the quickest possible time. In this aspect, it is best to consult with experts in the supply chain to find the best solution.

Legal Issues

In using global sourcing strategy, you need to decide on the body of law to apply on your contract, whether the law of the buyer’s country, or the law of the supplier’s country, or an applicable treaty between both countries. You have to be clear in your contract to avoid complications in the future.

Language and Culture

Implementation of global sourcing strategies may be hindered because of differences in culture and language. Misunderstandings may arise if this problem is not addressed, and it may be detrimental for your company. Before you hire sourcing services, make sure to ask if their staff understands your language.

Currency

You also need to decide on the currency to be used for the transactions. There are certain risks involved in this so you will want to be extra careful. Ask the advice of experts if you are unsure.

Other than the factors mentioned you also have to look into quality and packaging considerations. If you will be using sourcing services in China, make sure they have a defined global sourcing process that will meet your requirements.

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Elksourcing：Practical Guide for Choosing China OEM Manufacturer

Mar 30, 2021 , by 露露

The major and initial issue in choosing a Chinese manufacturer is determining whether the manufacturer is “real” or not. Chinese companies are masters of disguise. They use the Internet and sourcing websites to make themselves look much better than they are. But they can also hide the reality even on site. So you have to develop an efficient system for breaking through the façade to get to reality as quickly as possible.

The general procedure I follow and the one you should follow as well is as follows.

First, you or your representatives have to visit the factory personally. It is shocking how much variation there is in manufacturing systems even within developed areas such as Dongguan, Guangzhou and Zhuhai. Factories making a virtually identical product can range from those using primitive hand techniques from the 1930s all the way to those that use state of the art German or Japanese automated equipment. You cannot believe what the factory says about its systems and you cannot believe the photos they provide. You must go to look personally.

Second, when you visit the factory you have to use your time efficiently. You goal must be to determine whether the factory is real or is it a Potemkin village or movie set, composed of all surface and no substance. What every foreign buyer must realize is that any factory owner can create the illusion of being a strong business by putting on a show for the foreign buyer. The buyer arrives to see a buzzing, active factory with all assembly lines moving at full speed. As soon as the buyer leaves, the place shuts down again, waiting for the next victim to arrive.

I usually do the following to break through to reality:

I refuse to visit the factory floor first. The Chinese side is always upset about this decision. I just make clear that I have other things I want to do first.

The first place I visit is the raw materials warehouse. Is the warehouse full or empty? An empty warehouse is almost always a sign of a manufacturer that is struggling. If the warehouse is full, I then look to see what sort of material is in the warehouse. Are the materials consistent with what the manufacturer says it produces? Are the suppliers local, national or international? Do I recognize any of the suppliers? Are the suppliers reputable?

I next like to visit is the shipping warehouse. If the export warehouse is empty, this is an obvious signal that the manufacturer has no current business. If the warehouse if full, I then check whether the deliveries are for China internal markets or for export. If for export, I then check what the destinations for the product. Are they headed for countries that generally have buyers that care about product quality? I also pay close attention to the packing of the product and loading procedure. You can tell a lot about a company by the way it loads the product into a container.

My next visit is to the finance office of the manufacturer. I just sit on a chair for about an hour and observe what is going on. If there is no activity, I know the company is dead. If there is activity, I then observe. Is cash moving in and out of the safe? A company that relies on cash transactions is typically not part of an international sales market. Reliance mostly on cash evidences a local player with little China national and international business.

My next stop is the sales department of the company. Again, the first thing I observe is whether the department is busy. Are the sales people taking orders and working with purchase orders and invoices and receipts, or are they drinking tea and staring out the window? What language are they speaking? Are they talking in Chinese or English? No English means no international business. Finally, I just sit in a corner and listen. This can be very valuable. For example, in a recent factory visit I noted that 100% of the phone calls to the sales department consisted of customer complaints about late delivery, short delivery, incorrect delivery and faulty product. That told me all I needed to know about that company.

Finally, after all this back office visiting, I am ready to look at the factory. Here, I further frustrate the factory owner by refusing to look at the work shop floor. Instead, I make clear that I want to visit the quality control department. If there is no QC department, that tells me everything. If there is a QC department, once again I just take a chair in the corner and watch. My goal is to determine what happens when a quality problem is discovered. Do the QC people go out to the factory floor to see what happened?  Do they just pull out the defective item with no further action? Or do they do absolutely nothing? What happens to the defective item? Is it destroyed or is it put aside, presumably for sale in the local market. Some manufacturers will take you to their QC/RD laboratory. The same basic rules apply for this visit. Does the lab show signs of use, or it is just a fancy showroom designed to fool gullible foreigners? I recently visited such a lab at the offices of a food manufacturer. The equipment was beautiful. In fact, it was so beautiful that it was quite obvious that none of the QC and testing equipment had ever been used.

Finally I will visit the factory floor. By this time I have a pretty good idea what is going on at the factory. The factory floor visit is usually just a check on the equipment being used and the QC procedure is in effect.

Once you get used to using an approach like the one I use above, you will find that you can weed out the bad factories very quickly. In my experience, good factories are rare. If your initial review suggests that the factory is a good one, you should take the time to move to the next stage of discussing whether or not you can really do business with the factory. Any good factory will also be very busy. You need to have an honest discussion about what you want to have made, in what quantity and in what time frame. On the other hand, if you reject a factory, make your departure as soon as possible. Do not fall into the trap of wasting time going to lunch or dinner with the factory people that fall into the obvious reject list. On the other hand, if the good factories invite you to lunch or dinner, take the time to go. Good factories are rare and you should work immediately to build a relationship.