Category: China Sourcing Agent

中国采购代理指南

China Sourcing Agent

Elksourcing：For New Starters How to Source from China?

Apr 10, 2021 , by 露露

China is now an industry leader with its expertise in various products, including electrical appliances, electronics, textile, metal, plastic and consumer goods. However, for new starters, it is difficult to start. In this article, I’ll introduce some basic steps to follow.

1. Know Your Product

The first step is often the most difficult. You often don’t know where to start or who to talk to. Knowing exactly what type of product you are looking for is the first thing you need to figure out before anything else. Knowing the product will make it easier to narrow down potential suppliers and then later determine what qualifications the supplier should have. Having a clear photo ready to show suppliers is a necessity. And any additional specifications about the product would be ideal. Basically, the more information you have on your product, such as having a clear description of the material and function of the product, the easier it will be to find a qualified supplier. Making a list of questions to ask suppliers, along with a brief description of your company, will ensure leaving a meeting in good standing.

2. Search for Chinese Suppliers in the Right Places

Your best bet is to start by searching for your potential suppliers on B2B websites. At the moment, the top three websites for sourcing in China are Alibaba, Global Sources and Made-in-China. Using keywords to start your search is best to get the widest range of suppliers possible. Although you may need to change the key words a couple times to find exactly what you are looking for. Apart from just looking on websites, attending trade shows and using search engines are two effective options for finding suppliers.

3. Initial Contact with Chinese Suppliers

When you finally find the product, and have narrowed down some choice suppliers, your next step is to contact them. If you’re attending a trade show, you will likely be able to communicate with a representative directly in person – giving you the benefit of live feedback. Suppliers at a trade fair might also have product samples on-hand at their booth, which can offer practical insight as well.

When contacting a supplier which you’ve found online, reach out to them by email. Email the supplier by using the internal messaging system provided by the website you are using. Have a brief introduction of your company and what product you are looking to source. But most importantly, leave your email address and request for the supplier’s email address. The website may not have this information, so it is important to get it as early as possible. Follow up with the factory by email back and forth to verify their ability to communicate properly and efficiently. This will help you gauge their cooperation level and interest of doing business with your company.

4. Evaluate Your Chinese Suppliers

Get a feel for prospective suppliers’ attentiveness and communication. You might find it helpful to rate each supplier on how comfortable you would feel doing business with them. Judge them on their email and phone call communication, rather than only considering prices. Choosing a supplier based on price alone can prove to be costly in the end, by refusing a batch of worthless product. Some of the most important points to focus on are communication and the supplier’s management ability. A supplier that is slow or dodgy when responding to questions before an order is placed is far more likely to be unreliable once they’ve received your deposit for an order.

5. Further Investigation

Once you have narrowed your search to one or a few potential suppliers that you feel comfortable about, do NOT go ahead and place an order. Before any financial transaction or order takes place, perform an audit of the supplier or hire a qualified 3rd-party to verify the supplier on your behalf. This type of audit, sometimes known as a Supplier Review, is based on internationally-recognized ISO 9001 standards. A Supplier Review looks at various aspects of a supplier, such as production capacity, quality control and management to determine if this supplier is reputable and qualified for manufacturing your product. Find a verified China sourcing agent for help, if you feel difficult to do it.

Conclusion

Sourcing in China can be a daunting task when approaching it from another corner of the world. Remember these important steps to improve your chances of success:

1) Know what you are looking for in order to alleviate the process of finding an appropriate supplier.

2) Utilize B2B websites or attend trade shows to have the most access to viable candidates.

3) In order to establish a strong relationship with a future supplier, send a respectful email to introduce yourself and your company, rather than just requesting a price quote.

4) Evaluate your suppliers carefully and make sure you feel comfortable communicating with your supplier on a regular basis.

5) Carry out an audit to verify the supplier’s information and increase your chance of obtaining the best possible product from your order.

China Sourcing Agent

Elksourcing：3 Things a Sourcing Agent Can Help for Your Importing

Apr 10, 2021 , by 露露

It’s easy to find a factory online. So, if going factory direct is the best option, why are there still so many sourcing agents out there?

Most people seem to hold onto the common misconception that it’s always better to go factory direct. And sure, it’s great if you can find that perfect factory and you don’t need the benefits that a sourcing agent can offer. But in reality, you’ll find that most factories will have quality or communication issues, and the prices you can get if you buy through a sourcing agent are often lower. So, you may want to think about if you and the factory actually have the resources to work together. Here are three reasons why many importers continue to buy through a sourcing agent:

1. Supplier Verification and QC

Sourcing agents operate as the go-between for you and a factory. They work with a factory to manufacture your order, and in exchange, they earn a profit by charging you back a percentage of the order. A good agent will make sure all the products made in the factory are up to your standards, so they can continue to earn your business.

Many sourcing agents have a long-standing relationship with the factories, so they’re aware of the capabilities of each. Sourcing agents are able to reasonably ensure the quality of the finished products. They visit the factory to carry out product inspections and check up on an order. It can be very troublesome, and costly in the end, to leave this responsibility in the hands of the factory.

2. Favorable Pricing

Buyers often assume they’ll get a better price when dealing with factories directly, but that’s not always the case, particularly for smaller-time buyers. If a factory and an agent have been working together for a long time, they might be able to get you better prices and payment terms. Even if a sourcing agent is dealing with a new factory, they’ll likely be offered a lower price by buying many products in bulk and build a long-term relationship with factories.

3. Better Communication

Chinese education is getting better and better. Many factories currently have their own sales staff capable of communicating with overseas clients. But even with bilingual staff, there are still culture differences and communication gaps which sometimes can lead to disastrous results.

For example, when a Chinese sales rep talks to the factory manager, cultural norms dictate that the employee listen to the boss without questioning. Sourcing agent is technically the client of the factory. So, it’s often easier to have an agent communicate your product requirements and expectations to the boss instead of a sales rep.

You may have a very unique product that requires specifications to be frequently communicated with the factory, you can benefit from better communication if you buy through sourcing agents.

China Sourcing Agent

Elksourcing：5 Things to Consider when Selecting a Buying Agent

Apr 10, 2021 , by 露露

When you start to import from China, to make sure you find the good suppliers, work through the process, and assure product quality, you need to find a buying agent to help you. But it is not easy.

Here are 5 things you should keep in mind when selecting a buying agent:

1. Trust is everything

I think you would agree with me that to work with an agent, trust is important. I would rather use a reliable and trustworthy but mediocre agent than someone who is capable but not reliable. Ideally, you need someone who is both competent and reliable.

How can you tell if your buying agent in China is trustworthy? In many cases, first impressions can misguide you. You can do some online research to see if there are any comments and feedback about them. Give them some trial tasks to gauge their performance. You can generally understand their work ethic by working with them a few times.

2. Contract versus verbal commitment

Some buyers think a contract is not important so they work with purchasing agents and suppliers on verbal commitment, binding by morality and virtue.

My suggestion is to sign a detailed contract with your buying agent irrespective of how good your personal relationship is with the agent. Ask the help of lawyer to draft and review the contract.

3. Buying offices versus buying agents

Buying offices normally have experience in more industries while buying agents often specialize in certain areas such as consumer electronics. If your sourcing projects cover many industries, it might be better to use a sourcing office. If you deal with only a few products, you could work with an individual agent.

Also, if your project is relatively big, it might be better to use a sourcing office as you will need many sourcing experts to work on your project at the same time.

Buying offices are normally legally incorporated companies, so if they breach the contract, you will have somewhere and someone to chase after.

A sourcing agent is often a one-man show. If bad things happen, they might disappear. So relatively speaking, buying offices are more reliable than agents.

Individual Agents might offer lower rates compared with buying offices. For small buyers, a reliable agent might be a better choice.

4. Hire an expert, not a secretary

There are thousands of products global buyers are buying from China, and each product is different. Sometimes it takes months or even years to understand the production details of a specific product. A competent sourcing agent should be a product expert. If he does not know the product, he will not know how to plan quality control, he will not know the costing, and cannot negotiate the price properly. He might not even know where to buy the products.

5. Communication is often a problem

First is the language. You should make sure your sourcing agent speaks your language well enough to understand your emails, and to draft and review an English contract. They should also be familiar with the product in your language (parameters, specification, drawing, parts and other details).

You need a sourcing agent who is well prepared to hit the ground running. If you are looking to build a long-term relationship with your agent, ideally the agent should be proficient in oral communication, as in many cases, email is slow and you will need to call them to speed up the process.

The efficiency of communication is an issue to look at, especially when there is a time zone difference. Your agent should reply your emails promptly. Instant messengers can be used to speed up communication, but suggest you follow up with an email after text messaging to reassure all important matters are clearly communicated.

China Sourcing Agent

Elksourcing：Advantages to Outsourcing Development in China

Apr 10, 2021 , by 露露

Ever needed a new product developed but you couldn’t or have missed the deadline because your company is under resourced? Ever had an R&D project dropped on your lap that you have a hard time getting off the ground because you simply lack the experience or the expertise to get it rolling? So, what can be done in situations like this?

The short and most practical answer is outsourcing.

Here are a few reasons why outsourcing might be the perfect solution to your product R&D needs:

1. You can easily and effectively increase your R&D capabilities.

If you outsource your product design and development to a third-party company, whether it could be in China, India or another developing country in Asia, that has more of the expertise and the experience required in the field of research and development, you will have the opportunity to tap into specific resources that you might otherwise have difficulty obtaining on your own.

Designing and developing new concept products may sound easy, but it really isn’t, at least not without the right people and the right tools for the job. If you don’t have a skilled designer or an experienced fabricator on payroll to come up with a good prototype for the product concept, then you might as well outsource the job to the people who can and get your investment’s worth.

The key advantage of outsourcing, especially when it comes to product design and development, is that there are a lot of options available out there. You will have access to some of the most talented and well-respected developers and manufacturers in the industry. You’re essentially paying for their expertise for one single project.

2. You can capitalize on the latest prototyping technologies available.

When it comes to product design and development, you’re going to need to make a prototype of your concept. But prototyping technology can be rather costly, especially if you want some of the more advanced methods available today, such as 3D prototyping, CNC machining, and other custom prototyping techniques currently utilized by some of the most successful manufacturers in the industry.

Of course, you may choose to gather all of your resources and buy the (very expensive) equipment for your company, but who’s going to operate it? Do you have the right expert to take care of the design aspect or the fabrication of the prototype?

You see, it’s not just about the equipment and the machinery. As stated above, in order to be effective in product design and development, you need the right people for the job. And you can’t produce talent, skill, and experience with just a snap of a finger. But when you outsource, you will have access to everything you might need to accomplish your project efficiently and on time.

3. You can leverage experience and specific skill sets from various disciplines.

This point can’t be stressed well enough. Even if your company has the means and the resources to establish your own division dedicated solely for product research and development, you can’t just conjure up experience and expertise out of thin air. It takes time to develop the kind of experience and skills that are needed in the field of product design and development.

When you outsource the process to more capable hands, you will have access to professionals who have the experience and the specific skills that are needed to effectively handle the project. And the best part is you will also have the opportunity to capitalize on multidisciplinary expertise, which is very useful in the field of product R&D.

Also, sometimes, getting ideas and perspectives from someone outside of your group or company can help. Fresh ideas often help set a project or program to the right direction.

4. You can improve efficiency and expect your products to be manufactured on time.

Outsourcing the process, especially when it involves specialized tasks like creating an SLA prototype, can help improve productivity and efficiency. Well-trained outsourced designers are capable of providing solutions and assistance from the pre-production stage all the way to the implementation. As such, there is no need to jump from one designer to another to complete the project.

Therefore, there are lesser instances of delays, which is an important factor if the goal is to bring the product to the market at the right time. A timely release is essential in ensuring the success of a product. Just imagine what will happen if a product is brought to the market one month after the need and clamor for it has died down!

With an outside team dedicated to the project every hour of every day, efficiency is significantly improved and punctual product delivery will be a regular thing.

5. You can manage production expenses wisely.

When you outsource production work, the ideal scenario would be to set a meeting with the outsourced team and draw up a contract. The agreement will contain all details pertaining to the budget, for the project and for the skills and resources. Everything is indicated in the contract, including possible additional fees or expenses in case of changes in the plans or project.

Therefore, a set budget is usually delivered for every outsourced project. This budget contains all the figures you need to work on, so every expected expense is written in black and white. As such, managing financial resources is easier.

Generally, working with an outsourced team is already more financially practical compared to distributing the work within the company or organization. If the project is developed internally, there is a big possibility that work can drag on for weeks or months because the people involved have other tasks to complete. The longer the project remains incomplete, the longer the production time and the more money will be shelled out. Don’t make common mistakes like this as this can have a huge impact to your business.

6. You can focus on other core activities.

Since you outsourced the bulk of the production work, it will now be easier for you and your internal team to work on other core activities. Focusing on essential tasks will no longer be a problem. This can lead to better performance and increased productivity for you and your team.

Simple Tips for Outsourcing Projects

Enjoying the benefits of outsourcing is only possible if the process is done properly. Here are simple tips to follow when outsourcing projects:

1. Do not be content with giving only a list of the product requirements. Create a model or a sketch to give the designer a more concrete idea of what you want.

2. Aside from the visual representation of the product, prepare to give your designer a detailed specification of the product’s design.

3. Divide the project into parts and agree on how they should be delivered by the designer. Also, do not forget to check on or verify your designer’s professional capabilities and credibility.

4. Finally, build a strong and honest working relationship with your designer. This will go a long way in ensuring the project’s success.

So once again, if your internal resources, budget, and time are limited, the best thing to do is outsource product development needs.

China Sourcing Agent

Elksourcing：How to Find a Good Sourcing Agent in China?

Apr 10, 2021 , by 露露

Are you planning to develop a product in China? You don’t want to choose just any China sourcing agent. Having the right China sourcing partner in place will make the process a lot easier.

China product development is the wave of the future. It’s the easiest and most cost-effective way to get a product to market. If you have a specific prototype in mind, and you’re looking for product development in China, pay attention to what we are about to say.

1. Is the Price Right?

When working with China manufacturers, one of the first steps to take is to determine if China outsourcing is going to be the most effective way to develop your product. It’s possible that it just might not be worth it to go through with development.

A good China sourcing agent will help you determine if it’s worthwhile to develop your prototype. They will work with you to come up with a cost-effective solution to help get your product to market after development is through.

2. Quality Control

Some people feel that sourcing from China is a fool’s errand. They are afraid that poor quality control measures will be put in place.

But there are plenty of companies putting out quality products at an affordable price. It’s a matter of taking the time to do your due diligence. Find a company with a great reputation, work with them to come to an agreement and have them create your prototype as quick as possible.

3. Customer Testimonials

Last but not least, customer testimonials are always a great way to determine if a sourcing company will meet your needs. Look at past customer experiences. Pay attention to what others have said about the manufacturing process, and see if their experience meets your criteria.

In the end, it’s not difficult finding a good China sourcing agent. Put in the time, do the work and everything will come together in the end.

China Sourcing Agent

Elksourcing：Why You Should Hire a China Sourcing Consultant?

Apr 10, 2021 , by 露露

China has become a major sourcing hub, supplying businesses from all corners of the world with products in practically all types of industries. If you’re in the planning stage of setting up a new business, then you’re probably also considering sourcing your products from China. If that’s the case, it would certainly be a good idea for you to seriously consider hiring the services of a reliable China sourcing consultant.

Having the right sourcing consultant is one of the keys to ensuring that you get to maximize the benefit of sourcing your products from a low-cost country like China. If you’re still on the fence about sourcing products from China and hiring a consultant in the process, then you definitely should learn more about the sourcing process and why it is gaining popularity worldwide.

You may think you can handle the sourcing process on your own, but it’s really not as easy as you think. There are several good reasons why you should at least consider hiring a sourcing consultant to assist you in dealing with product suppliers from China. For one thing, a consultant is familiar with the laws and culture of the country. They can help you ensure that your transactions with Chinese suppliers are all above-board and they can also help expedite your transactions.

Sourcing consultants with ample experience have also established relationships with a good number of suppliers. They have likely worked with suppliers in your industry a few times before. This means they will have a good idea which suppliers are the most reliable when it comes to serving needs similar to yours. They also have the capability to help you negotiate terms with your suppliers, since they have likely done business with the supplier before and may have gained the supplier’s trust.

Of course, you can’t just hire the first consultant you come across. It is advisable to hire a consulting company with years of experience dealing with suppliers in China.

If you really want to benefit from a business solution, you can’t just apply the best practices. You should also do your best to avoid common mistakes that can cause significant damage. Where sourcing products from China-based manufacturers is concerned, these are the top 5 mistakes you need to avoid:

1.     Do not take sourcing processes for granted.

If you do an online search about sourcing products from China, you are likely to find countless articles on finding the right suppliers and going through the sourcing process on your own. This has led many business owners to thinking it is easy enough to source products from overseas. But that’s not necessarily true. In fact, you can get into a great deal of trouble if you engage in China sourcing without seeking help from a consultant.

Remember that there are laws involved that may not be the same as the ones that apply in your own country. There is also the matter of choosing suppliers from halfway across the globe. And if your business deals in a variety of products, then you’d most probably need several suppliers. The services of a consultant who is based in China and at least has years of experience in dealing with China manufacturers are indeed valuable.

2.     Avoid communicating important matters with your consultant via chat.

Sure, practically everything is now done online, from correspondence to trade and commerce. But when you’re sourcing products from a different country, especially one where the language is completely different from your own, you have to make sure the people you’re dealing with completely understand what you expect from them. In the same way, you need to make sure you understand everything they expect from you.

For this reason, it is not advised for you to communicate with your sourcing consultant for important matters via chat. You can still communicate daily issues with them online, but for important matters, it would be preferable to send an email after the chat. In an email, you can explain things in detail and ask your consultant to do the same.

Better yet, talk to them over the phone or via a video call. And don’t be content with an “okay” or “no problem” response. Chinese companies are fond of saying these things. Ask for concrete confirmation that they have understood what you’re trying to say perhaps by asking them to repeat the instructions to you or asking questions that could tell you whether they have indeed understood or not. If there is anything you don’t understand, ask them to explain further. Proper communication is the key to smooth transactions.

3.     Don’t be afraid of sample costs.

One of the best ways to secure your orders from overseas is to confirm them with samples. In most cases, it is even advisable for you to send a prototype or at least a blueprint/formula with detailed specifications to your suppliers. The supplier will then give you the opportunity to re-confirm the order by sending a few samples of their work. In this case, you may be asked to take care of sample costs.

Do not be afraid of this extra expense. You may recover the cost of getting samples sent by negotiating payback if you reach a particular amount of order. Even if you aren’t successful in negotiating payback, the added cost could very well be worth it in the end. After all, ensuring the quality of your products is one of the best ways to make sure you get good returns on your investments.

You may have paid a good deal of money to send prototypes and get samples back, but if that results in getting high-quality products your target customers can appreciate, then the amount of revenue you get in return will most definitely be well worth the expense.

4.     Do not ask for CIF prices at the outset.

The two most popular price terms in international trade are Cost Insurance and Freight (CIF) and Free on Board (FOB). With CIF, the seller (in this case, your supplier) pays for shipping the goods to your port. However, they no longer have any responsibility once the goods are loaded on the freighter. With FOB, your supplier will be responsible for loading the goods onto the ship and for clearing them for export. Cost and risk are divided between you and your supplier.

It may be tempting to buy CIF because of the convenience it offers. After all, you will no longer have to deal with shipping details, as it is all taken care of by the supplier. Note, however, that with this arrangement, the supplier chooses the forwarder and could mark up shipping costs to increase their profit. This means you’ll be paying more than you should and you can’t even be sure how reliable the forwarder is, since you’re not the one making the choice.

It is advisable for you to buy FOB instead, so you’ll have better control of who ships your goods and how much you spend on shipping. Being the one to communicate directly with the forwarder also helps ensure that you get assistance and information whenever you need it. And because you’re the one dealing directly with them, you can be sure the forwarder will have your interests, rather than your suppliers’ interests, in mind.

5.     Do not make decisions as regards suppliers without personally visiting their factory.

China may be halfway across the globe from where you’re based, but if you really want to make sure the sourcing process goes well for you, then you will have to visit the country at least once. Take the time and make the effort to visit about five factories before deciding which particular manufacturer to do business with. Do this for every product you need to source from the country.

As a general rule, it is advisable to get a list of prospective suppliers from your sourcing consultant and then visit the factories of the suppliers on the list. It would be preferable if you conduct the visits together with your consultant, since the consultant is the one with the local experience and cultural expertise. He can assist with the negotiations (perhaps carry out translations to avoid misunderstanding between you and the supplier) and advise you on which supplier best suits your needs and preferences.

China Sourcing Agent

Elksourcing：Difference Between Sourcing Company & Trading Company

Apr 10, 2021 , by 露露

A lot of people believe that a sourcing and a trading company is one and the same thing. There are good reasons for why this line is blurred as sourcing & trading companies often step into each other’s domain. However, I hope I can address some of the key difference between a sourcing company & trading company.

Process specialization Vs. Industry Specialization:

While there may be sourcing companies specializing in an industry, especially for highly technical industries like automotive, in most cases sourcing companies in China tend to be specialists in systems & processes related to quality control, international trade & supply chain management.

These processes & systems can be plugged into most industries & products. Trading companies on the other hand tend to specialize in specific products or industries.

Breadth of Knowledge Vs. Depth of Knowledge:

Professional Sourcing companies in China tend to have a wider “breadth” of knowledge about various industries as well as supporting industries such as quality control, testing, logistics, etc. and how all these come together to form an efficient & effective supply chain. Trading companies on the other hand may have a wider depth of knowledge about their own products or industries.

Sourcing companies do not carry product catalogs:

A sourcing company would not normally carry its own product catalogs & price lists while a trading company would actively carry and promote their own product catalogs. A sourcing company would “source” each product based on the client’s custom requirements. However, sourcing companies often leverage existing factory relationships from previous engagements to source for new clients.

Protect Client’s Interest Vs. Factory’s Interest:

A sourcing company is expected to be the representative of the client on the ground, executing their instructions and at the same at ensuring proper systems and processes are laid out to ensure a smooth transaction. These include quality control, risk-management and logistics depending on the scope of the sourcing company’s service.

A trading company has to play a fine balancing act between managing manufacturer’s interests and clients’ interests and often would put the manufacturer interest first, as they tend to have fixed manufacturers who they procure from to supply to multiple clients and hence may have a volume advantage with those manufacturers.

A sourcing company on the other head is in a position to put more pressure on a supplier or switch suppliers with greater ease if defined standards are not met as they do not have a vested interest in protecting a manufacturer and instead their interest lies in ensuring they retain their clients by helping them avoid issues with the suppliers.

Dispute Management:

If there is a dispute, for example a pre-shipment inspection of goods not passing or a payment dispute with a supplier, the sourcing company in China is expected to represent the client in the dispute and try to resolve issues or get compensation through various means (negotiation, contract enforcement, etc.)

Whereas, when dealing with a trading company, the trader is effectively the supplier and therefore, the importer would be directly dealing with the trader to resolve disputes.

Strategic Objective:

In most cases, the strategic objective of a sourcing company would be to manage costs, risks & quality for a client by using their established systems and processes, experience & knowledge of the area they are operating in & their available resources on the ground for execution purposes.

The strategic objective of a trading company is to maximize the sales of their product lines in order to get scale advantages when buying from their factories and hence improving earnings through expanded margins.

Network of Supporting Industries:

Most sourcing companies would either have a network of companies providing a range of services that may be needed on ad-hoc basis for supporting projects or have some of these services in-house. This may include, industry specific engineers, quality control inspectors, product & packaging designers, product testing laboratories, etc. This comes along with the exposure of working with different kinds of products, industries & types of projects (for example sourcing existing products, new product development, etc.).

Trading companies on the other hand may have a stronger network for parts and compatible accessories related to the products they deal in.

Value Added Services:

A sourcing company can provide a range of other value-added services to importers and depending on the relationship with the client may often add and customize services, and pretty much act as a company’s branch office in China. This may include market research work and product recommendations from other industries where profitable opportunities may exist. This may also include building a large supplier base for existing products, as well as strategic advice and consultancy.

A trading company may be able to provide added services in the form of product recommendations related to existing product or industry or customizations to the current product.

I hope the above gives some clarity into the nature of differences between sourcing company and trading company, however it is important to realize that pretty much every point mentioned for a sourcing company above can be applied to a trading company and vice-versa. This is what blurs the line of difference and often causes confusion.

China Sourcing Agent

Elksourcing：Factory, Trader, Sourcing Company Which is Better?

Apr 10, 2021 , by 露露

There are many commonly held beliefs in the west about getting a factory to manufacture your goods in China. It is true that you can vastly reduce your production costs, even when you have to ship products halfway around the world.

But it isn’t true that dealing directly with factories is always the best way forward. Let me tell you the pros and cons of factory, trading company and sourcing company, so you may know which is right for you.

Factories are often seen as the best and only source for your goods. You can communicate your needs directly with them and, if they are the right factory for you, they will have a high level of expertise in the manufacturing process and you should be able to rely on this from order to delivery.

Factories will make your goods to your specifications and within the tolerances you demand. The factory you choose will have probably been making similar goods for some time – you wouldn’t want a smart phone case factory to build the smart phone itself!

Finally, cost is frequently the main reason people go to factories direct as it is often thought that you will get the best price by that route (this isn’t always the case, as will be discussed when we look at trading and sourcing companies below).

Where you have decided to go to a factory, you must be aware that in China it is quite common for trading companies to try to masquerade as manufacturers, and they often will try very hard to fake for as long as possible. Though there are good reasons to go for a trading company, particularly if they are upfront about being one, if you specifically want a manufacturer here are either ways to smoke them out:

Ask them outright if they are a trading company or a manufacturer. Often trading companies, particularly the ones you may wish to work with, will come out and say that they are immediately.

If they do say they are a factory, tell them you’d like to pay them a visit. Manufacturers will leap at the chance to show off their factory and try to set up a date to meet, where someone with something to hide may be evasive and not be too willing to let you pay them a visit.

Look at their product range. Manufacturers will tend to specialize in a much narrower range of goods according to their tooling and expertise. Trading companies will have a network of contacts so will have a far greater range of products on offer. Rather than investing their resources heavily in new lines, they can just pick up the phone to a specialist factory and get them to make the product.

Is their listed mailing address on the outskirts of a city or is it an office in the central business district? As with western cities, manufacturing areas tend to be on the outskirts where the land value is lower. A trading company however only needs an office and could well be in a central location of the city.

How much do they know about the production process? A factory boss will know his lines intimately and be able to give good answers to good questions. A trading company will give much vaguer answers. A very detailed knowledge of the product on your part will go some way to persuading them that you are a serious buyer as well.

Ask for a third-party factory audit. There are specialist auditors in China who will examine the contact’s claims and research the factory, as well as any certification they have, before you sign anything with them. A trading company might be evasive about this, as they would be reluctant to disclose their sources.

Trading Companies

Trading companies are sometimes seen as an expensive and unreliable way of getting your product made. This is not always the case, and despite what you may have heard the trading company route may be the right one for you if your circumstances are a good fit.

One of the important differences between sourcing companies and trading companies is that trading companies will have a high level of expertise in a specific field. With multiple importers wanting similar goods, and a number of factories that make those goods, the trading company may well have a level of expertise that is close to that of the factory themselves. They may be able to advise you as to how to customize your product and improve its salability, which again could boost your bottom line when it comes to selling the product.

They will act as middle men. The good ones will have a number of contacts with factories in their region, and may well be able to get your product at a lower price per unit than going direct to a manufacturer because they will be able to achieve economies of scale as they can bolt your order on to an existing line of very similar goods. This is one of the strengths of going to a trading company – they can get a far lower price per unit than you might be able to at the scales you want to order.

One of the issues to look out for is that unlike sourcing companies, trading companies should be considered as being on the side of the factory should any dispute arise. They will be your point of contact at the factory – not the factory itself. They will often seek to protect their manufacturer’s interests; the lines of communication will be longer and disputes harder to resolve.

Sourcing Companies

Sourcing companies, work on your behalf to source a manufacturer and deal with the issues that arise in China. Unlike trading companies their loyalty will be to you rather than the factory, so when a dispute arises they will represent your interests.

As with trading companies the sourcing company will have a number of existing relationships with factories. Though their position is more on your side of the line, they will deal with the same factories on a regular basis and like trading companies, will often be able to drive some economies of scale into the final cost per unit.

One of the main advantages the sourcing companies should have is their grip on quality control processes that can be applied to a great range of products. This should include contracts in Chinese, inspections, follow-up and putting together a QC system in place. They can ensure that your product matches the specifications you have set and tackle any disputes on your behalf.

Sourcing companies specialize in the supply chain (logistics) as much as the production process & understand international logistics as well as compliance requirements better in most cases. A good sourcing company should be able to take over your entire sourcing process, right from finding the factory, to Chinese contracts, inspections compliance and logistics to your door. This would allow you to focus on your sales & marketing operations through the significant time savings achieved. A trading company might be better at reducing the factory price per unit, but a sourcing company might be able to drive greater savings in your supply chain overall.

Which Type is Right for You?

So how do you decide whether you should be working with a factory, a trading company or a sourcing company?

This decision is unique to each importer and is based on several factors, such as:

Experience importing from China,

Knowledge of import regulations & processes,

Size of your order (Total order value, as well as order value per product and per supplier),

Resources available to manage the import process.

If you are a large buyer that can comfortably meet the factory’s MOQ, have a good knowledge of the import processes & compliance requirements and have the time & resources required to manage the back & forth communication and order follow-up with the supplier, including order follow-up, you may consider a factory.

If you have larger orders and can meet MOQ, but are short on experience, you can go to factory direct and still work with a sourcing company as your nominated representative on the ground to manage the operational process as well as your risk and quality requirements.

If you are looking to buy a wide range of “related products” within the same industry but your quantities are not large, a trading company can be a good option for you. Trading company’s specializing in a given industry would often develop a wide product range with their products being manufactured at several different factories, thereby giving you the choice to carry multiple products in the same niche and at the same time being able to import smaller quantities per product.

As above, you can also use a sourcing & QC company to manage your risks, due-diligence, project management, quality control and logistics requirements when working with a trading company.

Finally, you can use a sourcing company in most of the scenarios mentioned above, especially if your order QTY is not large and related to wide range of products. Sourcing companies are in a better position to find direct manufacturers and skip trading companies which often dominate B2B portals.

As sourcing, quality control & project management process is highly time-consuming and often requires presence on the ground (for example factory audits, inspections, manufacturing control, container loading, etc.), importers of all sizes often use a sourcing company to work on the entire sourcing process so they can focus on their sales & marketing endeavors.