Find a sourcing agent or have your own international purchasing office in China?

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Facing with fierce global competition, Low Cost Country Sourcing (LCCS) , as one of the winning strategy, is put on manager’s desk for most western companies. Many companies source from China, while because of cultural, legal and language differences, how to make sourcing activity more effective and stable is still a big challenge.

 

Target is very clear:

Cost(TCO) down

Real time action

Reliable supplier relationship

Risk Mitigation

Protection of Intellectual Property

Local knowledge/culture

Quality management

Transparency

Continue improvement

 

 

Which one should be better, to find a sourcing agent or to establish own international purchasing office? Let’s discuss it from several aspects below:


1. Evaluating and selecting the right supplier is an important responsibility

IPO: the result of routine sourcing activities depend on employee’s skill and attitude.

Sourcing agent: usually have more supplier resources because they serve more companies, they gain profit by sourcing. Therefore, more good service could be provided to their clients.


2. Ensure supplies on-time delivery, correct product quantity

IPO: most IPO set their office in big cities, like Shanghai or Guangzhou. And they always visit suppliers by travelling.

Sourcing agent: their location might be very close to supplier’s and they could work together with supplier to provide correct product quantity and make timely delivery.


3. Ensure good quality

IPO: will get more support from inner company and know more information so as to ensure quality.

Sourcing agent: must be good at communication to ensure no information lost between their clients and suppliers.


4. Able to reduce cultural gap, build trust between the client and the supplier

IPO: cultural difference might create tension and affect buyer-supplier performance, and that’s why to have a local office helps alleviate such concerns. However, sometimes IPO staff regard themselves as the buyer and make things even more complicated.

Sourcing agent: a professional agent is good at reducing cultural gaps.


5. IP protection

IPO: need to find reliable people to take charge of IPO work.

Sourcing agent: to find a reliable agent is not an easy job.


6. Transparency

IPO: hold yourself aloof from corruption. For some big companies, they switch supply chain manager every 3-4 years, but it is difficult for SME companies to do so.

Sourcing agent: again, to find a transparent agent is not easy in China.


7. Cost(TCO) down

Sourcing agent could make more cost down to your company, especially for those small or medium size companies. Comparing with IPO, more cost can be saved if you choose sourcing agent, e.g. own employee’s salary, insurance, office renting and other cost.


Author:Steven

Email:steven.zhou@pintuu.com