You are a small business owner. This means you need to account for every cent that comes into and goes out of your business.
This makes you question if you really need to hire a sourcing agent to find your high-quality, Chinese products. You also question if the cost of a sourcing agent is worth the expense.
You have two options for sourcing products from China:
- Create your own purchasing team to do work in-house;
- Outsource purchasing to a Chinese product sourcing agent.
Each choice has advantages and disadvantages.
An in-house team can oversee all details of the supply chain but at a higher cost to you as the business owner. A purchasing agent partner in China will make your business more profitable. The trade off is you will not have 100 percent control of the purchasing agent as you would if it were a direct employee. However, your purchasing agent will work with you as much as possible with all of the details.
Sourcing Nova feels the best decision is to hire a sourcing agency. We say this not because we trying to sell our services. We want you to make an informed decision. This is the purpose of this blog – to demonstrate the value in a quality sourcing agency for high-quality Chinese products.
What factors do you need to consider between an internal purchasing team and a sourcing agent in China? There are four points of consideration between the two.
1. How much does a sourcing agent cost
Cost is the biggest consideration of them all. Determing how much a sourcing agent will cost is vital to the success of your business.
What is the cost of an in-house purchasing department vs. the cost of hiring a procurement agency?
Answer: It depends.
The biggest determining factors are the size of your business and the job you need done. This means costs can have a huge margin. For simplicity sake, let’s assume you want a full-time employee for product procurement. This does not mean you cannot outsource some of the tasks like product packaging design, photograly, third party inspections, customs clearance and international shipping.
Regardless, a quality purchasing manager overseeing these tasks is the most cost-effective manner. You can do this on your own but make sure to get paid for the work.
Here is some data from Indeed, outlining the average monthly salary for a purchasing manager in California:
Wages are only one part of the overall cost. There is the hiring, training, any allowances, leave, supplies, perks like commissions and related expenses.
Before too long, your costs can jump well over $6,000.00 a month – for one employee.
As much as Sourcing Nova wants to tell you, we cannot give you a finite answer to the question – How much does a sourcing agent cost?
Sourcing Agent fees can also vary based on the total order volume on your products and the specific agent you select.
Here is a hypothetical example to review: You decide to use an agency like Sourcing Nova, who uses a price tier system for sourcing agent fees. Your total product purchase pricing is $20,000.00 per month.
The amount here is based on the manufacturer’s ex-factory price including tax, not product purchase pricing. If you do not understand the ex-factory price, this blog will explain it for you.
All of your sourcing agent fees will be approximately $1,000.00.
Sourcing Nova adds a percentage to the manufacturer’s ex-works price. Sourcing Nova is also committed to finding the best manufacturers of your products – not the cheapest. If you look at the options available from Alibaba and compare to ours, you see Sourcing Nova has a clear advantage:
- If the Alibaba products equal our quality, we have a better price.
- If the Alibaba products equal our prices, we have a better quality.
The sourcing agent fees are going to be less than if you had an in-house purchasing team.
It is normal to be thinking, “Is the decision still the most cost-effective choice for me?”
That question brings us to our second point.
2. Quality of work
The quality of work you receive is determined by the skill of the person doing the job.
Sourcing Nova assumes you want the most cost-effective approach. This means you need a well-rounded purchasing manager. One that understands best practices for sourcing products from China like finding the best factories, negotiating prices, getting samples, customizing products, hiring third-party inspection services, international transfers, designing product packaging, arranging product photography, shipping internationally and more.
Since you cannot have a purchasing manager with experience in every aspect of sourcing products from China, here are the three choices you will have before you:
- Accept some of your products will have a degree of imperfections;
- Outsource any elements you or your purchasing team lack;
- Hire employees with specific skills in those areas.
Your decision to have an in-house purchasing team means one or more of these choices will be a part of your supply chain.
If these choices are not appealing, you may wonder how hiring a sourcing agent in China will be more cost effective.
Here is real synergy – each individual has an individual task, and the division of labor increases efficiency. What does this mean for you as the buyer?
- Each step of the product sourcing process is professional help;
- The three choices listed above disappear from the supply chain.
Work quality is still dependent on the individual within the team. Some buyers look to trading companies to source their products from China. You may luck up on the perfect sourcing agent with an exceptional team.
A purchasing agent, on the other hand, will find the optimal matches for your products up and down the entire supply chain. It makes no difference which factory you want for your high-quality products. Hire a sourcing agent, and realize your dream.
Remember – Sourcing Nova’s goal is to find you the best possible manufacturer for your products and not the cheapest.
It is clear. The most cost-effective way to get the high-quality products and work you want is to use the services of a sourcing agent in China.
3. Workload, time and divison of labor
The overall size of your company and the amount of effort in sourcing products will have a hand in the cost-effectiveness of your procurement budget.
A full-time procurement team needs to stay busy all the time to justify the expense. Employees with downtime lead to resentment on your part. Why are you paying employees to sit around, play on their phones or use the Internet for something besides the business?
Good product sourcing is also a task that is always evolving. This mean the procurement team will need regular and consistent training – a necessary part of running a solid business.
An employee or product sourcing team is a significant investment. You must be sure there is enough work satisfaction to keep your team on your staff. It is common for your direct competition to snatch up your employees, especially if their newly acquired skills are ideal for the competition. After all, the more skilled an employee, the more money they can command for those skills.
Your purchasing manager is on staff and likely gets paid with regularity – weekly, bi-weekly or monthly and either by the hour or on salary. The sourcing agent you hire gets paid when they complete your order and not before.
This means your purchasing agent will work for you for the duration of the contract. Any learning and training acquired is not charged back to you, the buyer. All of the time spent managing the supply chain, a considerable amount of time at that, will not be billed to you either.
Today’s young employee does not have the same loyalty to a company or person as the employees of old. This leads to a very unstable workforce.
It is important to recognize employee turnover is a part of doing business. An employee deficit places a burden on you as the owner of the company until you find a suitable replacement
This problem occurs across the world and in all industries. Many factories in China struggle to find skilled labor, and each Lunar New Year here is a wave of employee resignations as people seek new employment. This takes around a month to stabilize and return to regular productivity.
Can you blame someone looking for a better opportunity for themselves and family? Of course not. Again, it is a part of the business world.
This is not to say Sourcing Nova or any sourcing agency will not experience employee attrition. It means you will have no additional costs due to the sourcing agency’s employee attrition. It is even more likely you and your business will not experience any interruptions or a change your direct contact within the sourcing agency.
Reviewing the evidence, the costs of a sourcing agent is the best choice for sourcing products from China.
Here is a team of skilled sourcing agents ready to start sourcing your products immediately.
Hiring a purchasing agent usually is more cost-efficient than an in-house team to perform the same tasks.
A sourcing agency has a team in place with experience in all steps of the supply chain.
You pay a single, one time cost and not paying by the hour.
Employee turnover is never a concern.
Sourcing Nova has a complete team of professionally trained individuals who have worked collectively for some time now. We are ready and willing to help you source any high-quality product from the same manufacturers as many world-class brands.
What can we source for you today?