There is no doubt that every e-commerce seller needs to source products from China, but how to do so is up for debate.

Buyers have a variety of options, and what works for another company may not work for you.

Two main options for buyers to consider:

1. Form your own company’s purchasing team and do all the work in-house

2. Outsource purchasing to purchasing agents

Both routes have their own advantages and disadvantages.

Ultimately, in-house teams provide precise control over every detail at a higher cost. On the other hand, hiring a purchasing agent can make you more profitable, and a trusted purchasing agent will help you with as many details as possible.

Of course, there are many more factors to consider when deciding whether to hire a sourcing agency, and that’s what we’ll discuss in four points below.

Internal Purchasing Team vs Purchasing Agency

1. Cost

Your first consideration is how much does a sourcing agent cost . How does it cost to set up your own procurement team vs. the cost of hiring a procurement agency?

Depending on the size of your business and the job you hope to accomplish, costs can vary widely. To simplify the description, let’s assume that you need a full-time person to handle most of your procurement-related work. Of course, you may outsource some of the work in certain aspects, such as product packaging design, product photography, third-party inspection, customs clearance, and international shipping.

In any case, you need a good purchasing manager to oversee these tasks for you, as this is the most cost-effective. You can also supervise yourself, but please don’t forget to pay yourself 🙂

According to Indeed, the average salary for purchasing managers in California is $5,464 per month.

purchasing manager salary
purchasing manager salary

 

Of course, wages aren’t the only cost to an employee – you also have to factor in onboarding, training, transportation allowances, sick leave, office supplies, and other perks and expenses. Your final cost could be over $6k.

We cannot give a definitive answer to this question–how much do sourcing agents charge ?

Sourcing agent fees can also vary widely, depending on the total volume of your product orders and the agent you choose.

However, let’s say you want to use the lowest price tiers offered by agencies like SourcingNova, and you purchase products over $20,000 per month.

sourcing agent fees
sourcing agent fees

The total cost of the purchasing agent is approximately $1000.

It is worth noting that we are adding a percentage to the manufacturer’s ex-works price. And we’re committed to finding the highest quality manufacturers in their class. Compared with Alibaba suppliers, our advantages are obvious:

If the products we purchase are of the same quality as theirs, then our prices are lower than theirs;

If our price is the same as theirs, then our quality is better than theirs.

 

The purchasing agent model allows each buyer who hires a purchasing agent to get a team of purchasing experts for less because they actually split the cost.

Hiring a purchasing agent is obviously the lower cost decision, but you still have to decide if it is more cost effective.

 

2. Quality of work

The quality of work depends on the skills of the people you hire.

Assuming you’re looking for the most cost-effective approach, you’re going to need a well-rounded purchasing manager. He understands the best practices when sourcing products from China, such as finding factories, negotiating prices with factories, collecting samples, customizing products, hiring third-party inspections, international transfers, designing product packaging, arranging product photography, international shipping, and more.

The best purchasing managers tend to specialize in one or two skills while possessing basic knowledge in other areas of the job. This is the person you want to find because you can’t find someone who is an expert in everything.

 

To compensate for the purchasing manager’s weakness, you have three options:

  1. Accept lower quality in some links;
  2. Outsource things you are not good at;
  3. Hire more employees to build a more well-rounded team

Hiring a purchasing agency is unique because it has a team of people with expertise in all aspects of the purchasing process. Each member is responsible for a fixed area of ​​work, and a clear division of labor makes the skills more proficient. This allows you to receive professional help at every stage of the procurement process without having to hire the entire team yourself.

Of course, the quality of work still depends on the individual. Some people choose trading companies to source products. If you find the right person, you can have an outside team that is just as knowledgeable as the purchasing agent. The biggest difference between a trading company and a buying agent is: a trading company always tries to sell what they already have, and if you need them to source from a competitor, they won’t be able to help; Purchasing agents can help you find optimal mixes across the entire supply chain. No matter which factory you want to produce products for you, the purchasing agent can go to realize your dream.

Then, in terms of cost-effectiveness, purchasing agents offer the most cost-effective way to get high-quality work.

 

3. Workload

The size of the company and the amount of procurement effort required play an important role in the cost-effectiveness of the procurement budget.

Hiring a full-time procurement team takes a lot of work to justify the cost. If you find it hard to keep your employees busy, you’ll really start resenting the high salaries you pay them.

In addition to the actual work, you also pay for the time employees spend learning and improving their skills. It’s all part of investing in good people, assuming they stay with your company for the long haul and don’t transfer to your competitor’s company midway through. You definitely don’t want to train employees for a competitor. But the purchasing manager you train is likely to move to a rival company because his work experience in the related field can make him easier to hire, or can command a higher salary.

Generally speaking, purchasing agents face less workload than full-time purchasing managers. But the time a purchasing agent spends working with your company is productive, with more output per hour. On top of that, most buying agents don’t charge based on time, but on final performance.

Your purchasing agent will focus on your assignment for the duration of the contract, and the time they spend on learning and training will not be out of your pocket. Purchasing agents spend a lot of time managing the supply chain network, and they don’t charge you for that time.

 

4. Stability

The younger generation is less loyal to the company than the employees of the past, so the stability of employees is increasingly concerned.

However, employee turnover has always been a normal and costly part of doing business. When an employee leaves, their job becomes an additional burden for the employer to find a suitable replacement.

This seems to be a worldwide problem, with many factories in China complaining that it is increasingly difficult to recruit skilled workers. Most factories in China experience mass employee resignations around the Lunar New Year, a situation that takes about a month to stabilize.

It’s hard to blame young people who are always willing to try different jobs to get the most out of themselves.

A sourcing agency will ensure that your sourcing tasks are carried out consistently day after day and year after year. That’s not to say we won’t experience attrition, just that you don’t have to worry about any costs associated with it. In fact, you might not even notice that the purchasing agent you interface with has changed staff.

 

Summarize

All things considered, you can see good reasons for a purchasing agency to handle purchasing for you.

You have a team of experts ready from day one

Purchasing agents usually cost less than hiring in-house staff to do the same

Sourcing agents already have experts in every area of the supply chain to help your business with any activity

You pay for their work, not for their time

You don’t have to worry about the negative impact of employee turnover, and your purchasing activities are more consistent over the long term.

All things considered, a purchasing agency is more cost-effective than forming an in-house purchasing team.