Sourcing Agency — Everything a Procurement Professional Should Know
Have you ever heard of a sourcing agency? In this modern age, sourcing agencies and sourcing agents have a critical role in managing international supply chains. Their large scope of work has confused a lot of small businesses, especially misleading information about them on the internet.
For this article, we will talk about sourcing agencies and how it helps the international supply chain. We will also explore the services that sourcing agencies provide to their clients.
After this article, you will be cleared of the confusion about sourcing agencies. Additionally, you will learn when you will need sourcing agencies or agents in your business.
A sourcing agency, like sourcing agents, is employed by the client to source and purchase products that are far from its reach. That is why they are undeniably needed in international trade.
In the past, the only job of a sourcing agent or a sourcing agency was to find suppliers for their clients. This includes selecting the right supplier, negotiating the price, quality control, product compliance, testing, and shipping.
Before, they were not required to provide the full range of services. The scope depends on the agreement they agreed upon. However, times have changed a lot and so is the competition in gaining a client.
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Difference Between Sourcing Agency and Sourcing Agent
A sourcing agent is an individual sourcing agent who you can hire as a full-time agent. It usually has two people working for it and a small rented office.
Some sourcing agents have several years of experience working in a sourcing or trading company. Some are freelancers that you can find on websites like Fiverr and Upwork.
On the other hand, a sourcing company is supported by a group of professional sourcing agents.
A sourcing company can serve numerous buyers at the same time as they are a group. Sourcing companies are usually seen or found in industrial clusters.
A sourcing agency and a sourcing agent are both a link between their clients and suppliers. The main difference between these two is which one you prefer the most to source materials for you.
Services the Sourcing agencies Provide
1. Supplier selection
Supplier selection is the basic service a sourcing agency can provide. Typically, a sourcing agency will not give the information of the supplier directly. Since the information that they will give you is their asset that is why you can get a competitive price from sourcing agencies.
Additionally, they will not give immediately the information as some agencies charge based on the percentage value of the total goods.
2. Price negotiation
Other than sourcing suppliers, sourcing agencies are the ones who will negotiate with the supplier on behalf of their client.
They do this obviously because they know the supplier better than their client. Also, it knows negotiation tactics that will give its client the best price in the market.
3. Follow-up the production and quality control
A sourcing agency will coordinate with the factory to monitor the whole production process. This will ensure that the factory will finish the production on time and that the quality meets the requirements of the client.
4. Product compliance and shipping
The last step of their service is to ship the products to their client’s location. Shipping arrangement needs a high level of expertise.
Other than bargaining for low shipping prices, a sourcing agency also informs you of the necessary documents and certificates that you need to prepare for Customs of the country.
How Do Sourcing Agencies Get Paid?
1. Gain from the price difference
Typically, the agency can provide suppliers with competitive prices with a good product quality that is impossible for their clients to find just by searching on the internet. With this, they can gain profit with the price difference of the product.
2. Percentage fee based on the product value
This method is the most common among sourcing agencies. Since they provide services from sourcing to shipping, they charge a certain percentage value of the goods as a service fee. It is common in China to have a service charge of around 5 to 10% of the final order value.
Many sourcing agencies do not accept a service charge lower than 5%. Some will try to attract you with a lower service charge but you will end up finding that the price of the product is higher than what you can find online.
Who Needs the Services of a Sourcing Agency?
1. People with no experience with the importation
If you import overseas, you need to comply with a lot of requirements and documents to authorities. That is why it is better to hire experts who have experience in overseas purchasing to help you with your business.
2. People with multiple product categories
When selecting suppliers, you will not immediately have a list. You will also go through the process of calling 10 suppliers to ask for a single product. This is a tedious task that requires a lot of patience.
This is the time you can consider hiring a sourcing agency. Sourcing agencies will help you in calling numerous suppliers for your multiple product categories.
This will allow you to focus more on other things as the sourcing agency will do all the sourcing for you.
3. Large retailers
You may think that retail giants do not need sourcing agencies as they have extensive experience when it comes to sourcing. But that is far from the truth. Retail giants need them to manage their supply chains efficiently.
Large retailers have many products and it would be impossible to purchase the products directly from the suppliers themselves. That is why sourcing agencies are needed so that they will be the ones to do all the tasks in purchasing the products.
4. People with special product categories
It is quite difficult to find suppliers of special products on the internet. A sourcing agency can help you as they have a huge network of suppliers to source your special products.
Benefits of Sourcing Agencies
1. Offers competitive prices and good quality materials
A sourcing agency can help you find the best possible prices with good quality materials. This is because of the large network of suppliers they have accumulated through time.
2. Improve your sourcing
A sourcing agency can help you to overcome cultural and language barriers. The sourcing agency knows how to deal with the supplier more than the client which results in the reduction of the price of the product.
3. Lessens the risk of importation
Sourcing agencies are experienced with all the importation processes a country requires. This will allow you to lessen the risk of spending too much on your importation.
Examples of Sourcing Agencies
Jing Sourcing is named after its founder, Mr. Zhu Jing. This sourcing company is based in Yiwu, Zhejiang which is the leading hub for wholesale products in China.
Jing sourcing has a great digital presence and offers small buyers free product sourcing services. All it needs is the product name and it will get back to you with quotations from its network of suppliers.
Asiaction is a French-owned procurement agency based in Guangzhou, China. It is originally focused on the home and furniture space. Today, it offers a wide range of product development and procurement services that covers several industries.
Unlike other agencies, baysource global is based in the United States and its head office is in Tampa, Florida. It mainly offers its wide range of services to US clients from contract manufacturing to sourcing services.
It is another agency that offers a complete set of sourcing services from product identification to product development and delivery.
Frequently asked questions
1. What is a sourcing agency?
A sourcing agency is an organization employed by a client to purchase and source products far away from its reach.
2. What is the difference between a sourcing agency and a sourcing agent?
A sourcing agent is either an individual or a freelancer you can find online. On the other hand, sourcing agencies are supported by a group of sourcing professionals.
3. Do I need the services offered by a sourcing agency?
Yes. Sourcing agencies offer to source suppliers with the best prices and good quality of materials available in the market.
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