using a sourcing agent with lindy chen and brendan elias

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Using a Sourcing Agent with Lindy Chen and Brendan Elias

Using a Sourcing Agent

with Lindy Chen and

Brendan Elias



Sourcing agents and what they do

Soucringagentsworkdifferently. Depends on what sourcing agent defines

themselvesthrough. Theamountofworkandexpertiserequiredto

sourcefromChinaisoftenunder-estimated. If agent can demonstrate ability to manage

projectend-to-end,itwillsavetimecoordinat-ingagentsandinspectionofcompanies,criti-calorders,customs.

Asourcingagentcanreallycoveralotofas-pectsyourimportingprojects.

Maybesomeonewhofindsproduct,butcanalsobemoredetailedintermsofauditingandinspectingfactories,productionmanagement,anddeliverfromChinatowhereveryouare.

Somesourcingagentsonlyoffersomeservic-es,andsomeofferalltheservicesfromstarttofinish.

Theyallreallyworkquitedifferently.

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Advantages of using sourcing agent vs. do-ing it yourself

Doing it yourself requires a lot of differenttasks.

Thereisasignificantlanguagebarrier. Alsosignificantculturaldifferences. Import/exportexpertise.Importingbusinessis

challenging. Canbeverydifficultwithoutexperienceinthat

area. Knowledgeof localmarketandsupplierand

knowing whether its a trading company ora manufacturer based on knowledge of ad-dress.

Choosingtherightagentwillmeanthediffer-

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encebetweensuccessand failureofan im-portproject.

Asourcingagentknowsthequestionstoask;beginning importerdoesnot,norhowtoaskthem.

Smalltomediumcompaniescanuseasourc-ingagenttogoodbenefit.

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Do large companies (K-Mart, Wal-Mart, Tar-get) use sourcing agents?

Yes.Theyallhavetheirownanduseasourc-ingagent.

Evenifpeopleknowhowtogoaboutimport-ingprocess,therearestillbenefitsfromusingsomeonewithmoreexpertiseandknowledge.

Itslikewhenyoureusingtaxagentoranac-countant. Yourenot trying todoeverythingyourself.

Largeandsmallcompaniesbenefit fromus-ingasourcingagent.

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Is it an absolute necessity to speak Chinese to deal with Chinese factories?

Itwouldbeverybeneficial.Itisnotnecessar-ilyamust,butcertainly100%beneficial.

ThereismoreofawillingnesstodobusinessifyouspeakChinesebecauseofculturalsimi-larities.

Byspeakingthesamelanguage,andalsotheunderstandingof the localcultureand ideol-ogy and terms can create an instant under-standingofthesituation.

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Regarding trading companies and facto-ries, what are some techniques you can use to determine if youre dealing with a direct

source or a trading company?

Agentscanveryeasily identify thesebyad-dress. Most factoriesare located in remotezones. Trading companies are normally inhigh-risebuildinginthecity.

Byaskingverydirectly.Theywilltellyouwhattheyare,butafactorymayalsohaveatradingarm.Thisleadstofurtherquestionsregardinghowmanyemployeesdoyouhave,whatstherelationship.

You can also ask for their business license.Thisisatrickypart. IfyoudontunderstandChinese,youcantreadit.

Byreadingthebusinesslicense,youcanseeifthename,addressandpersonmatch.

Thisistheresearchimportingagentsusuallydo.

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What are the specific tasks and services of a sourcing agent that go from start to finish?

Payasyougosystem.Youchooseaparticu-larscopeofworkandpayforthatservice.

Researchandtender.Findingtherightsup-plier,contactthesupplier,summarizethesup-plierwhosinterestedinthatproject,doquotecomparison,analysis,andreallygettoseeinblackandwhitehowtheprojectwillturnout.

Ifproject ispromisingandfeasibleandwhattheclientdesired, thenextstep is todo thesamplingprocess.

A sourcing agent is not just a go between.Youreallyneedtohavecapacitytoguidetheclient in the rightway tohelp client achievethefinalgoal,whichistobegloballycompeti-

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tiveandgloballyprepared. The second part of that is really to do the

samplingstageand then to identifyandfindtherightsupplierandwhethertheyarecoop-erativewiththeclientornotandwhethertheyaredeliveringasexpectedornot.

The sampling process includes drafting thepurchaseorderandnegotiatingontheclientsbehalf,andtomakesuretheclientsinterestsare protected (i.e., price increases, terms,conditions,termsofpayment,qualitycontrol).Allofthishasalreadybeennegotiatedinthepurchaseorderpackage.

Monitortheactionandhavethesupplierful-fillwhattheyhavepromisedinthepurchaseorder, during production and delivery man-agement,coordinatingwith theshippingandfreight-forwardingcompany.

Alsotoclearcustomsanddeliveryoftheprod-ucttothecustomersdoor.

Thereisalotofworkinvolvedthatbeginnersdonotunderstand.

Itisveryextensiveandverydetailedworkin-volvedinthewholeprocess.

Each project is totally different, and somesuppliersneedconstantmicro-management.

Youcannotmissonestep.Ifonepartydoesnotanswer,lateritwillbackfireonyou.

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Does process get easier when re-ordering from established suppliers?

DealingwithChinesesuppliersneedconstantmicro-management.

Evenifthesixthorderisexactlythewayyouwanted, this doesnt guarantee the seventhorderwillbethewayyouexpectedagain.

For instance, ifasalespersonchanges jobs,

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your order may be lost. Or if the factorychanged location from one to another, yourorderwouldbedifferent.

People change jobs quite often. So we al-waysmakesureallthedocumentationinyourhandsiscomplete.

If thesupplier changesstaff youhave tobeextremelypatientanddealwiththemandlayout theorderandrequirementspecificationsagain.Also,allofthedocumentationhastobetranslatedintoChinese.

Established suppliers can also change fromtime-to-time.Soyoureallyhavetoask.

Also, when these kinds of things happen,whenorderisreceiveditmighthaveadiffer-entquoteinit.Sothenyouhavetofindasolu-tion.

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If youre located in America, Australia or New Zealand, why is it important to actually have a physical presence on the ground in

China?

WehighlyrecommendhavingapersoninChi-na,becauseyoucanactuallyseetheproductyourselfandcanverify if thesuppliersareaactuallyproducingofwhattheysaytheyare.

Alsobyhavingaperson inChinawillmeanissuescanbesortedmuchquicker,andtheycanactasyourJohnnyontheSpotforanyissues.

HavingapersoninChinaalsomeansthere-lationshipisabitbetterwiththefactories.

Oftenyoumustbeverydiplomaticwhendeal-ingwithaChinesesupplier.

Communicating with Chinese can also bequitechallenging.

Chineseareafraidoflosingface.

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Someoneon theground inChina can com-municateyourintentionsaswellasmaintainthegoodrelationship.

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What are the consequences of making a mis-take and making someone lose face?

Thatistheworstthingthatcanhappentoyou.Ifyou insultsomeone, theydontwant todobusinesswithyou.

Evenifyourepayingthemoney,thesupplierwillsayno.

Someofourclientsarereallydemandingandquiterudetoacertaindegree.Letterscanbeveryintrusive.

Agentsoftenhavetosoftenclientstone,andsuppliersmaysaytheydontwanttodealwiththatclient.

So if thishappens,allprioreffortsandworkaregone,andyouhavetostartalloveragain.

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How do you balance the line between being firm and getting what you want

and not being rude?

ThestrategyweuseiscalledSandwichTalk. Isagreatwaytobuildarelationship. First,wealways talkabout thecommitment.

Wealwaystalkaboutthecommitmenttotheclient.Thisistomaketheclientpreferredandgloballycompetitive.

Also,ourcommitmenttosuppliersistohavethemmakeaprofitandcreateafantasticre-lationshipwiththecustomer.

Therefore,oncewesetup thecommitment,then we deal with the issue. For instanceif thequalityhasntbeenmet. If thequality

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hasntbeenmet,thatmeanstheclientcannotselltheproductproperlyandtheycannotre-order.Thiswouldimpactthesupplier.

Wealwayscreateawin-winsituation. Sandwich Talking lays out the commitment

first,thenaddressestheissue,andthencre-atesthefuture.Byyousolvingthis,itwillcre-ate opportunity for the client to re-order theproductsmuchfaster,etc.

Inthatway,thesupplierseesthebigpicture,wheretheyfitin,andtheyaremuchmorein-clined to agreewith you tomake it happenmuchfaster.

Wegetthesuppliertoseethelong-termben-efitvs.theshort-termbenefit.

Youalsoget them involved in theconversa-tion and they see they are in same bus to-gether.

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What is your strategy for negotiating the best price with Chinese factories?

Oneof the strongest negotiation techniquesasuppliercanuse is tosimplysayno. Theabilitytodistinguisharealfromanousedasanegotiationtechniqueisvitallyimportant.Thefollowingtipswillhelpyoumovepastthenoandnegotiateabetterdeal:

Shift focus. Try to shift focus onto anotheritemofvalue.Forinstance,negotiatealongerwarrantyperiod,oraskforsomefreeproductsoraccessories,orgetanagreementonpric-ingforalongerperiodoftime,oradownwardpriceproductioncost,orbetter lead time,orseekgreatdiscountonrelatedgoodsorser-vices.

Dothemath.Settheemotionasideandworkour suppliers through the different problems

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youbothface.Developashouldcostmod-eltodetermineifthereisroomforadditionalcostcompression. Benchmarktheofferyoureceiveagainst thepublisheddataand fromother suppliers or a backup plan. Also theanalysiswillhelpyouknowhowtolowerthecost,andhavethesupplierreallyseeyouaresincere.

Paint the picture. Sometimes the suppliersneed help understanding the implicationsofnot reaching theagreement. Explain theimportance of your business, describewhatyour businessmay look like in two or threeyearstime,andiftherelationshipisdamaged.Thenyoucanaskhowthisfuturewouldhelpthesalespersonontheirperformancereviewsandcareer,compensation,etc.

Change the player. For instance, you canincrease the involvement of a higher levelsupplierrepresentativeinthenegotiations;orsometimesyoumaysayImnottheboss,andI need to askmyboss, and then you comebackwithanotherplayer.However,althoughthisonemayseemelementary,manynego-tiatorsmess thisup. Soyou reallyneed toknowhowtousethis.Thetrickistofindthehighestlevelexecutivewhowouldexperiencethegreatestdependenceonthelossofyourbusiness.

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What about the strategy many beginners use to order many, many, many containers even if intention is to order a

minimal quantity?

Thatssuicide. Youcanexaggerateoneor two times,but if

youdoitconstantly,theattitudeofthesupplier

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willdramaticallychange.Itwillbemuchmoredifficultwhenyoustartsamplingprocessandnegotiations.

Idontrecommendthisstrategyatall.

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How do you get a minimum order quantity (MOQ) but still get a good price?

Thiswillbetricky.TherearesomesupplierswhowillsupplysmallMOQs.

However,thosekindsofsuppliersarenotnor-mallyregisteredwithAlibaba.

NeitherdotheywritetheirwebsiteinEnglish. Tobuyyouhave tosearchonChineseweb

sites, and you cant speakEnglish to them.Therefore,youhavetouseasourcingagent.

Sourcingagentwouldchargefee. Ifyoucantgetwhatyouwant,itissometimes

betternottoimportfromChina. Youhavetoknowwheretostop. Would be helpful to invest in resources or

takeaseminartoeducateyourselfbeforeyouproceedfurther.

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How do you ensure a factory is reliable and trustworthy?

Thisisthecoreofthewholesourcingprocess. Noonecanguarantee100%. In China Direct we find the manufacturers

whoaretrustworthyandreliablethediplomat-icway.Ourfirststeptoresearchandinvesti-gatemanysuppliers,from30suppliersdowntoprobablyonlythree.

Afterquotecomparisons,costanalyses,andfrom the sort list of supplierwe start to see

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whichsuppliershavethetrackrecordforreli-abilityand theirpreviousdealingswithotherclients.

Throughsamplingstagewestart tosee thesupplier actually having the willingness andalsothecapacitytofollowinstructions.Theymay be good for other companies, but notyou.

Thesamplingstageistherealopportunityforyou tosee if theywouldbe reliableonyourproject.

Theprocessofnegotiation.Thisiswhereyoustarttoseeiftheyarewillingtofollowqualitycontrol.Whethertheyarewillingtoaddressthatornot.Whethertheyareabletodothepackagingyourequiredornot.

Allof thesepointsshowyou if theyare reli-ableandtrustworthyornot.

Werecommendourclientsnotuseasupplieriftheyreturnthequotewithkeyissuesmiss-ing; i.e., quality control points. This showsthatsupplierwillbedifficulttodealwithfromthestart.

Thewholesourcingprocessislinkedtogethertoanswerthatquestion.

Alotofsmallthings,whichsingularlymaynotbefatal,butwhenyouhaveenoughofthemtogether,itcanleadyoutostayawayfromafactory.

People are exited to get into business andlosesightofthesemistakesthatareglaring.

How do you stop people who are so excited to make the deal to be more careful?

Weexplain toourcustomers thewholepro-cess and thewhole sourcing project fromaholisticpointofview.

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Regardless whether it is a small project orlargeproject, it has togo through thesamestepstoproducethestepsyouwant.

What you really want is the consistency oftheproduct.Therefore,youwantthesupplierwho will achieve the best results you want,whichistomakeaprofitandsavemoney.

Youhavetofollowthesystemtoproducetheresults.

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What are some tactics or strategies you can use to ensure you get a good

quality product?

Westartwiththesamplemakingagreement. Thesamplingprocessisagreatwaytoestab-

lishthequalitycontrolprocedure.Whentheproductarrivesandyoufindqualityissues,itsalreadytoolate.

You really have to start with sampling. Wehave a supplier self-assessment tool. Ourclient listsall thecriteriaandwhatneeds tobedone,suchasworkmanship,appearance,packaging,functionality,etc.Thisproducesaqualitycontroldocument.

Thequalitycontroldocument isusedas thecriteriatocheckthesample.

Inpurchaseordernegotiations,youhaveallthequalitycontrolproceduresinplace.

Thereisalsoaninspectioncriterion. Youneedtospecifytothesupplierwhatthe

qualitycontrolmechanismstheyaregoingtoputintoplaceandhavethemagreewithyouwith the acceptable quality level (AQL) per-centage.

Oncethatisinplaceandoncetheproductioniscomplete,you reallyneed tohaveanon-siteinspection.Wehighlyrecommendthisto

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inspecttheproductbeforeitleavesChina. Ifyouhavethoseelementsofthequalitycon-

trol in place, the chanceof gettingaqualityproductismuchhigher.

The on-site inspection is scientific, and youdonotneedtogothrougheverysinglepiece.WehaveAQL,whichisstandard.ItdependsontheAQLyouhaveagreedon.

A lotsizemaybe1,000units,and thenyouneed to choose what would be the samplesize.Thenyouwoulddecidehowmanyde-fects.

There aremajor defects andminor defects.Howmany of eachwill be allowed? If thatlevelisexceeded,thewholebatchwillbere-jected.

Ifthefactorymakesamistakeandhasmajordefects,wewilldoananalysis.Thenwewilllistthedifferentoptions,andthenwewillne-gotiatewiththefactorytoseewhatwouldbefair.

When the factorymakesamistake, there isnogeneralrulethatappliestoall.Itdependsonthesituation.

What is your legal recourse if goods are not up to your standard and supplier

is not cooperative?

Itsveryhard. Youcangothrougharbitration. AlsoyoucanusethelegalsysteminChinato

protectyou.Iknowitworks. Ittakesalotofeffortandenergy. Prevention ismuch better thanwaiting until

somethinghappens. Usinga sourcingagent in stage1, stage2,

research, samplingprocess, purchaseorder

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negotiationsarethecriticalpartstominimizetherisktoavoidthathappening.

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Do you have any final words of wisdom from an experienced importer and sourcing agent

for absolute beginners looking to import?

Patience is the key in dealingwithChinesesuppliers.

Thecommitmenttosuccess. Alwaysbewillingtolearnfromothersandto

listentowhatotherpeoplesay. Bepreparedtounderstandmore. Havingpatience,acceptance,andwillingness

tolearnfromotherswillgainyoumuchmoreexperience.

Learn the whole process from a sourcingagent.

Tofindoutmoregoto:www.chinadirectsourcing.com.au

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Q&A

1. Whataresomeofthebenefitsofusingasourcingagent?

2. WhyshouldyouspeakChinesewhendeal-ingwithChinesefactories?

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Saves time coordinating agents and inspection of

companies, critical orders, and figuring out cus-

toms

While not necessary, the Chinese will be more

willing to work with you. Speaking the same lan-

guage and understanding the culture can give you

an instant understanding of situations.



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3. Whatarethreewaystotellifyouaredealingwithadirectsourceortradingcompany?

4. Whataresomeservicesandtasksyoucanexpecttobetakencareofbyusingasourc-ingagent?

5. Whatisthepayasyougosystem?

6. Whatdoesthesamplingprocessinclude?

7. TrueorfalseOnceyouhaveasystemsetupwithaChinesesupplier,youdonotneedtoworryaboutfutureorders.

8. WhatarethebenefitsofhavingaChinesepresence?

1) Location - Factories are usually located in

remote zones. Trading companies are usually in

high-rises in a city. 2) Ask them directly. 3) Re-

quest their business license.

They will handle the research and tender, the

sampling process, monitoring the process, clear-

ing customs and delivery of the product to your

door.

You choose a scope of work and pay for that ser-

vice only.

Drafting a purchase order, negotiating price and

conditions.

False Chinese suppliers need constant micro-

management. If a salesperson changes jobs or

the factory moves your order could be lost or dif-

ferent.

1) They can see the product and verify suppliers

2) The can instantly resolve problems 3) Local

presence will ensure a better relationship with the

factory 4) You have an expert who can communi-

cate effectively with the local vendors



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9 WhatarethestepsofSandwichTalk?

10.Whatisthestrongestnegotiatingtechniqueasuppliercanuse?

11.Whatarefourwaystogetaroundtheno?

12.WhatdoesMOQstandfor?

13 Howdoyouensureafactoryisreliable?

14.Whatareyourbestlegaloptionsifasuppli-erisnotprovidingthestandardyourequire?

15.Ifyouhaveadditionalquestions,whichWebsiteshouldyougoto?

1) Talk about commitment. 2) Address the issue 3)

Create the future

www.chinadirectsourcing.com.au

Saying no to your requests.

Minimum Order Quantity

Research and investigate suppliers utilize re-

sources online resources like www.chinadirect-

sourcing.com.au.

Prevention, using a sourcing agent, arbitration,

utilize the Chinese legal system

1) Shift the focus onto another item of value. 2) Do

your homework and work with the information you

have with the suppliers to see where cost can be

moved around. 3) Explain the importance of your

business and potential future. 4) Approach a dif-

ferent player in the company.

using a sourcing agent with lindy chen and brendan elias

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