Procurement is one of the most important activities in increasing profitability in any business. It involves identifying the right source of raw materials and using the right strategy to purchase them after proper negotiation.
Today, China has become one of the major hubs for sourcing different types of raw materials and products. But small and medium-sized companies frequently don't have the means to handle this on their own, so they look to China-based procurement or product sourcing agencies for help.
Global supply chains were thrown off balance by COVID-19, and China stopped producing for several months. Now, travels from the USA are not restricted but airlines are significantly less than before so the prices are very expensive, therefore, consistent best practices in supply chain management are essential. Working with a procurement agency helps build resilient supply chain. These agents facilitate efficient sourcing, ensuring businesses obtain quality products at competitive prices. But, do you know what role does these procurement agents play? Let us discuss the role of a procurement company and its procurement agents in China.
Why procurement is important?
No company operation can function without procurement activity. The procurement department is responsible for ensuring that all raw materials and goods are available at the right time and at the right price so that production can continue uninterrupted.
There are several ways the procurement department can help improve the profitability of the company, such as:
- Buying materials at the right cost
- Making the availability of materials at the right time
- Ensuring the material quality
- Avoiding any delay or mistakes in procurement
- Maximising the use of resources.
In addition to leading the development of novel new procedures and negotiating profitable manufacturing and supplier contracts, procurement management can also be crucial in expanding a domestic company's global reach.
The role played by a China-based procurement agent
A procurement agent finds goods and supplies for companies at reasonable costs. Reducing the production expenses of companies is the aim they partner with such agents. A procurement agent can operate their own procurement company, employing numerous employees to deal with multiple organizations at the same time, or they can work independently with one company at a time.
A trustworthy procurement agent in China should possess the following attributes:
1. Good knowledge of various manufacturing hubs
A competent procurement agent usually possesses a thorough understanding of the many production centres within his country of origin. For instance, a procurement agent with contacts at multiple companies and production centres is situated in China. They can get in touch with these people to ask questions about the availability of products and/or raw materials needed by a business. A procurement agent can still approach other manufacturers in an attempt to negotiate a favourable price, even if his discussions with their representatives is not satisfactory.
2. Proficient in speaking both English and Chinese
Being multilingual - speaking in languages other than English - is frequently a sign of a better procurement agent. China has been known as the "factory of the world," drawing businesses from all over the world, thanks to its cheaper labour and production prices. Strong communication abilities are also essential for a Chinese procurement agent, as they are used to get advantageous conditions for foreign businesses.
3. Excellent coordination skills
In order to achieve good bargains, procurement agents must maintain constant communication with a variety of people from various background, therefore they need to have excellent coordination abilities. When working with a company that needs to obtain raw materials or various goods from China, a procurement agent should be able to work well with a variety of personalities. The procurement agent needs to maintain good and open channels of communication with his contacts, therefore maintaining composure is crucial.
4. Awareness of compliance rules and regulations
Many legal factors enter the picture when a company sources its goods and/or raw materials from another country. In this case, it is the responsibility of the Chinese procurement agent to remain watchful for any indications that the manufacturers may not have complied with industry norms. In addition, the procurement agent has an obligation to physically visit manufacturers on behalf of the company he represents.
What steps are needed for procurement?
It is very important to create a system and procedure while procurement activities are performed so that the whole process can run efficiently. The procedure can vary depending on the company's policy, and different steps may be followed. However, a few steps remain common in every company. Typically, a procurement company follow these steps for procurement.
1. Specifying and planning - Determine the requirement for the product or service, establish the product's specs, and plan or forecast when and how to order or reorder the product based on current facts and projections.
2. Identifying and Selecting Suppliers - Determine and pick a supplier to fulfil product requirements. This can be done by looking up new suppliers and submitting an enquiry, or request for information, proposal, or quotation, or by utilizing existing connections with approved or preferred suppliers.
3. Negotiating and contracting - Through competitive bidding from suppliers with their quotations, negotiate the best conditions and price for the product. After that, steer the negotiations to express needs and establish expectations in a clear and concise manner. Once all conditions have been met, complete and sign the supplier agreement.
4. Placing the purchase order - The purchase order (PO) delineates the terms and conditions, along with the product specifications and price, of the product or service that is being provided. It also acts as the different impacted business units' "source of truth" on the goods being purchased.
5. Expediting - There are instances when it is required to expedite the product order (e.g., an earlier than anticipated product obsolescence, a schedule change, etc.). Analysing the promptness of deliveries during this phase might highlight problems that need to be fixed, like unclear deadlines for payments, delivery windows, and job completion.
6. Receipt and inspection of purchase - Conduct a "three-way match" between the purchase order, the invoice, and the packing slip/receiving document, and evaluate each order in light of the stated specifications and quality standards. In the event that the delivered item fails to satisfy the required requirements, this step may include filing a receiving discrepancy report.
7. Invoice clearing and payment - After the product has been inspected and the alignment of the supporting documents (PO, invoice, packing slip, and receiving document) has been verified, align purchasing and accounts payable to finish the purchase process.
8. Maintaining records and relationships - Keep all relevant documentation for tax purposes, audit protection, product warranty verification, and simple product reordering. Provide the supplier information and input based on KPIs to pinpoint areas that require tweaking in the product or the supplier agreement, as well as areas that need improvement.
Why should you procure from China?
There are multiple reasons to source from China. The sourcing procedure may appear risky and time-consuming if you don't know who to source from or what you will gain in the long run. The following are the primary benefits of sourcing from China.
1. Cost cutting
Profitability attracts investment, enabling expansion and competitiveness. China, the world's largest manufacturer and exporter, offers low production costs compared to Western countries, making its market competitive. Minimal expenses for raw materials, labour, and utilities, along with high production capacity, allow businesses to place large orders and reduce unit prices. Chinese wholesalers provide affordable products, enhancing profitability.
2. Quality
Cheap things had to be of lower quality, a belief that was previously widely held and is still held by certain people. But quality is no longer valued more highly than money. Chinese businesses are now producing goods that meet Western standards. In fact, some of them do provide lower-quality goods. Still, a substantial number of them produce low-cost products without compromising on quality. All you need to do is make sure you check the Chinese suppliers or wholesalers you have already chosen to work with. A reliable sourcing company will speak with the manufacturing sector to guarantee you have the best quality control.
3. Variety
Statistics on a wide range of products show that China is the world's largest producer, contributing more than 28% of global industrial production. This implies that practically nothing is off limits when buying from China. A common site to find out about the diversity of products they provide is the Canton Fair. But even so, you would not have witnessed everything they are capable of.
Why should you hire a procurement agent in China?
In addition to connecting buyers and suppliers, the majority of Chinese procurement agents also help in a number of other areas, including finding the best pricing, communicating, ensuring quality control, making payments, and performing other necessary inspections at the customers' locations outside of China.
This has made it easier to import goods into China, and most Western enterprises can now easily obtain commodities from China. It can take a long time to find Chinese wholesalers in China. A sourcing agent, however, can greatly simplify and successfully complete this task. There are a lot of sourcing agencies in China.
The main duty of a sourcing agent in China is to identify and suggest trustworthy Chinese suppliers. This is done in accordance with technical business metrics and client needs. These are some arguments in favour of using a reliable Chinese sourcing company.
1. Best cost
It is typically preferable to use local expertise to help in your sourcing process. Most Chinese procurement agent will know how to bargain for the best deal if you give them your list. They can therefore help you save money, effort, and time. It is also easy to protect oneself from being a victim of scammers.
2. Quality assurance
Most Chinese sourcing agents have had extensive training in product sampling, mass production inspection, and factory audits. Thanks to their expertise, they help you reduce the likelihood of buying inferior products from manufacturers or wholesalers.
3. Continue to learn
China is a country that produces continuously. Thus, demand and goods prices will fluctuate frequently. A Chinese sourcing company will be knowledgeable about the state of the market. Their help will teach you about advancements in the market. The best selections will also be emphasized.
4. Logistics and shipping assistance
Communication between the buyer and the Chinese supplier will be facilitated via a sourcing business in China. They can either give you links to other online shipping businesses or handle the purchase, warehousing, and logistics.
Make use of their assistance in carrying out directions for a prudent course of action. They will let e-commerce website owners receive the merchandise at their warehouse from the producer. Following approval, the goods are unpacked, inspected for damage or shipping errors, scanned into their system, and shipped to your various customers.
5. Bridging the cultural gap
The cultural divide between Eastern and Western businesses significantly impacts negotiations. Direct negotiations might reveal this gap, but a reputable procurement agent bridges it effectively.
Fluent in Mandarin, these agents gain manufacturers' and suppliers' trust, ensuring smoother interactions. They are extremely skilled at navigating linguistic and cultural differences, which helps to build lasting, mutually beneficial partnerships and get better bargains for your company.
6. Contract negotiations on your terms
Negotiating directly with China-based suppliers often favours them, but a procurement agent in China can secure better terms for you. These agents represent your interests, leveraging their expertise from years of negotiating to ensure the best deals. Their deep understanding of local markets and negotiation tactics ensures that sourcing from low-cost countries remains truly cost-effective.
Conclusion
We hope that you will select a dependable solution for your company now that you are fully aware of the duties performed by the agents of a procurement company in China and the advantages of working with them.
Recall that procurement agents offer more than just a way for you to assign your company's product purchasing duties. They can guarantee that contract discussions work in your favour because they are also trusted in their home nations.
They are among the most valued assets for companies these days because they are adept at working with suppliers and manufacturers. This is particularly valid for companies purchasing goods from countries with low labour costs.
English