Buying your ideal raw materials or finished products in wholesale offers several benefits, and it is not a rocket science to know that this can also help optimize your business. However, most business owners need assistance when obtaining materials and products from China or when outsourcing their manufacturing to that country. At that point, the role of an agent for procurement starts to make sense.
Being on the front lines in China, the procurement agent will be viewed as the business owner's right-hand man and a reliable ally. However, anyone can have the title of "procurement agent"- a legitimate and competent agent or a phony one. The importer bears the sole responsibility of selecting a suitable agent, as a poor choice could result in losses far exceeding the service charge.
We will discuss the advantages of obtaining materials and products in wholesale in this article and provide you helpful advice on how to handle the procedure efficiently. We will walk you through the crucial processes to improve your product sourcing plan, from realizing the need of bulk buying to locating trustworthy wholesale suppliers.
Also, we will try to know how you can take the help of suitable procurement agents in China so that you can maximize your benefits.
What are the common raw materials needed by the manufacturing industry?
In the manufacturing sector, "raw materials" refers to the fundamental compounds or materials that are utilized during the production process in order to produce final goods. Usually found in their raw or unprocessed form, these materials go through a number of transforming steps before becoming finished goods.
The following are a few typical instances of raw materials utilized in production:
1) Metals - If you are in the business of electrical components, cars parts, machines, or any building supplies, then you may have the requirements for metals like copper, aluminium, iron, steel, and nickel.
2) Plastics - If you are in the business related to electronics, automobiles, or packaging items, then you may have requirements for plastic items made of polypropylene, PVC, and polystyrene.
3) Chemicals - There are several businesses where chemical compounds and materials are extensively used. These business sectors are pharmaceuticals, textile, paint coating industries, and many others. All these industries will need chemicals like acids, dyes, solvents, adhesives, pigments and resins.
4) Textiles and Fibers - If your business is related to textile and clothing, then you will be extensively using the following materials like polyester, nylon, acrylic, natural fibres, cotton, wool, and silk.
5) Wood and Paper - Furniture, construction, and paper factories will need wood in sufficient quantity as a raw material. Most of their paper items can be books and stationery made from paper pulp, where wood is the main ingredient.
6) Petroleum Products - Businesses related to energy, chemicals, plastics, and transportation will need crude oil or its derivatives such as gasoline, diesel, lubricants, and polymers as raw material.
7) Glass - The Glass has many applications in windows, mirrors, bottles, and many other items. If you are in the business of manufacturing glass, then you will frequently use materials like silica sands, soda ash, limestone.
8) Ceramics - Supplies od feldspar, silica and clay are used extensively for producing tableware, sanitaryware, tiles, or any other ceramic-based products:
Factors that can decide the raw material pricing
Several factors can influence the price of raw materials.
1) Availability and scarcity - Following the basic economics theory, prices of any raw materials will always be affected when there is a shortage of that material. Factors such as environment legislation, political stability of the country, and geopolitical situation can influence the price.
2) Market speculation and investment - Another important factor influencing the price is rumour or speculation floating in the market. Those who are good at speculation are very well aware of market dynamics and can foresee price fluctuations. An experienced agent for procurement can take measures based on speculation, which can also influence the price of raw materials.
3) Exchange rates - The exchange rates of any country, whether a supplier or a buyer, will have an impact on the price of raw materials in any international commerce involving raw resources. The price will decrease if the seller country's currency gains value relative to the buyer country and vice versa.
4) Transportation and logistics - If, for any reason, the shipping and transportation cost increases in the supplier country, it will influence the cost of materials. Shipping and transportation costs can increase due to factors like distance to be travelled, mode of transportation changes, infrastructural issues, and transportation efficiency.
5) Seasonal and weather-related factors - The price of any raw materials can also be influenced by bad weather or natural calamity. Some of the examples are flood, droughts, pandemic situations like covid 19, and destruction of crops.
Why should you source raw materials in bulk?
How you source your raw materials can greatly impact the bottom line of your business and also the performance of your company. There can be many advantages to this, including:
1) Cost savings - You can negotiate the price better with your supplier due to large-volume purchases that can lower the price. The cost advantage could enhance profit margins and boost market competitiveness.
2) Consistent supply - Buying in large quantities can guarantee a consistent and unbroken supply chain. By doing this, the possibility of production delays or disruptions due to material shortages is reduced, guaranteeing that the manufacturing process continues as planned.
3) Inventory management - Managing your inventory can strongly influence your purchase pattern and is a very effective way to reduce your operational costs. With proper inventory management, you can do the following:
- Reduce your ordering frequency
- Less spending on your procurement
- Maintain a proper inventory level
- Reduce wastage.
4) Operational Efficiency - Purchasing raw materials in bulk can increase operational effectiveness. It will be possible to maximize production volumes, minimize downtime, and optimize schedules with a steady supply of resources at hand. Faster order fulfilment, quicker turnaround time, and more customer satisfaction are all results of this increased efficiency.
Why should you appoint a Chinese procurement agent?
A procurement agent is a person who assists businesses in importing goods and products from abroad markets. They may be employed by your firm or work independently. Any business that wants to outsource services to China should hire a procurement agent since they can assist the owner with the following:
- Find new and related suppliers and products.
- Conduct audits to assess their capacity and efficiency.
- Manage draft agreements and negotiations
- Manage logistics and shipping.
- Audit the existing suppliers.
- Perform quality control at each level for production and shipping.
- Conduct production inspections at the factories.
1) Dealing with supplier becomes easier
Dealing with Chinese suppliers can take a lot of time. A business owner who decides to deal directly with Chinese suppliers without the assistance of an agent may encounter a number of difficulties.
Language barriers, a potential ignorance of the true market value, potential difficulties in negotiations, and many more are among them. Furthermore, selecting the right provider is a challenge that calls for careful planning.
Chinese procurement agents will actively employ these techniques, and thanks to their many years of expertise, they will be able to quickly identify a qualified manufacturer and weed out the unreliable suppliers. The Chinese sourcing agents have this valuable asset - significant knowledge - which is necessary to choose the right supplier.
2) Save on cost
It is acceptable to save costs if you have experience sourcing or if you have an internal agent who can handle these issues. These important considerations, however, can assist anyone else just starting out on this path in choosing the best purchase and procuring agent in China.
3) Meeting safety and legal requirements
Safety restrictions apply to things that are imported from overseas. Importing goods that do not meet legal requirements is prohibited, and if anyone is harmed by the product, a lawsuit or mandatory recall may ensue.
Many Chinese suppliers offer goods that don't meet international standards. Some of them don't even understand the significance of complying with foreign buyers. Also, many suppliers lack the necessary knowledge to comply with market safety rules for products.
Dealing with these agents may put your investment at risk because you will be held accountable in the event that the items don't meet the required criteria. As a result, you should only work with reputable companies who have a track record of satisfied clients when using China procurement agents.
4) Right knowledge and expertise on products
Expertise in a certain product area is another important consideration. It will only rely on the thing you are purchasing if you are importing goods from China. While some things are fairly easy to obtain, others need some level of complexity.
As a result, you should enquire about buyer references and prior order case studies from the Chinese agent you intend to hire. Even if you are having trouble finding a Chinese agent with experience in a particular niche product, you can find out if an agent is competent by asking for a buyer reference from a related business.
Hiring a procurement agent with the necessary expertise will ultimately determine whether a business operation is a total success or a total disaster.
5) Locating ideal suppliers
The organizations and processes used for sourcing are another crucial element on which you should concentrate. It is imperative that you understand that while locating a supplier is simple, locating the ideal, qualified one requires significant effort. An effective procurement agent is needed for this, as well as a well-executed sourcing strategy.
An expert agent will be aware of the client's certification requirements and product specifications and will handle them with transparency. A procurement agent will always make an effort to prioritize these needs. Although sourcing agencies in China may operate differently, the general flow of the purchase process should resemble this:
- Product discussion
- Initial price negotiations
- Supplier vetting
- Qualified supplier’s audit
- Choosing the qualified supplier
- Sales agreement
- Confirmation of certification requirements
- Confirmation of product specification
- Sample order
- Quality and production control
- Shipping.
6) Supplier’s location
The agent’s office location is crucial for your import success. At the very least, a seasoned buying agent will have a legally recognized business office in a Chinese location, such as Shenzhen. They are serious about their business and strive to deliver quality products on time, which cannot be said about the fly-by-night agents who operate with just a cell phone. They can leave your stranded and disappear with your money. Your agent must have a proper registered office in China or Hong Kong.
Make sure that you have chosen the right procurement agent
Although being aware of this information is not essential to the success of your company, it will provide you a clear picture of the purchasing agent's background, experience, and dependability. These knowledgeable agents may also live close to industrial areas, which could save you money on transportation and travel expenses.
There are many challenges associated with selecting a foreign country for the procurement of products and services, such as communication and linguistic barriers. However, when you decide to collaborate with a trustworthy procurement company, managing these aspects becomes simple. You will be hiring Chinese procurement agents, and they need to speak the local language fluently.
It is definitely difficult to communicate with a foreign supplier who does not speak English. Successful corporate relationships are more likely to be maintained when there is clear communication. Hiring China procurement agents may offer you numerous helpful services that can significantly streamline the purchasing process, regardless of the size of the purchases you want to make.
Conclusion
Every business needs to procure raw materials or finished products from other countries like China, where it is possible to save on cost. This can always offer a competitive edge to any business. Therefore, the role of a procurement agent can be very effective in making any business profitable. A professional procurement agent in China can help you in many ways, as they are more familiar with the country's business culture.
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