To the request of many buyers, today I would like share some information & opinions base on my own experience when dealing with manufacturer, trading company & sourcing agent. What are the differences among them and which one fits buyer the best?

Definition:

• a manufacturer, who has their own manufacturing plant (middle or big size) or just workshop (many still exists in 1688.com, Alibaba Chinese version B2B platform) to produce a certain type or multi-types of product. The ones are usually thought to be able to offer the BEST prices among all three. Is it true or false? We will see later.
• a trading company (also known as trader / distributor), who doesn’t have his own manufacturing plants and purely reply on one or multiple manufacturers, business model is to buy and sell. The ones are usually thought to flexible but NOT being able to offer good prices (no matter what it’s, it’s just not good enough because of trading company:))
• a sourcing agent (refers to both sourcing company or sourcing freelancer in some case), who usually is just a service provider works as per customers’ requests (product sourcing, price negotiation, quality control or logistic arrangement etc.). The charge model usually base on a certain percent of commission of the FOB purchase amount, but it could be various subject to agreement made between. The ones are getting more & more popular in recent years, especially for those small buyers who have small order volume but with a big product range.

Product range on offer:

Sourcing agent > Trading company > Manufacturing

Normally a manufacturer can only produce a certain type of product within ONE industry; while a trading company usually get involved into multi-industries product range for meeting various market demand; as for a sourcing agent, they may specialized in some certain industry, but most of them are not limited to any industry, their business model is to work as per customers request /demand and to find what the customers want.

Customization on products:

Sourcing agent > Manufacturer > Trading company

When dealing with trading company, who usually sell the products offered by his manufacturers, it’s less likely for them to offer custom option and possibility than manufacturer and sourcing agent. While as a sourcing agent, who has more access (network) to different suppliers, thus they are more likely to offer wider range of custom products as per customers requirement. 

Sense of Quality Control:

Hmm, it could be interesting, in my view and experience, it could be Sourcing Agent > Trading company > Manufacturer

This may surprise many buyers who always prefer to work with manufacturer directly, but the fact may surprise you more if you are willing to dive into their business model.

As a matter of fact, a manufacturer could be on the top above the other two, trading company and sourcing agent both buy from manufacturer, then who would care the quality more? Of course, the ones who pay money, in that case, it makes sense why the trading company and sourcing agent CARE MORE. And therefore, in many cases, trading company and sourcing agent would perform PSI (pre-shipment inspection) for each order (it depends). However, frankly I don’t know too much about trading company, but I know Quality Control is very essential and even a selling point for sourcing agent, while as for trading company, many of them may reply a lot on their suppliers, they might check the first several batches for new suppliers, once getting steady, they would reduce gradually and don’t do it anymore.

I am not saying sourcing agent must have better Quality Control than the others, but they do have this sense and it is part of their job. However, with regard to how they do Quality Control, it is a big topic and I would like to share it separately in my another article in the coming days…

Cost/pricing:

Chasing the best cost is the nature of business, that is why many of buyers want to buy directly from manufacturers, but is it REALLY manufacturer can offer the BEST price, in my view, I would say it really DEPENDS, depends on your order size (volume), type of product, type of manufacturer etc.

• manufacturer, if you have decent volume and small variety, with no doubt, manufacturer is the best choice, and you can squeeze a best price.
• trading company, must offer a higher price? It is NOT as a matter of course. In my sourcing experience, some capable trading companies can even offer better price than the manufacturer behind. H.O.W C.O.M.E? It is still a matter of VOLUME, if the trading company is strong in this industry, they must have much bigger combined volume than any of single buyer, that is why they can get a much better price than buyer himself. However, like I said, the pre-condition is a CAPABLE (STRONG) trading company, usually the small ones would mark up the price a lot, that is why people always complaint the prices were too high.
• Sourcing agent, traditionally a sourcing agent just get a certain percentage (as commission) from the FOB order amount, the deal occurs between supplier and buyer directly, it seems like a fair deal for all three. However, nowadays the charge models vary a lot compare to old times, sourcing agent might find his way easily to mark up the selling price to buyer, such as kickback, rebate, bribe etc. All these could make things different. (am I putting myself into a dangerous position now as a sourcing agent? NOPE, I will tell you more “gossip” about sourcing field in my future article)

Services & Language:

In general, sourcing agent≥trading company > manufacturer

Sourcing agent is a service provider, no matter the service or language skill is just part of essential of their business; in many cases, the sourcing companies operated in China are run by foreigner; with no doubt, the buyer can get a swift response and fluent communication from sourcing agent; while as for trading company, to some extent, they reply on service as well, so they focus on more resource in improving service and language. Manufacturer is a special case, some big ones also have very organized sale team, while as for the ordinary ones (middle-small size), they don’t even have someone who can SPEAK English at the office (only read & write)!

In the end, of course the final decision comes down to buyers themselves who know what they expect or value the most from a supplier. I cannot put myself into everyone’s shoes, what I would like to suggest (it is actually a word from Benny Chu, a famous blogger)” instead of questioning whether your supplier is a middleman or not, question his/her value”, evaluate the total value he/she can bring to you, forget about his/her ID.

The best is yet to come, see you next time.