What is a Sourcing agent vs Distributor?

What is a Sourcing agent vs Distributor?

Major difference b/w Sourcing agent vs Distributor, A distributor gets hold of products in a wholesale manner and sells it to various vendors at the current market price. He usually buys the products, stores them, and then sells them at the preferred rate to anyone he wants.However, a sourcing agent collects information about a wide number of vendors and manufacturers. He is responsible for sourcing the products you require and he gets the commission out of the above sale.

Differences between sourcing agent & Distributor.

Differences

The product range offered A distributor has a specific set of inventory products that he deals with and sells. On the other hand, a sourcing agent has an in-depth knowledge of overseas markets too. They can arrange all kinds of products tailored according to your need and from the best quality vendors and manufacturers.

Customization of Products

When working with a distributor, the option to customize a product is not available since they have inventory products. However, a sourcing agent will have connections with a number of suppliers and vendors which will give you the choice to obtain perfectly tailored products. Not only that, but the buyer also gets to make any final alterations if he feels the need to do so.

Varying costs of Sourcing agent vs Distributor

Working with a sourcing agent is cost-effective as he gets a part of the commission based on the contractual agreement between the buyer and the vendor. You also get the products at factory cost while the distributor can charge you extra costs without your knowledge.

Availability of a prototype

When working with a sourcing agent, there is a possibility of receiving a prototype from the vendor before placing the actual order. They can help you gain those prototypes from the best vendors at a low cost but a distributor cannot do so, because he only deals with finished products.

Factoring in time

If the buyer requires urgent and small quantities of product, then contacting a distributor is the better option since they have ready products to sell and this saves your time. A sourcing agent may take longer to source the products but they offer the best and desirable prices, products, and services.

Quality Control

If a buyer chooses to work with a sourcing agent, they choose to gain access to a wider range of products with full control over prices and quality, in India as well as foreign markets. Moreover, the products can be custom-made as well as altered if the need arises. The sourcing agent can help the buyer to get customized products but a distributor cannot do so because he deals with finalized goods and products.

It all boils down to your requirements as a buyer. List down your priorities and decide if you prefer to work with a sourcing agent or a distributor.

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Sourcing Agent Tasks

Tasks that a sourcing agent performs for an online/small business company

Recognizing the products

If you are a beginner in the field, refer and contact a sourcing agent. Once you have chosen the product you want to manufacture, take the extra step of finding out all the required components and specifications.

Generate a Product Specification Sheet

Before identifying the suppliers, a sourcing agent will collect all the necessary products and components required for the completion of the job. Most companies prefer to have a detailed discussion with you before taking further action so as to ensure that there is no confusion when a quotation is submitted to the factory.

Even a minor error in your product sheet can lead to a restart of the whole process so ensure that there are no changes or errors in the submitted sheet of products.

Product validation by sourcing agent

Compile all the required information about your manufacturing cost and validation the product as this will help you in the future. During the validation process, find out all the compliances and certifications required ( if any) for your product. This is your task as the factories are not aware of the rules and regulations of a particular market because they deal with various firms and companies.

Identify at least 20 prospective suppliers

Make full use of the sourcing lists available as the more suppliers you connect with, the higher are your chances of securing a good supplier. This can increase your knowledge and reach.

Narrow your suppliers down to 5

Even though it is a difficult task, it is very vital in nature. Start crossing out the suppliers based on different criteria ( except for price). As your list narrows down much further, take control and think of all the criteria which match your requirements. Do not compromise on what a supplier needs to have in order to be selected.

If you do not like our selection, we will provide you with another 20 suppliers. In India, a wide range
of suppliers are available with a wide range of qualities. All we need to do is to pick them out.

Place sample orders

Now that you have selected your top 5 preferences, reach out to the suppliers and collect their sample product as it will allow you to minutely compare their quality output. At this stage, factor in the price and quality of the product. Try to collect more than one sample from the factory so that you are aware of their general product quality and not just of the model product that you have been sent. Try to collect as many as 10 samples.
The sample cost can be easily recovered so do not worry about that. The one way to procure the spent money is to mention in your contract that the cost will be deducted from the final cost. The other way is to sell the obtained sample online, via Amazon or eBay. This not only recovers your money but also gives you a glimpse of the customer reviews and needs. The sourcing company will then conduct thorough research about the samples by photographing and evaluating them. They can also send all the samples together, which says a lot of your time and money in the long run!

Negotiate by Task’s of sourcing agent

The next step is to negotiate with your vendor. First, think about the factors that matter to you and then, relay these to your vendor so he knows what to expect. Do not focus on only one goal like a low price. Frequently, lower prices lead to lower quality.

Do not let low prices be your first priority! Instead focus on qualitative factors like special labeling, packaging, and preparations. If you continue to demand lower prices, it is highly likely that the supplier will try to make up the remaining cost by lowering the quality of your goods. This will lead to you getting lower quality goods than you approved.

Identify at least 20 prospective suppliers

Make full use of the sourcing lists available as the more suppliers you connect with, the higher are your chances of securing a good supplier. This can increase your knowledge and reach.

Identify your key supplier

Now is the time to narrow all your suppliers to find your key supplier. Refer to the list of factors that you prepared and ensure that your selected supplier provides them all. However, if one or 2 attributes are leading to the cancellation of many suppliers, rethink them.

By this stage, people are tired and sluggish. They give up on choosing the ideal supplier and just settle for a supplier that they think will work. Do not do that! If you are tired, take some rest and restart again. Never settle for less.

Produce production requirements and Purchase Agreements

It’s time to assemble all your documents in your preferred mode – be it Productional Manual or Proforma Invoice – and get the final discussions going. Reach out to your supplier and clearly discuss all your documents so that there is no confusion and misunderstandings.

Purchasing and production agreements should be agreed upon by both parties after they have understood the whole agreement. It should be written in English and signed by both the parties once it is understood. It also helps to have an international business attorney by your side in this process. So contact an international business attorney who has knowledge of the Indian demographic and lean on their support. If you are investing hefty capital , an additional protection is a good law firm. It can really lower your risks.

Make initial payment

Once you are certain and clear, making the payment is the right way to go.

Maintain weekly production updates

Ensure that you are not passive when it comes to checking in. Actively ask the supplier for updates, at least on a weekly basis. Ask the supplier to inform you as soon as an issue or problem crops up so that you can solve it as efficiently and as quickly as possible.

Organize Freight Forwarder collection

Let your freight forwarder be aware of the shipment details as well as your supplier information so that they can arrange a pick up as soon as the production ends.

FBA Organisation and preparation by Task’s of sourcing agent

Look into your sourcing strategy and ensure that you have a solid plan to have your commodities marked under and tailored according to Amazon’s requirements. If you would rather use another source, instead of your supplier, talk it out with your supplier before the completion of production.

Quality control

Never ignore this step! It is extremely important to have your goods inspected before they are released in the market. There are different types of inspection and you should choose the one that is tailored to your need. However, do not ignore this step.

Shipment

Ensure that all the produced goods are available to your forwarded and all the necessary documentation is ready. The important documents include custom documents, fees, and information. This is very important to ensure that the goods are safely delivered. Hire a good SCM and he can handle this for you.

The above-explained points are very significant when trying to prepare a sourcing strategy to find a supplier in India. You can always be extra careful and add other points to the above checklist. However, this is considered to be the bare minimum at Guided imports.

As an example for internal sourcing, our purchasing agents add around 15 to 25 points to the above checklist to ensure that their imports from India are safe and secured.

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How is a trading firm different from sourcing agent?

Trading firm

trading firm is recommended that a thorough inspection of your goods takes place before shipping so that only good quality products are shipped. You can hire a QC team to inspect the products.

  • Trading firms act as a link between suppliers and buyers by buying products from a factory and letting the suppliers buy them. They make money by gaining profits from the suppliers’ cut.
  • If the purchasing methods confuse you and you deal in small quantities of product ,trading firms are the way to go.
  • They have their own directions and connections, you can directly purchase it from them.
  • They work better with small businesses and family owned businesses since they do not need large quantities of products. However, they do not mostly come in contact with foreign or indirect buyers.
  • Traders do not only have knowledge of Indian market but they also have in depth knowledge of foreign rules and regulations.
  • It is recommended that a thorough inspection of your goods takes place before shipping so that only good quality products are shipped. You can hire a QC team to inspect the products.

Sourcing agents

  • Sourcing agents help firms to gain access to low cost supplies and products which helps them save money during production.
  • Sourcing companies are known as buying agents
  • Sourcing agents act as a connecting link between customers and suppliers.
  • Sourcing agents do not conduct promotional activities as they do not own a line of products of their own. They cannot sell their products.
  • Sourcing agents are customer oriented. Their main objective is to ensure consumer satisfaction and protect consumer rights.
  • For online companies like FBA sellers or Amazon,product sourcing is an important component of their supply chain.
  • They perform OEM services, that is, identifying the label manufacturers for Amazon private label .
  • Sourcing agents make their income by charging commission depending on the purchasing value which is around 5%
  • However, some sourcing agents prefer to have a fixed fee or salary.

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