Using A Sourcing Agent With Lindy Chen and Brendan Elias

Using a Sourcing Agent with Lindy Chen and Brendan Elias
Using a Sourcing Agent

with Lindy Chen and
Brendan Elias
www.ChinaImportAcademy.com

Sourcing agents and what they do
Soucring agents work differently.
Depends on what sourcing agent defines
themselves through.
The amount of work and expertise required to
source from China is often under-estimated.
If agent can demonstrate ability to manage
project end-to-end, it will save time coordinating agents and inspection of companies, critical orders, customs.
A sourcing agent can really cover a lot of aspects your importing projects.
May be someone who finds product, but can
also be more detailed in terms of auditing and
inspecting factories, production management,
and deliver from China to wherever you are.
Some sourcing agents only offer some services, and some offer all the services from start
to finish.
They all really work quite differently.
Advantages of using sourcing agent vs. doing it yourself

Doing it yourself requires a lot of different
tasks.
There is a significant language barrier.
Also significant cultural differences.
Import/export expertise. Importing business is
challenging.
Can be very difficult without experience in that
area.
Knowledge of local market and supplier and
knowing whether its a trading company or
a manufacturer based on knowledge of address.
Choosing the right agent will mean the differ-
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ence between success and failure of an import project.
A sourcing agent knows the questions to ask;
beginning importer does not, nor how to ask
them.
Small to medium companies can use a sourcing agent to good benefit.
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Do large companies (K-Mart, Wal-Mart, Target) use sourcing agents?
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Yes. They all have their own and use a sourcing agent.
Even if people know how to go about importing process, there are still benefits from using
someone with more expertise and knowledge.
Its like when youre using tax agent or an accountant. Youre not trying to do everything
yourself.
Large and small companies benefit from using a sourcing agent.
Is it an absolute necessity to speak Chinese

to deal with Chinese factories?
It would be very beneficial. It is not necessarily a must, but certainly 100% beneficial.
There is more of a willingness to do business
if you speak Chinese because of cultural similarities.
By speaking the same language, and also the
understanding of the local culture and ideology and terms can create an instant understanding of the situation.
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Regarding trading companies and factories, what are some techniques you can use
to determine if youre dealing with a direct
source or a trading company?
Agents can very easily identify these by address. Most factories are located in remote
zones. Trading companies are normally in
high-rise building in the city.
By asking very directly. They will tell you what
they are, but a factory may also have a trading
arm. This leads to further questions regarding
how many employees do you have, whats the
relationship.
You can also ask for their business license.
This is a tricky part. If you dont understand
Chinese, you cant read it.
By reading the business license, you can see
if the name, address and person match.
This is the research importing agents usually
do.
What are the specific tasks and services of a

sourcing agent that go from start to finish?
Pay as you go system. You choose a particular scope of work and pay for that service.
Research and tender. Finding the right supplier, contact the supplier, summarize the supplier whos interested in that project, do quote
comparison, analysis, and really get to see in
black and white how the project will turn out.
If project is promising and feasible and what
the client desired, the next step is to do the
sampling process.
A sourcing agent is not just a go between.
You really need to have capacity to guide the
client in the right way to help client achieve
the final goal, which is to be globally competi-
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tive and globally prepared.

The second part of that is really to do the
sampling stage and then to identify and find
the right supplier and whether they are cooperative with the client or not and whether they
are delivering as expected or not.
The sampling process includes drafting the
purchase order and negotiating on the clients
behalf, and to make sure the clients interests
are protected (i.e., price increases, terms,
conditions, terms of payment, quality control).
All of this has already been negotiated in the
purchase order package.
Monitor the action and have the supplier fulfill what they have promised in the purchase
order, during production and delivery management, coordinating with the shipping and
freight-forwarding company.
Also to clear customs and delivery of the product to the customers door.
There is a lot of work involved that beginners
do not understand.
It is very extensive and very detailed work involved in the whole process.
Each project is totally different, and some
suppliers need constant micro-management.
You cannot miss one step. If one party does
not answer, later it will backfire on you.
Does process get easier when re-ordering

from established suppliers?
Dealing with Chinese suppliers need constant
micro-management.
Even if the sixth order is exactly the way you
wanted, this doesnt guarantee the seventh
order will be the way you expected again.
For instance, if a salesperson changes jobs,
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your order may be lost. Or if the factory

changed location from one to another, your
order would be different.
People change jobs quite often. So we always make sure all the documentation in your
hands is complete.
If the supplier changes staff you have to be
extremely patient and deal with them and lay
out the order and requirement specifications
again. Also, all of the documentation has to be
translated into Chinese.
Established suppliers can also change from
time-to-time. So you really have to ask.
Also, when these kinds of things happen,
when order is received it might have a different quote in it. So then you have to find a solution.
If youre located in America, Australia or

New Zealand, why is it important to actually
have a physical presence on the ground in
China?
We highly recommend having a person in China, because you can actually see the product
yourself and can verify if the suppliers are a
actually producing of what they say they are.
Also by having a person in China will mean
issues can be sorted much quicker, and they
can act as your Johnny on the Spot for any
issues.
Having a person in China also means the relationship is a bit better with the factories.
Often you must be very diplomatic when dealing with a Chinese supplier.
Communicating with Chinese can also be
quite challenging.
Chinese are afraid of losing face.
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Someone on the ground in China can communicate your intentions as well as maintain
the good relationship.
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What are the consequences of making a mistake and making someone lose face?
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That is the worst thing that can happen to you.

If you insult someone, they dont want to do
business with you.
Even if youre paying the money, the supplier
will say no.
Some of our clients are really demanding and
quite rude to a certain degree. Letters can be
very intrusive.
Agents often have to soften clients tone, and
suppliers may say they dont want to deal with
that client.
So if this happens, all prior efforts and work
are gone, and you have to start all over again.
How do you balance the line between

being firm and getting what you want
and not being rude?
The strategy we use is called Sandwich Talk.
Is a great way to build a relationship.
First, we always talk about the commitment.
We always talk about the commitment to the
client. This is to make the client preferred and
globally competitive.
Also, our commitment to suppliers is to have
them make a profit and create a fantastic relationship with the customer.
Therefore, once we set up the commitment,
then we deal with the issue. For instance
if the quality hasnt been met. If the quality
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hasnt been met, that means the client cannot

sell the product properly and they cannot reorder. This would impact the supplier.
We always create a win-win situation.
Sandwich Talking lays out the commitment
first, then addresses the issue, and then creates the future. By you solving this, it will create opportunity for the client to re-order the
products much faster, etc.
In that way, the supplier sees the big picture,
where they fit in, and they are much more inclined to agree with you to make it happen
much faster.
We get the supplier to see the long-term benefit vs. the short-term benefit.
You also get them involved in the conversation and they see they are in same bus together.
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What is your strategy for negotiating the

best price with Chinese factories?
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One of the strongest negotiation techniques

a supplier can use is to simply say no. The
ability to distinguish a real from a no used as a
negotiation technique is vitally important. The
following tips will help you move past the no
and negotiate a better deal:
Shift focus. Try to shift focus onto another
item of value. For instance, negotiate a longer
warranty period, or ask for some free products
or accessories, or get an agreement on pricing for a longer period of time, or a downward
price production cost, or better lead time, or
seek great discount on related goods or services.
Do the math. Set the emotion aside and work
our suppliers through the different problems

you both face. Develop a should cost model to determine if there is room for additional
cost compression. Benchmark the offer you
receive against the published data and from
other suppliers or a backup plan. Also the
analysis will help you know how to lower the
cost, and have the supplier really see you are
sincere.
Paint the picture. Sometimes the suppliers
need help understanding the implications
of not reaching the agreement. Explain the
importance of your business, describe what
your business may look like in two or three
years time, and if the relationship is damaged.
Then you can ask how this future would help
the salesperson on their performance reviews
and career, compensation, etc.
Change the player. For instance, you can
increase the involvement of a higher level
supplier representative in the negotiations; or
sometimes you may say Im not the boss, and
I need to ask my boss, and then you come
back with another player. However, although
this one may seem elementary, many negotiators mess this up. So you really need to
know how to use this. The trick is to find the
highest level executive who would experience
the greatest dependence on the loss of your
business.
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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?
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Thats suicide.
You can exaggerate one or two times, but if
you do it constantly, the attitude of the supplier

will dramatically change. It will be much more
difficult when you start sampling process and
negotiations.
I dont recommend this strategy at all.
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How do you get a minimum order quantity

(MOQ) but still get a good price?
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This will be tricky. There are some suppliers

who will supply small MOQs.
However, those kinds of suppliers are not normally registered with Alibaba.
Neither do they write their web site in English.
To buy you have to search on Chinese web
sites, and you cant speak English to them.
Therefore, you have to use a sourcing agent.
Sourcing agent would charge fee.
If you cant get what you want, it is sometimes
better not to import from China.
You have to know where to stop.
Would be helpful to invest in resources or
take a seminar to educate yourself before you
proceed further.
How do you ensure a factory is reliable and

trustworthy?
This is the core of the whole sourcing process.
No one can guarantee 100%.
In China Direct we find the manufacturers
who are trustworthy and reliable the diplomatic way. Our first step to research and investigate many suppliers, from 30 suppliers down
to probably only three.
After quote comparisons, cost analyses, and
from the sort list of supplier we start to see
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which suppliers have the track record for reliability and their previous dealings with other
clients.
Through sampling stage we start to see the
supplier actually having the willingness and
also the capacity to follow instructions. They
may be good for other companies, but not
you.
The sampling stage is the real opportunity for
you to see if they would be reliable on your
project.
The process of negotiation. This is where you
start to see if they are willing to follow quality
control. Whether they are willing to address
that or not. Whether they are able to do the
packaging you required or not.
All of these points show you if they are reliable and trustworthy or not.
We recommend our clients not use a supplier
if they return the quote with key issues missing; i.e., quality control points. This shows
that supplier will be difficult to deal with from
the start.
The whole sourcing process is linked together
to answer that question.
A lot of small things, which singularly may not
be fatal, but when you have enough of them
together, it can lead you to stay away from a
factory.
People are exited to get into business and
lose sight of these mistakes that are glaring.
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How do you stop people who are so excited

to make the deal to be more careful?
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We explain to our customers the whole process and the whole sourcing project from a
holistic point of view.
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Regardless whether it is a small project or
large project, it has to go through the same
steps to produce the steps you want.
What you really want is the consistency of
the product. Therefore, you want the supplier
who will achieve the best results you want,
which is to make a profit and save money.
You have to follow the system to produce the
results.
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What are some tactics or strategies

you can use to ensure you get a good
quality product?
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We start with the sample making agreement.

The sampling process is a great way to establish the quality control procedure. When the
product arrives and you find quality issues, its
already too late.
You really have to start with sampling. We
have a supplier self-assessment tool. Our
client lists all the criteria and what needs to
be done, such as workmanship, appearance,
packaging, functionality, etc. This produces a
quality control document.
The quality control document is used as the
criteria to check the sample.
In purchase order negotiations, you have all
the quality control procedures in place.
There is also an inspection criterion.
You need to specify to the supplier what the
quality control mechanisms they are going to
put into place and have them agree with you
with the acceptable quality level (AQL) percentage.
Once that is in place and once the production
is complete, you really need to have an onsite inspection. We highly recommend this to
12
inspect the product before it leaves China.

If you have those elements of the quality control in place, the chance of getting a quality
product is much higher.
The on-site inspection is scientific, and you
do not need to go through every single piece.
We have AQL, which is standard. It depends
on the AQL you have agreed on.
A lot size may be 1,000 units, and then you
need to choose what would be the sample
size. Then you would decide how many defects.
There are major defects and minor defects.
How many of each will be allowed? If that
level is exceeded, the whole batch will be rejected.
If the factory makes a mistake and has major
defects, we will do an analysis. Then we will
list the different options, and then we will negotiate with the factory to see what would be
fair.
When the factory makes a mistake, there is
no general rule that applies to all. It depends
on the situation.
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What is your legal recourse if goods

are not up to your standard and supplier
is not cooperative?
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Its very hard.

You can go through arbitration.
Also you can use the legal system in China to
protect you. I know it works.
It takes a lot of effort and energy.
Prevention is much better than waiting until
something happens.
Using a sourcing agent in stage 1, stage 2,
research, sampling process, purchase order
13

negotiations are the critical parts to minimize
the risk to avoid that happening.
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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?
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Patience is the key in dealing with Chinese

suppliers.
The commitment to success.
Always be willing to learn from others and to
listen to what other people say.
Be prepared to understand more.
Having patience, acceptance, and willingness
to learn from others will gain you much more
experience.
Learn the whole process from a sourcing
agent.
To find out more go to:
www.chinadirectsourcing.com.au
Q&A
1. What are some of the benefits of using a
sourcing agent?
Saves time coordinating agents and inspection of

companies, critical orders, and figuring out customs
2. Why should you speak Chinese when dealing with Chinese factories?
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While not necessary, the Chinese will be more

willing to work with you. Speaking the same language and understanding the culture can give you
an instant understanding of situations.
14

3. What are three ways to tell if you are dealing
with a direct source or trading company?
1) Location - Factories are usually located in
remote zones. Trading companies are usually in
high-rises in a city. 2) Ask them directly. 3) Request their business license.
4. What are some services and tasks you can
expect to be taken care of by using a sourcing agent?
They will handle the research and tender, the

sampling process, monitoring the process, clearing customs and delivery of the product to your
door.
5. What is the pay as you go system?

You choose a scope of work and pay for that service only.
6. What does the sampling process include?
Drafting a purchase order, negotiating price and
conditions.
7. True or false Once you have a system set
up with a Chinese supplier, you do not need
to worry about future orders.
False Chinese suppliers need constant micromanagement. If a salesperson changes jobs or

the factory moves your order could be lost or different.
8. What are the benefits of having a Chinese
presence?
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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 communicate effectively with the local vendors
15

9 What are the steps of Sandwich Talk?
1) Talk about commitment. 2) Address the issue 3)
Create the future
10. What is the strongest negotiating technique
a supplier can use?
Saying no to your requests.
11. What are four ways to get around the no?
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 different player in the company.
12. What does MOQ stand for?
Minimum Order Quantity
13 How do you ensure a factory is reliable?
Research and investigate suppliers utilize resources online resources like www.chinadirectsourcing.com.au.
14. What are your best legal options if a supplier is not providing the standard you require?
Prevention, using a sourcing agent, arbitration,
utilize the Chinese legal system
15. If you have additional questions, which
Website should you go to?
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www.chinadirectsourcing.com.au
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