What is a Sourcing Agency, And Do You Need One?
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What is a Sourcing Agency, And Do You Need One?

Quality products lead to loyal customers. However, building quality products in a global economy has its fair share of challenges. For example, you might need to acquire supplies from one country, manufacture the finished product in another, and finally ship it to customers scattered across the world. Managing the entire sourcing process without any hiccups is difficult, but sourcing agencies can help with the manufacturing and logistics of your product. 

Be warned though, sourcing agencies can also take you for a spin by charging hidden commissions, supplying low-quality materials, and carrying out other dubious activities.

In this blog, we first look at what a sourcing agency is, the different services they offer, and then the pros and cons of working with one. Finally, we present a solution that provides all the benefits of a sourcing agency while minimizing the risks.

What is a sourcing agency?

A sourcing agency is an entity that helps its clients find sources for goods and supplies at reasonable market prices and with certain quality standards. For instance, a sourcing agency can assist you in finding a Chinese manufacturer that meets your price, quality, delivery, and other requirements. Some of the key areas where a sourcing agency can help in your product journey are:

  • Selecting a supplier – Good suppliers provide more value than just a low price. They are also reliable, stay on top of delivery commitments, and offer excellent customer service.
  • Negotiating prices – You get the best prices for your raw materials and finished products when you build a relationship with your supplier. Think about how you can create a win-win situation for both of you — can you provide a gateway to new markets? Can you reduce supplier risks?
  • Ensuring timely production – Once you obtain your raw materials at the best prices, you need to monitor the production processes and coordinate with the production facilities to ensure everything gets done on time.
  • Maintaining quality standards – The finished products must meet all the quality and compliance standards. You also need to find ways to improve the production processes and minimize defective rates.
  • Shipping finished products – You need to consider multiple factors like shipping based on dimensional weight or volume weight, peak season volumes, and customs.

In addition to the above services, a sourcing agency can help with product photoshoots, product packaging, customization, and other services required for order fulfillment. 

Let us now look at the pros and cons of working with a sourcing agency.

Benefits of using a sourcing agency

Identify legitimate suppliers

Online marketplaces have undoubtedly accelerated business but have also led to the proliferation of fake suppliers. Whether you’re an SMB or a Fortune 5000 company, a sourcing agency can save you from getting duped. You can count on them to conduct their due diligence to verify any supplier and ensure that you get precisely what you’ve ordered.

Leverage cultural understanding

The language barrier is one of the biggest challenges in sourcing raw materials or manufacturing products from a foreign country. With a local sourcing agency that understands the cultural context of a place, you can communicate more effectively and land better deals.

Access a trusted network of manufacturers

Sourcing agencies have experience working with a wide variety of manufacturers coming from different industries. They keep an up-to-date list of reliable companies based on their working history and can find the best fit for your product. However, as we will see later why, you need to build a relationship with the manufacturer directly and avoid intermediaries if you plan to scale.

Drawbacks of using a sourcing agency

No direct line of communication

Working with a sourcing agency makes you overly dependent on them since you have no direct contact with the suppliers or manufacturers. Imagine a scenario where you need to give instructions to the factory manager after facing a delay in the arrival of a shipment. You can only route your messages through the sourcing agency. Moreover, an intermediary may not fully understand what you intend to say and may convey it incorrectly.

Marked up prices

It’s no secret that sourcing agencies engage in dishonest practices to maximize their profits. If you haven’t done any pricing research for your product and only rely on the quotes provided by your sourcing agency, you could end up paying inflated prices. Sourcing agencies are also known to cut secret deals with suppliers to earn extra commissions.

No factory relationship 

When partnering with a sourcing agency, you lose the opportunity to build a relationship with the factory manager and other important employees. Without these relationships, you can’t negotiate better prices, special credit terms, and faster lead times. As a result, you have less control over production and have to hope that the sourcing agency provides you with the best possible service.

Switching suppliers

Another sneaky tactic that sourcing agencies deploy is switching suppliers behind your back. For instance, they may source lower quality materials from another supplier that agrees to pay higher commissions. Such under-the-table deals lead to inferior products being shipped to your customers, eventually impacting your bottom line.

Even though sourcing agencies rely on quality and efficiency of service provided to build a reputation, it is still tough to find a sourcing agency that you can trust — one that truly wants to see your business succeed. But what if you can get all the benefits of a sourcing agency without any of the risks? Enter Gembah.

Think differently with Gembah

Gembah is the first global marketplace for product development that empowers SMBs and Fortune 5000 companies to bring their product vision to reality. With Gembah,

  • You can directly communicate with a vast vetted network of suppliers and manufacturers, enabling you to cut off any intermediaries in between. 
  • It’s a one-stop-shop solution that gives you complete transparency to see how your product is being developed at any stage of the process.

Step away from sourcing agencies and explore how Gembah can help you in your product journey. 

Get started here.

Topics: Sourcing