Most discussions regarding strategies for reducing procurement costs focus on low cost country sourcing. With the right provide of procurement service and plan, companies that use China sourcing service can have their cake and eat it too as long as they ensure that they are dining with the right China sourcing consultant. Emerging as a major sourcing hub, China has been providing products across industrial areas to companies around the world. For organizations interested in establishing a supply center in China to purchase products at moderate prices, setting up a wholly owned buying office locally is a viable option. Additionally, buyers may choose to join hands with traders or collaborate with a Procurement Service Provider who specializes in providing outsourced China sourcing services of the highest standard or can attempt to source directly from their home base in high cost countries.
The below given table gives a quick rundown on the advantages and disadvantages of managing a fully-owned purchasing office vs making use of an outsourced PSP (procurement service provider).
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Your Own Buying Office |
Outsourced PSP |
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Pros |
Cons |
Pros |
Cons |
| Total advantage of suppliers market prices | High costs to open and operate (especially if you have not achieved critical mass) | Limited investments to get started and low fixed costs to operate | Need to cover PSP’s margins |
| Complete control over the supply chain | Can suffer from high HR turnover | Ability to leverage knowledge and scale of PSP | |
| Hinders flexibility if you want to search for suppliers in other countries | Possibility to exit the country at lower costs | ||
The Right Sourcing Agent in China for Your Business
A third-party provider of procurement service is a good choice because they provide you direct access to suppliers in China, the top destination market for low cost products. More importantly, this option allows you to probe into various China sourcing services when compared to operating your own buying office. When it comes to fixed costs and investments with a China sourcing agency, you can stop worrying as there is no need to build offices, as well as, hire staff. On the other hand, if critical mass in spend value to be managed from China has been reached, you can always consider insourcing.
It is also crucial to realize that hiring a China sourcing consultant is not just a means to save money through one-time cost reduction. Although the near-term cost savings are an attractive draw, the ability to operate globally brings with it its share of benefits to most Western companies. Over time, these might even exceed cost savings and help the organization develop new sales channels and encourage overseas sales without much effort. For most companies, these aspects are unthinkable prior to using sourcing services in China. Take for instance the case of the American auto giant, Ford. China was initially a market they sought to reduce purchasing costs. Today, they are selling their cars in this rapidly growing economy as well.
Deploying the Right China Sourcing Service
The task of selecting the right product, qualifying overseas suppliers and handling logistics without incurring high expenditure is challenging. Besides that, you need to ensure that the standards of social responsibility are met, intellectual property rights are maintained and make sure that the suppliers manufacture, as well as, ship products which satisfy the quality standards. However, as a western company seeking products in China, you can use the services of a China sourcing consultant for their strategic and tactical expertise. They facilitate introductions to the best suppliers in the country and also minimize international travel and related expenses. Hence, choosing a partner with experience who offers a wide array of sourcing services including knowledge of the culture and results-driven purchasing techniques, business practices and language in the local country is crucial to a successful low cost country sourcing strategy. Enjoy cost savings from a move to the global economic stage and find opportunities that complement your business vision.