How to find and hire a sourcing agency?

Full Question I want to have a China-based sourcing agency look after my orders. I buy different types of consumer goods. What are my options for agents?

Answer Finding the right agency will depend on your order size, desired level of support/expertise and product categories. But here are the general options.

Option one: Engage a Large Sourcing Agency which focuses on medium-large clients and charges a flat rate and/or a small performance-based commission for sourcing services.

Option two: Hire a Small Sourcing Agency which focuses on small to medium-sized clients and charges a slightly higher % of PO value (because the order sizes are smaller). Sometimes they charge an upfront fee to get you incorporated into their buying platform.

Related content: The dangers of working with an agent who “doesn’t charge” for sourcing.

When the orders are small (because there is a minimum monthly retainer for the Large Agency) the costs can be prohibitive. But when the orders are large, the buyer will end up spending less on a percentage basis going with the Large Agency option.

As a rule of thumb, when orders are over a few 100,000 USD per year, most clients gravitate to Option 1. But if the order size is less than 5000 USD per year, even the small sourcing agencies may not be interested. That leaves the following options:

Option three is to engage freelance sourcing advisors (often westerners living in China) to walk you through the key steps. But they don't handle communications or negotiations with the sellers. Type 3 is a good fit when the client is willing to do the "heavy lifting" of project management, but wants a seasoned China advisor to offer advice and counsel throughout the project. These freelancers generally make themselves available for a quick phone call at a set time each week, but they don’t get involved in actually managing the vendors for you. They charge a few 100 USD per month. I have a few of them in my network and would be happy to make introductions.

Option four: DIY On one hand, external costs are reduced because a sourcing agency or advisor is not engaged, but internal cost may increase because you need to spend your own time managing the supply chain. Plus the risk of having a problem on the China side increases dramatically if you don’t have expertise in-house.