The Pros and Cons of Having a China Sourcing Office
September 21, 2018
A China sourcing office is the best way to support a sourcing program: all your issues are addressed from placing orders to quality assurance to on time delivery. But (there always seems to be a “but”) it requires an investment. How do we know all that? Well, we have one, obviously.
Have your cake and eat it too.Wouldn’t it be great if you could keep all the benefits of a sourcing office and not worry about the investment?
In this blog, we share the pros and cons of having a China sourcing office, and explore how importers might be able to keep the pros and avoid the cons.
Imagine having a well-managed China sourcing office full of professional andexperienced staff. People that speak the language, know the culture and communicate well. All your sourcing needs would be met: optimal pricing, good quality, and on-time delivery.
- Optimal Pricing: We found that most importers can save an average of at least 10%* of sourcing cost with their own sourcing team because they by-pass agents and deal directly, and efficiently, with the manufacturers. (*Extent of savings depend on the specific product.)
- Good quality means getting a product that conforms to your specific needs, not more, nor less. And that is what your sourcing team delivers.
- Your sourcing team can deliver close to 100% on time delivery because they (a) anticipate and factor all the supply chain challenges (i.e. Raw materials and packaging supply) into the time equation and (b) closely monitor the manufacturing process.
With the above, the productivity of your supply chain would increase exponentially, you would get an edge on your competition and you would increase market share.
OK, reality check. Yes, a China sourcing office would deliver all the above, but such an operation would cost a lot of money and would be a challenge to manage.
Everything has its drawbacks. Having your own sourcing office, the real thing, a place for your team of employees to strive would cost money. According to this article, setting up shop in China is cumbersome and expensive. Even if you don’t want or need a set up as complex as a WOFE (Wholly owned Foreign Enterprise – pronounced “woofee”) a properly staffed China sourcing office will cost at least $300,000 to $500,000 per year, depending on where you locate it, how many staff and their level of experience.
On top of that you will havea management burden to consider. If you have a China sourcing office, someone must manage it, lead the team, train the employees and be accountable. This would be true if your new office was in San Francisco, not to mention Shenzhen. Plus, in China, you would need to deal with the bureaucracy, taxes etc., most of which are quite different from the USA system.
Having your cake
Would it be possible to have all the benefits of a China sourcing office without the cost and the management burden?
In theory, yes. You could tap into a company who already has a professional sourcing structure in place and is willing to give you access to these resources on an as needed basis so that you would only pay for the resources you are using. Such an approach should be very cost effective – it could cost you as little as, say $20,000 per year to run a $5 million program**.
**Much of that depends on the complexity of the sourcing process. A $5m program with 3 skus is easier to manage that one with 1,500 skus.
Do you want to know more? Search on line using the key word “China sourcing office.”
How would you benefit from having your own China sourcing office? Share your thoughts with us in the comments below!
By Jocelyn Trigueros