Identify and Shortlist Potential Suppliers

Sourcing Selection, Procurement Souring, China Consultants, Quality ControlYou are now ready to distribute your RFQ but don’t know where to send it. You have researched the attractiveness of certain locations of production (or at least have discarded some alternatives), but you are not sure, within the markets you have identified, who to contact.

Factory Direct or Trading Company

The next critical decision you need to make is whether you want to go factory direct or whether you will be using an agent or trading company to help you.  There are pro’s and con’s to each approach.

A good agent, in simplest terms, needs to be adding value to your supply chain for it to make sense.  Clearly, anyone getting in the middle of your trade will be charging you for the work that they do.  They key is to make sure that you are getting good value for what you are giving up (i.e. the fees they will charge are really worth the services they provide).

There are some cases where a local agent will actually be in a better position to obtain more competitive pricing than you will get by going direct.  Some Chinese factories prefer to deal with a local, someone that they know and have developed a long-standing relationship with (referred to as guanxi in Chinese), than to sell to an overseas buyer.  Furthermore, there are many highly qualified Chinese factories that are not set up with an export licenses and therefore will need to liquidate the transaction in local currency.  A trading company or agent is in the best position to handle this for you.

Some trading companies also have certain product expertise and may have scale economies that they can pass along to you such that your price is either improved or at least the same as it would be if you go direct, yet you have the additional assurances and value being provided by your agent.

Sourcing Services, Procurement Sourcing, China Consultants, Quality ControlComplexity is possibly the best reason to use an agent or trading company.  If you will need to source a number of products from different manufacturers (as components that will need to be assembled, packaged, etc. or as individual items that will confirm an entire line) then you are better off using a trading company with packaging and assembly capabilities.  Similarly, when working with multiple factories, you may need someone to oversee all production schedules to ensure that everything arrives on time, are checked against your quality assurance standards, and consolidated per your instructions.  In this instance, a good trading company that has been pre-qualified by you is probably your best option.

Many of our largest clients are big box retailers who have significant operations in China.  However, given the complexity of their business and the lines that we manage for them, they prefer to use a single independent entity to handle all purchasing, quality assurance / control, assembly and packaging, such that their private labels are branded consistently across the line.  Walmart and Target are good examples of these types of clients.  The ease of dealing with one account representative that can handle everything, when the purchases are complex in nature, is a very strong argument for using an agent when sourcing from China.

A good agent can be invaluable, but finding the right partner can be a challenge.  There are hundreds of small trading companies that are set up to literally intermediate a transaction but add very little (if any) value.  We refer to these entities as “middlemen.”  They operate with a severely limited or no infrastructure; and add hardly any value to your transactions, acting as a matchmaker but with a nice margin built into the trade.

Therefore, when looking for an agent, it is very important to find a reputable company that has a good infrastructure, deep local relationships, and sound market knowledge.  Your best bet is to find one that is a US or European based company with wholly owned Chinese operations that are managed by Westerners and staffed with locals.  This addresses the concerns of having someone with local expertise, but provides the comforts of dealing with an entity that is incorporated in a developed market, speaks your language (and can bridge communication seamlessly), and offers greater legal protection to you as a buyer.

If you are looking to put together a simple, single item order that can be sourced from one factory and you plan on ordering full container load (FCL) quantities, we almost always recommend that our clients go direct.  Many of these customer types have hired us to help source a reliable factory and to oversee production to ensure on-time delivery and quality control.  Our services are billed out as they are used (or bundled for repeat orders/transactions, offering volume discounts for these clients), which has given birth to a “middle ground” that can be used by buyers when sourcing from abroad.

Sourcing Services, Procurement Sourcing, China Consultants, Quality ControlThe middle ground, which is often overlooked, is to utilize a local partner to help you “manage” your factory direct orders.  Here, your local partner is not taking any proprietary position in the product you are buying (as we do in our trading business), but rather charging you strictly for the services you need.  Many of our clients are moving toward this model and have found they are able to capture many of the benefits of going direct to manufacturers (i.e. establishing a direct relationship and clear lines of communication with the maker), while being able to benefit from the value added by a local, on-the-ground independent partner that will act as their eyes and ears.  In fact, for almost all of our Agency Services customers, we have found that we can help not only in negotiating more preferential pricing, but also help with negotiations or provide assistance with financing.  These are extremely valuable services that should be considered when looking to source from China or anywhere else off-shore for that matter.

How to Find Manufacturers

China has thousands of factories that are churning out the world’s products every day.  The hard part really isn’t finding a factory – it’s finding the right factory for what you need.  The most common way (and certainly the easiest) is to tap the internet.  There are a number of sites and directories that you can use, including the three largest: Global Sources (, Alibaba ( and Made-in-China (  While you will most certainly find a number of supplier alternatives on these sites, you have not solved the problem of qualifying these entities.  Many may not even be manufacturers at all or worse yet, might be looking to swindle you out of your money.

How can you verify whether a supplier is indeed real, is a true manufacturer, and is a good fit with your needs?  There are a number of companies that you can hire to perform a background check on the factory.  Yet just because some third party has “verified” a supplier, does not mean it is truly a good fit and there is no guarantee for the accuracy of the information you are provided.

You may also check with your local government.  For example, the U.S. government will help US businesses in verifying Chinese company information.  This can be done on-line ( or you can contact the Commercial Service Dept. at the US Embassy in Beijing.  However, the depth and breadth of information you will receive is not really enough to allow you to move forward with confidence.  It is certainly better than nothing and a good place to start.  But to get relevant and detailed information that pertains to your particular needs, you are best served by finding a company that can perform a factory evaluation for you, but that you intend to keep involved in the process.  A company that manages transactional exchanges, selling one-off background checks, is less likely to work with you to understand all of your needs and perform a relevant and comprehensive evaluation than is a company that will be involved in helping you manage the order from start to finish (or some form of involvement down the road).