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Do importers need trading companies to buy in China?

by Renaud Anjoran

A reader asked me an interesting question:

I am really disappointed and fed up from the dishonest way of doing business: changing prices in the last moment, late deliveries and all the other tricks that were mentioned in your blog.

In these days I am in china to visit the factories. My question is: do I always need a trading company to help me with the buying process? Is there another way of buying from different factories in china without a trading company?

Several importers asked me similar questions in the past. And the response is simple:

  • Most importers don’t buy through a trading company.
  • The trend over the past 20 years has been more direct trade (manufacturer to importer).

To understand why, let’s examine the traditional functions of the trading company.

1. Finding a suitable manufacturer

These days, with websites like Global Sources and their competitors, most of the information is available to buyers for free. So the first step (finding potential suppliers) is easy.

And then, of course, it takes background checks as well as good judgement to screen the suppliers. It takes time and money.

But, at least, you get to know your supply chain. You are not in the dark. It means you are not at the mercy of an intermediary who might take shortcuts and expose your project to a level of risk you might not tolerate.

2. Making communication easier

Many Chinese factories now have English-speaking staff and are familiar with the way overseas customers think and do business.

Finding a supplier who “gets it” easily is not difficult if you really look around. And, when it is a real issue, hiring a Chinese fresh graduate in your office is a solution.

3. Buying for several customers at the same time

Most often, my response to readers’ questions about “sourcing direct from factories” is: can you buy up to the minimum order quantity (MOQ)?

Some traders collect orders from several customers and organize one production batch. They solve the MOQ issue this way. However, in my observations, this is mentioned quite often in the trading companies’ sales pitch but is seldom the reality.

The risk is that they place production is a small workshop with no quality control. These small factories accept small orders and offer very low pricing, but they need to be constantly supervised.

4. Keeping track of progress in a professional way

As I wrote before, 99% of Chinese factories have no system for planning what they will do in the coming few weeks. So, whose job is this? The buyer can take care of it if there is no trader.

Unfortunately, even trading companies are seldom following good scheduling and/or project management approaches. If you can’t find professionals, do it yourself and use specialized software if you need to.

5. Managing quality

This is really a non-issue. There is no shortage of quality assurance agencies in China, and they tend to be much more professional than the average trader.

My best advice on this is to plan for several inspections during production, not just one before shipment. I always tell my clients that final inspections are too late, and having only 1 pair of eyes check an order is a little risky.

6. Managing shipment and Customs clearance issues

Freight forwarders do this well, with minimal followup work on the importer’s side.

I am no expert on logistical issues, so I will point to this article: 4 options for managing shipping and Customs issues with China.

One thing traders sometimes do is this: they combine orders from different factories into one shipment. How can you do this yourself without sending staff on the ground?

Easy. You appoint a freight forwarder, who will receive (separately) each factory’s goods in a warehouse. Then the forwarder will put it all in a container and ship it out together.

In your view, what functions are usually managed best by a trading company?

Renaud Anjoran has been managing his quality assurance agency (Sofeast Ltd) since 2006. In addition, a passion for improving the way people work has pushed him to launch a consultancy to improve factories and a web application to manage the purchasing process. He writes advice for importers on

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