by Renaud Anjoran
These days, it seems the same subject of conversation comes up whenever I meet with a sourcing agent: does their activity have a future?
It is a very wide question, and as such it invites a nuanced answer. Actually I don’t want to provide answers — just a few pointers.
Let’s start by decomposing the traditional processes managed by the sourcing agent.
“Sourcing” means identifying a supplier that is capable of, and interested in, manufacturing the product in question for a price that is workable for the buyer.
With the B2B directories like Global Sources, Alibaba, and others, one would think this process only takes a few clicks.
Unfortunately, the problem is not solved yet. These directories only facilitate the first step of the sourcing process (identifying potential suppliers, but not really screening or auditing them).
So the question is, will this problem be solved in 10 years? Are we in the same situation as internet users in 1997, before Google arrived and improved search results dramatically? Maybe.
In any case, it won’t impact sourcing agents that much, for the simple reason that they make their money after sourcing is done. Why is that? Because the buyer gives them a few percentage points, or a retainer fee, for following the production.
Which brings us to the next part…
This is a pretty wide category. I had to break it down into several sections.
Let’s say the importer wants a factory to make a technically challenging product, but that factory is a little lost and the buyer doesn’t have the resource to guide them. That’s where a third party can really help.
Is this something the generalists (those agents who work on garments, furniture, electronics and so on) can deliver? Hardly. How can they have engineering capabilities that span multiple types of processes?
Shouldn’t they get specialized? And, if they want to remain generalists, shouldn’t they start setting up a network in hard-to-penetrate (for small buyers, that is) countries like Myanmar, Laos, and Cambodia?
In 10 years, will there still be a need for someone on the ground to “solve problems” and save the buyer some time? Yes, probably. But less so than today, as Chinese suppliers get better at communicating and at understanding the importer’s side.
The question is, how will the successful agent work? With a phone and a laptop, without any roadmap? Or with strong processes in place to bring value to all parties?
And will buyers demand that agents learn how to be project managers? Surprisingly I haven’t heard of such demand from buyers.
Many specialized agencies are happy to provide quality inspection services for fees that are much, much lower than most sourcing agents’. And they are more competent, at least when it comes to consumer goods.
So there will probably still be a need for specialized engineers in the QA business, for the more technical products.
This is even clearer than the last section: I can’t see any need for an agent. More and more freight forwarders offer good service for very modest fees, even to small importers.
Sourcing agents can make themselves indispensable by “making things happen”.
A very common way to achieve this is to put small orders in small factories that are unable to communicate directly with foreign customers or to manage export procedures. But the question is, how long will this be necessary to manufacture small batches in China?
Another way agents can bring value is by organizing production so that a batch is made in 2 weeks rather than 4 weeks. It demands a certain network and a deep understanding of all the variables at play — again, generalists are not in a good position.
What if the future of sourcing agents is to also become… marketing agents?
Some of them approach retailers with a whole concept including in-store displays and “credibility enhancers” (e.g. a famous chef’s name can be helpful to sell more cookware). This way, the agent makes good use of his understanding of the supply chain and cuts importers out of the loop.
How will agents conduct their business in the future? A lot still act as traders these days. And some of them pretend to own factories.
Yesterday a friend told me the future would be shaped by what buyers are comfortable with. In Europe and in the US, buyers go and see the manufacturers that work for them — they seldom buy through an intermediary if volumes are above a certain amount. His bet is that China will get to the same situation, and that most trading companies would be extinct within 5 to 10 years.
I tend to agree with him, but there are notable exceptions (read the comment below this article, for example).
What do you think?
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 qualityinspection.org.