Sourcing from a Trading Company vs. Manufacturer:

 

There are advantages to both trading companies and manufacturers depending on your situation. Let’s see if we can identify a few positives and negatives for both. This thread applies mainly to sourcing from China and I welcome your suggestions and corrections.

 

Overview – Size matters

Trading companies can be huge operations in China that deal across multiple product lines and industries and work with thousands of suppliers. They can be located in glitzy office towers in Shanghai or in dirty buildings without heat or toilet seats. They can also be a single person smoking a cigarette next to his fax/phone machine and computer.    Obviously, you should understand who you’re working with. A single person operation is not well placed to do the QC mentioned below and may not have a close tie to good factories. If that is the case then most of the trading company advantages listed below are lost.

 

Of course there are always exceptions. I’ve worked with small trading companies in the garment field that have very close ties to a couple of key factories. In fact, often they are partially invested in those factories. That is certainly different from the lone guy with his cigarette and fax machine.

Naturally, factories also come in different sizes. It’s amazing how small some operations can be in China. Sometimes the factories don’t even have employees (or the lights turned on) until they get an order. Other factories are monstrous with campuses the size of several football pitches.   This is why when you are purchasing directly from the factory you need to make a visit. (Also, beware that if the factory owner doesn’t know any of the employees and gets lost on the way to the bathroom, it might not be his factory at all. I’m serious. He may have called a friend to let him pretend the factory is his for the day. )

 

So let’s take a look at some advantages of each type of supplier.

Trading Companies

 

 

 

 

That doesn’t mean factories can’t communicate as well. It just depends on who you’re working with. The factories with export experience are often just as good as the trading companies with regard to communication. Even better if that means you can avoid the middle man in communication.

 

Manufacturers

 

 

Actually good exporting manufacturers exist all across China. So if you are in a single product line not dominated by tiny factories (think key chains) then going straight to the manufacturer might be for you.   Of course you still need to do your due diligence, visit the factory and so forth but it is a good option.

 

This means that if you have good company, established a strong QC procedures, which are already exported to their markets, you can go directly to view. You still need to visit, but even here there is a good, trusted factories in China which can produce high quality products (just to the nearest store to record). Most buyers prefer to work with a large factory due to the enormous advantage of direct costs. To check this possibility, if you care, is about 100 containers every other month.

 

While I’m sure that some of the information above sounds conflicting, that is mostly because conflicts do exist. A good trading company is better than a bad factory. A good factory is better than a bad trading company. Look at your product line and the services you need based on the size of your organization and keep an open mind. Both trading companies and factory direct can both be worthwhile.

 

 

 


Article Source:China Sourcing Blog

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