What is Sourcing Agent?

Sourcing agent is a new type of material purchasing mode, and its cheap, efficient and fast characteristics will be recognized by more companies and become a new choice for many companies to reduce purchasing costs.

In other words, under the material procurement agency model, most companies will no longer need to set up a special material procurement department and reserve a large number of stock materials, and these tasks will be completed by a new type of material procurement agency company.

This kind of material procurement agency is completely independent of the client unit but different from the general procurement intermediary, it is from the customer’s point of view, specializes in the procurement agency of certain or related types of materials, and has its own warehouse and professionalism. The customized material distribution team can deliver the materials to the location designated by the customer in a timely and accurate manner after receiving the customer’s purchase order.

Material procurement agency companies use this professional procurement method and efficient material distribution team to replace the original work carried out by the customer unit’s procurement department, which can help the customer unit achieve the goal of reducing procurement costs while developing itself.

Of course, in order for this new material procurement model to survive and develop, it must meet the following three conditions: one is low price, that is, the price of materials it provides is lower than when customers purchase themselves. This is a sourcing agent. The prerequisite for existence; the second is high quality, that is, the quality of the materials provided must meet the requirements of customers, which is the key to the existence of procurement agents; the third is honesty, that is, to make customers believe that the materials they need can be delivered accurately and timely To the designated location, this is the basis for the existence of purchasing agents. This requires purchasing agents to have a high sense of social responsibility, a highly professional material distribution team, and a highly professional management method, and rely on efficient management and high-quality talents to establish a good social reputation.

Let’s dive right in now, and you can click on the question that interest you, 

1 Problems with the traditional model

The traditional material procurement model refers to a material procurement method in which a special procurement department is set up within an enterprise to be responsible for the procurement of the production materials required by the enterprise. It is the most common material procurement model in our country. Although this model has advantages in protecting the business secrets of the raw material supply of enterprises, and there is no need to worry about integrity issues, the cost is high.

First of all, the daily overhead costs are high. In order to ensure the timely supply of required materials, enterprises must set up a special purchasing department and allocate special purchasing personnel; in order to prevent shortages, they must also establish large warehouses to store a large number of backup materials. These expenses are an indispensable cost for enterprises.

Indians Bargain at Half Price

2 The strengths and capabilities of sourcing agent

The key to the survival of purchasing agents lies in whether purchasing agents can purchase cheap and high-quality materials for customers. Therefore, the low-cost operation is a common strategy adopted by procurement agency companies. In fact, purchasing agency companies do have such advantages and capabilities.

1) There is room for cost squeeze

According to relevant data, the procurement cost in my country’s traditional material procurement model accounts for 60% to 65% of the total investment cost of enterprises, while in foreign countries, this proportion is below 40%. In other words, there is at least 20% room for compression in my country’s material procurement costs. To improve economic efficiency for enterprises, reducing material procurement costs is a very realistic choice.

2) Realize purchasing cost savings

Purchasing agency companies specialize in the procurement and distribution of materials. It separates the function of material procurement from the production enterprise and realizes the social division of labor. According to the theory of division of labor and specialization, division of labor contributes to the development of specialization, and the direct impact of specialization is cost savings. The procurement agency is a professional material procurement company, which has a professional procurement and material distribution team, which can effectively reduce procurement costs. First of all, it specializes in the procurement of one or several types of materials and can provide services to multiple customers at the same time. Therefore, it is usually bulk purchases in operation.

Bulk purchases often have greater discounts in price and can enjoy more than ordinary customers. For preferential discounts. Secondly, the agency procurement company only deals with the procurement of a certain type or several types of materials, has more information than ordinary companies, is familiar with the market in this field, and can quickly complete the procurement task when the customer issues a purchase order, which can save a lot of money Transaction costs such as inspections and negotiations. For customers, in addition to saving the daily expenses of the purchasing department, the salaries of the purchasing personnel, the inventory cost of materials, and the transaction costs in the procurement, they can also purchase the required materials with higher efficiency and lower prices. The entire procurement process of an enterprise tends to be simplified and process-oriented, and procurement costs are greatly reduced.

3) Guarantee the quality of materials

The survival and development of a purchasing agent enterprise lie in that it is subject to an intangible restriction, that is, its responsibility to customers. Customers trust it and are willing to entrust their material procurement business to it so that it can survive and grow. Therefore, it must stand on the customer’s standpoint, think about what the customer thinks, and be anxious about what the customer wants.

It must stay awake at all times because, in a society where information is highly circulated, single negligence or fraud (such as shoddy) will not only cause you to lose a customer forever, but it may also bring you a devastating disaster. In this sense, purchasing agency companies have a more sense of responsibility and crisis than the client’s own purchasing department and are more motivated to seek high-quality and low-cost materials. In addition, procurement agency companies specialize in the procurement of certain or several types of materials, have more professional procurement personnel, have a more accurate grasp of market conditions, and are more capable of discerning the quality of related materials.

Therefore, purchasing agents are more able to purchase materials that meet customer requirements. This kind of more specialized ability for a certain or several types of materials is an indispensable means for the survival and development of a purchasing agency company; but for customers, it saves purchasing costs invisibly.

4) Provide fast service

Purchasing agency companies have a professional material distribution team, which has the ability to accurately deliver the materials required by the customer to the customer’s designated location in a relatively short period of time. Moreover, long-term engaged in the distribution of a certain type of material or several types of materials, and a better understanding of the performance and transportation requirements of the delivered materials, thereby reducing the loss of materials in the process of loading, unloading, and transportation, and saving costs. For client companies, as long as the purchase order is issued within a reasonable time according to the production schedule, the required materials can be supplied in time, so there is no need to reserve a large number of materials, only a small amount of inventory or zero inventory, which prevents the backlog of raw materials and materials, thus Reduce inventory costs.

5) Prevent corruption in procurement

In the traditional material procurement model, in order to determine the supplier, the procurement personnel often need to conduct on-site inspections of the suppliers, and this is usually a link in the procurement process that is prone to corruption. In reality, in order to obtain qualifications for material supply, some suppliers do not hesitate to spend a lot of money to win over purchasing personnel or promise to give rebates secretly. But the wool is on the sheep, and the result of the purchasers’ greed for small profits is that the company pays higher costs. In order to prevent fraud in the procurement process, companies have established a series of supervision mechanisms, but from the actual implementation results, the companies not only spent high costs for this, but the effect was not obvious.

The procurement agency model separates the function of material procurement from the enterprise, and the relationship between the procurement agency and its customers is open and clear. For the client enterprise, the link of material procurement is reduced, thereby reducing the possibility of corruption in material procurement at the source, and greatly reducing the supervision cost in material procurement.

As a new type of material procurement model, procurement agencies will be recognized by more companies for their cheap, efficient, and fast characteristics, and it will become a new choice for many companies to reduce procurement costs.

After explaining so much content, you might want to know how much do sourcing agents charge?