- 1. Work Directly With the Factory
If you have the bandwidth and the experience, partnering directly with a factory lets you avoid paying intermediaries or agents. It gives you complete control and responsibility over the process.
- Pay a Third-Party Source
A third party will find your factory, manage everything, and run almost every aspect of procurement. They offer one-time fees and transparency. However, they require up-front payment and can be expensive.
- Work Through a Trading Company
A trader is a middleman that fills your order. They handle everything then charge you for the final product. Working with this type of sourcing company gives you little control and has higher long-term costs. But it’s fast and easy.
- Utilize a Sourcing Agent
A sourcing agent is a person or small business that is your resource on the ground. They work to find your factory, assist in negotiations, and help fix problems when they come up. They receive a commission when you pay the factory.
The sourcing agent is a popular solution because you may not have the experience or internal resources to work directly with the factory. A distributor, whether a third party or trader, can be expensive. A sourcing agent gets paid a percentage of what the factory gets paid, making compensation simple. In short, they are your representative in the country you have chosen to work in and they are getting paid to solve problems, find resources, and advocate for your best interest.
A sourcing agent can be an attractive option for a first-time entrepreneur looking for a way to cost-effectively manufacture their product and maintain competitiveness in the market. However, there are several risks involved in using a product sourcing agent.