Procurement is an essential and necessary structure of a business that wants to obtain products, goods and services in order to run their business operations. When done incorrectly, procurement can be quite risky and unpredictable, considering the complicated processes which involve too many variables such as prices, quantity, quality of products, availability of suppliers and the internal back-and-forth processes, which makes it difficult to monitor and control. These risks and unpredictability can be managed with the right knowledge of what certain products or items you need, and knowing where and from whom to get them. Getting a sourcing agent or a contacting a distributor may be your first move, but depending on the type of business you run which varies from what type of products you produce and sell, the overall production process, costs, and many more variables to consider, it would be important to know whether a sourcing agent or a distributor would be best for your business. In this article, we will discuss the differences, similarities and what you should consider when choosing between a sourcing agent or a distributor for your business.
Definition and Roles of a Sourcing Agent
A sourcing agent’s primary role is to reach out to various suppliers, whether local or overseas, and evaluate products that would satisfy your business standards in looking for certain products or materials. If the client or business is satisfied with the supplier’s products or services, the sourcing agent would then negotiate terms with the supplier on specific products, quantity, price, delivery time, and on recurring orders. After a successful deal with a supplier, the sourcing agent would get commission upon the agreed terms with the business
Advantages of Choosing a Sourcing Agent for Your Business
- Market Knowledge and Expertise
Sourcing agents have detailed knowledge and expertise of local markets and suppliers which can get your business great deals from suppliers. On an international level, sourcing agents are skilled to build rapport and relationships with overseas suppliers to ensure that you get the best deals and quality products possible.
- Maximize Resources
Sourcing agents can help your business get favorable yet reasonable negotiation terms with suppliers to help your business maximize its resources by purchasing products at lower costs for maximized profits.
- Quality Assurance and Control
Sourcing agents can assure that the products your business will receive will meet quality standards. Sourcing agents can do production inspections, product testing, and facilitate quality control measures to ensure that the products are in high quality condition.
- Supplier Management
A sourcing agent’s job is to reach and negotiate terms between a supplier and your business. Sourcing agents will handle all communications, negotiations, terms and agreements, and other aspects of managing suppliers and relationships. With the help of a sourcing agent, your business can have more time and control over other areas of your business.
- Product Prototyping
Since a sourcing agent would be directly working with suppliers, it would be much easier for your business to produce the draft or final model by making a product prototype. For example, if you’re looking to build and sell a chair from your own designs, measurements, and materials, a sourcing agent could ask for an early prototype of the chair you want made.
Definition and Roles of a Distributor
The role of a distributor is focused in purchasing or selling the products. The distributors buys the product in bulk or wholesale and distributes it to buyers, customers, and clients at a marked-up price.
Advantages of Choosing a Distributor for Your Business
- Simplified Supply Chain
Working with a distributor can simplify your supply chain management and reduce the number of suppliers and partners you need to manage. A distributor can do all the jobs for you such as inventory, logistics, deliveries, warehousing, transportation which allows you to focus on other areas of your business.
- Established Relationships with Suppliers and Customers
Since distributors have an existing customer base it would be easier for your business to form relationships with suppliers and customers. Your business won’t have to start from the ground up in connecting with suppliers and customers when working with a distributor.
- Value-added Services
One advantage of working with a distributor is that they frequently offer value-added services such as order assembly, installations, and other services included on the products they sell.
- Wholesaling and Bulk Quantity Products
Distributors can sell wholesale products with quantity discounts. This helps your business maximize your resources by allowing you to buy products in bulk for a lower price. The more quantity you buy, the more money you can save and sell them at a retail price which can maximize your returns on investment.
- Support from Distributors
Distributors have existing knowledge and insights about the products, competition, and market. Working with distributors can help your business grow by providing insights and insider information about the business market that can help you make better business decisions.
The Difference Between a Sourcing Agent and Distributor
While a sourcing agent focuses on reaching out, negotiating, and building relationships with suppliers; a distributor is a middleman between suppliers and wholesalers and earns by reselling them to customers, businesses, and clients.
Things to Consider Before Choosing Between a Sourcing Agent or a Distributor
Before you choose between picking a sourcing agent or a distributor for your business, you would need first to consider what type of business you are. Here are some things to consider before taking your next step.
- Variety of Products
Distributors can only offer products on what they have on their inventory. Products may be limited in terms of product variation and quantity that are ready to be sold.
On the other hand, a sourcing agent can network with local and global markets. Sourcing agents can help you provide specialized products, raw materials, and do the ordering for your business.
- Product Complexity
Working with a sourcing agent vs a distributor solely depends on the complexity of the products you want to produce and sell. The type of product being sourced from a supplier can help you create complex products which requires the expertise of a sourcing agent. Simpler or pre-made products from a distributor can be suited for your business.
- Costs Considerations
Whether you outsource or employ a sourcing agent, they get commission for every successful deal with a supplier for your business. On the other hand, a distributor sells their products with mark up. Considering costs for which to pick between the two, it is up to you on what works best for your business.
- Supply Chain Management
Your business’ supply chain management can impact the choice between a sourcing agent and a distributor. If your business has complex supply chain management, the expertise of a sourcing agent may be more efficient at managing your supply chain process. A distributor may only focus on logistics, inventory, and distribution.
- Level of Control
If you consider the level of control you have over your product selection process, working with a sourcing agent may provide more control over the selection of products, suppliers, contracts, and negotiations. Working with a distributor may provide you with control over the distribution process and customer relationships.
The Bottom line of Choosing Between a Sourcing Agent vs Distributor
Choosing between a sourcing agent or a distributor may impact the way you run your business such as inventory, supply chain, and distribution management. The bottom line is, whether you choose a sourcing agent over a distributor, or vice versa, your business can purchase wholesale products. To make it clear, consider these tips:
If you aim to produce products from the blueprint, designs, to the final product, a sourcing agent would be the right move for you. For example, if you’re a small business that wants specialized products to produce and sell furniture or clothing then connecting with a supplier through a sourcing agent helps you get raw materials specifically designed for your products.
If you’re a retail business or a service provider, getting a distributor can be the smart move for your business. For example, if you’re a reseller, in food service, or anything similar, a distributor can help you procure products for your business to sell.
Shoppable Business: A Way for your Business to Get Products at Wholesale
If your business is looking to purchase products at large quantities with discount, your business can do it easily online through a B2B eCommerce platform in the Philippines, Shoppable Business. Shoppable Business is an online marketplace platform specifically designed for B2B transactions.
Have you tried Shoppable Business’ FREE request for quotation service? Through our request for quotation service, you can find products you need at best prices. Whether you’re looking for food & beverage, raw materials for construction, office equipment, and many more, Shoppable Business can provide you with the largest network of vetted suppliers in the Philippines.
With Shoppable Business, you can eliminate all the manual process of sourcing products and get guaranteed wholesale prices for products you purchase for your business. Through Shoppable Business’ integrated data analytics tool, you can create contracts with suppliers, premium delivery schedules, improved inventory management, get invoice for your business when you need it for tax compliance, and get only 100% authentic products guaranteed.
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