Actually, it is difficult to differ a sourcing company and a trading company. And many people always think it is the same. So let us know these two companies. And then we can know who offers better, or who suits your business.
SOURCING COMPANY
Sourcing services can be provided either by a company or an individual who acts as your agent as required, regardless of whether you need to arrange sourcing from China or any other country, or ensure a smooth production process. Usually, companies offer services such as identifying and selecting suppliers, evaluating and auditing supplier capabilities, negotiating and entering into contracts, managing supplier relationships, monitoring quality and conducting inspections, handling logistics and transportation, and managing the entire supply chain.
TRADING COMPANY
Trading companies usually forge partnerships with several factories and strive to maintain strong business relationships with their manufacturers. These relationships can become so intimate that traders appear to be an integral part of the production company. In some cases, they may even function as if they are an extension of the factory's overseas trading division. Traders value partnerships with dependable factories as it allows them to negotiate more favorable prices, delivery times, and quality, and receive needed support when placing orders. To assist our clients in making informed choices, let's compare the key similarities and differences between trading and sourcing companies.
AREA OF WORK
Typically, sourcing companies handle business operations such as inventory management, storage, and quality assurance. The smooth management of these processes is crucial to the success or failure of a project. On the other hand, trading companies primarily concentrate on a specific industry or product. For example, if you are searching for a specific type of pipe, it would be wise to reach out to a trader specializing in the steel industry. They will have a thorough understanding of the product and the industry, but may not be experts in the underlying business processes.
PRODUCT CATALOGUES
Trading companies have catalogs, while sourcing companies do not. Trading companies typically offer a broad selection of products, and their catalogs include established pricing information. When it's necessary to create a product with specific requirements and manage its production, a sourcing company is typically brought in.
EXPERT KNOWLEDGE
Sourcing companies possess a wealth of knowledge about the entire production process, from start to finish, as well as logistics and delivery. This expertise helps to reduce the risk of project disruptions or delays. Trading companies are knowledgeable about their products and manufacturers, but when it comes to technical and process-related details, they typically do not offer much specialist support.
PROTECTION OF INTERESTS
A trading company must navigate the delicate balance between serving the interests of its manufacturers and those of its clients. In the event of a conflict, a trading company will usually act in the best interests of the manufacturer. It would not make sense to jeopardize the established business relationship with the factory or to forego its benefits for the sake of a single client. In contrast, sourcing companies prioritize the interests of the customer and act as their representative on the ground. With a focus on fulfilling the client's order, a procurement company can apply more pressure on a supplier or switch suppliers if the smooth execution of the contract is threatened.
STRATEGIC GOALS
A sourcing company typically leverages its expertise to assist a client in executing their project in the most cost-effective manner, while also reducing risks and ensuring optimal quality. The primary objective of trading companies is to achieve high sales volume, as they can earn more by placing larger orders with the manufacturer.
VALUE ADDED SERVICES
A sourcing company can offer a range of value-added services to its clients, including customized solutions such as in-depth market research, supplier identification, new product development, and supply chain consultancy. As a result, a sourcing company can be seen as an extension of its client's global procurement department. Traders can also provide recommendations on existing products or industries and offer customization of existing products as value-added services.
CONCLUSION:
When it comes to selecting a manufacturer, there is no one solution that fits all. It's important to have a clear understanding of the priorities and preferences of both you and your customers to make the best choice of a supplier that fits those needs.
