“Are you a factory or trading company?”. When importing from China and dealing with all kinds of suppliers, it’s definitely one of your most concerned questions. The majority of you are convinced that it’s always the best choice to purchase directly from the factory and cutting out middlemen (trading company, sourcing agent, etc.). However, the two types of suppliers actually both have their respective pros and cons.

 

1, Chinese factory & brand manufacturer

A factory or manufacturer is one who owns a production plant that turn raw materials into products. With an emerging number of Chinese factories extending from domestic to overseas markets or even growing into export-oriented, importing from Chinese factory directly becomes more realizable than ever.

 

Pros

  • Generally offering its products at better prices than trading companies.
  • First-hand control over quality, pricing, and lead time of products and orders.
  • More straightforward to get the newest products of certain niche industries.
  • Direct communication if there is any after-sales or technical issue.

Cons:

  • High MOQ( Minimum Order Quantity) requirement, not friendly to small orders.
  • Tend to provide worse service and less flexibility in handling customized orders.
  • Many factories even do not have international sales departments or export licenses.
  • Only specialized in a certain industry and offer a limited product range.

Note: A wide variety of factories, especially brand manufacturers in China may just produce a few main products, and expand product categories by outsourcing production to other factories to meet more needs of different importers. So even if you find a factory, it does not mean all of their offered products are directly produced by themselves.

2, Trading Company & sourcing agent

Trading company-supply chain managementA trading company is one that doesn’t manufacture products, but act as an intermediary between factories and global importers. With a growing number of factories turning to trading directly, the market share of some trading companies with a long history in China even has shrunk.

 

Pros:

  • Usually offered at lower MOQ and even cheaper price for low quantity.
  • More extensive product categories with partnered factories in different cities.
  • Find factories with the most competitive industry cluster for your interested products.
  • Professional communication and experienced supply chain management services.

Cons:

  • Tend to add up certain margins or even hidden commissions.
  • It’s hard to find a reliable and trustworthy trading company.
  • Importers do not have a chance to communicate directly with factories.
  • May put the interests of factories in a priority when there are disputes.

Note: Many of you prefer going straight to deal with factories instead of trading companies when importing from China. But in this case, some Chinese companies may claim partial ownership in a factory and try to hide the fact that they are indeed a trading company.

3, Choose a factory or trading company.

Based on the analysis of pros and cons, it’s obvious that a factory is not always the best choice for startups or small businesses and for most importers who are looking for a wide range of products. Ordering from a trustful trading company or sourcing agent in China even makes more sense than from a factory in some situations.

 

Choose a Chinese factory or brand manufacturer if:

  • You specialize in only a certain niche product.
  • You are always ordering in big quantities for each product model.
  • You are familiar with the product you are looking for.
  • You have a purchasing department with knowledge in all kinds of industries or much time in sourcing.

Choose a trading Company or sourcing agent if:

  • You frequently order low quantities for each product.
  • You are looking for a variety of product
  • You can not find a good factory for your product.
  • You prefer more professional value-added services.

Note: The type of supplier is becoming a less important factor when importing from China, as the boundary between manufacturer and trading company is becoming obscure, so it’s no need to make yourself in a dilemma when choosing your supplier, instead you should simply pay attention to the trusted one and then focus more on your core competence based on your business situation.