Common Challenges of Opening Your Own China Sourcing Office
March 28, 2017
When sourcing from China, to maximize your profits, to ensure predictability and reliability and to make sure your own interests are protected, you need to have a good China sourcing team. Many companies get a “sourcing team” either by hiring agents or independent contractors, but for some companies, this means opening their own China sourcing office which is what I am addressing here.
Opening a office is a great solution if you have enough buying volume to justify it, and it is especially rewarding when you think of all the things your sourcing team can do to improve your business (See “The Importance of Having a China Sourcing Team” and AYLMOT Part 4.). But setting up a China sourcing office is not for the faint-hearted. Below, I’ll review the most common challenges western companies face when opening their own China sourcing office.
- General: Once you have decided on setting up your own China sourcing, you need to confront a number of fundamental issues ranging from finding and renting office space, to HR and regulatory concerns, to taxation and accounting issues.
- Overhead: Opening your own China sourcing office costs money. When you factor in the cost of office space, (qualified) employees’ salaries and operational costs, you are looking at a minimum of $500,000 per year. To justify this kind of costs you need to have a significant and steady business.
- Management: Effective management is key in a good sourcing office. You will want your China office to operate as an extension of your home office. The main functionalities are (1) efficient and responsive interface with the home office and (2) professional and effective sourcing processes on site in China. However, making sure this will go smoothly from a distance can be difficult. A well-run China sourcing office, managed from the West can be demanding and time consuming. To lift the management burden from your state-side office you want the right people in the right seats doing the right thing. To realize these HR concerns can take a great deal of time and effort.
- Training: In addition to this, you will need to ensure that the right code of conduct as well as procedures and processes are in place for a seamless and successful liaison between your state-side office for great China sourcing Training your staff according to your company’s vision and core values will be the key.
- Business regulations: From Intellectual Property Rights (IPR) to foreign currency conversions, VAT and other taxes and trade settlements, there are many regulations affecting China sourcing and foreign businesses. You will need to be familiar with international business and foreign trade regulations in China.
All this often amounts to long distance worry and frequent China travel. However, with the right team, it will all be worth it. A good China sourcing office can take your supply chain to the next level, allowing you to be “best in class” in terms of costing, quality and delivery and allowing you to distance yourself from your competition, maximize profits and expand your horizons.
Do you have a sourcing office in China? Would you like to open one? Tell us about your experience in the comments below.
By Jocelyn Trigueros