China Sourcing Office Common Challenges

When sourcing from China, to maximize your profits, ensure predictability and reliability, and make sure your interests are protected, you need to have a good 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.

Opening an office is a great solution if you have enough buying volume to justify it. 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”). But setting up an office in China is not for the faint-hearted. Below are the most common challenges Western companies face when opening their own China sourcing office.

Common Challenges to Opening a China Sourcing Office

• General: Once you have decided on setting up your own office, you need to confront several fundamental issues. These range from finding and renting office space to HR and regulatory concerns to taxation and accounting issues.
• Overhead: Opening your own 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) an efficient and responsive interface with the home office and (2) professional and effective sourcing processes on-site. 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. 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, many regulations are affecting sourcing and foreign businesses. You will need to be familiar with international business and foreign trade regulations in China.

Is it worth it?

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. It’ll allow you to be “best in class” in terms of cost, quality, and delivery. You will also be able 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?