Sourcing and Procurement | Meaning and Process

Do you frequently need clarification on the distinction between sourcing and procurement in international trade? Despite their similarities, these two terms hold distinct meanings. Reading the following post will give you a comprehensive comprehension of these terms.

1. What is sourcing?
2. What is procurement?
3. 6 steps of sourcing with Tacole(us) as an example

What is sourcing?

In international trade, China sourcing involves carefully selecting the appropriate supplier through comparisons, evaluations, and audits. Subsequently, this encompasses tasks such as sample production, production follow-up, quality control, and shipping arrangements. Sourcing companies offer immense value by overseeing the entire sourcing process in China. They assist in obtaining competitive prices, monitoring factories, managing order progress, and ensuring product quality. This seamless coordination is crucial before your goods are transported out of China. While sourcing agents are particularly beneficial for larger companies, they are especially advantageous for small startups, particularly those importing goods from China for the first time.

What is procurement?

In the business realm, procurement is a term that finds wider usage. Larger and well-organized companies often establish dedicated procurement departments that handle the procurement of products or services on a large scale.

Procurement is a strategic and systematic process that encompasses various aspects. It involves analyzing procurement needs, budgeting, market analysis, and risk management. Additionally, it entails activities such as supplier selection, evaluation, and maintaining positive supplier relationships. Moreover, procurement is responsible for cost reduction, facilitating new product development, contract management, inventory control, shipping, receiving, and storage.

In international trade, many people often use sourcing and procurement interchangeably. For instance, China sourcing and China procurement refer to purchasing products from suppliers in China.

6 steps of sourcing with Tacole(us) as an example

Step 1. Specific sourcing plan

This marks the initial stage of the sourcing process. If you are an importer looking to procure goods from China, the first step is understanding your desired products clearly. You can communicate your requirements to us either through our service page or by sending us an email. Including design drawings, product reference pictures, and any other relevant information would be helpful. Based on your project, we will estimate the sourcing or customization process cost.

Step 2. Supplier selection

Finding a reliable supplier requires significant time and effort, making it the most challenging aspect of the sourcing process. However, we specialize in locating suppliers who manufacture your desired items. Typically, our selected suppliers are situated within industrial clusters. This is advantageous compared to those outside the production area; these suppliers possess the professionalism necessary to deliver competitive pricing and high-quality production.

To ensure the reliability of our suppliers, we conduct rigorous factory audits that evaluate various aspects, such as scale and production capabilities. Only suppliers that meet our strict standards are approved to manufacture your goods. This is precisely why many importers place their trust in our services.

Furthermore, numerous complex products require the collaboration of multiple factories. For instance, in the case of a plush toy, the plush toy factory is responsible for producing the outer skin. In contrast, an audio factory manufactures the acoustic generator. Often, it can be challenging to identify the appropriate suppliers independently, even with extensive time and effort invested. This is where the value of sourcing agents comes into play. They possess the expertise to help you discover the right factories and facilitate the production of your goods.

Step 3. Sample production and bargaining

Based on your budget and product requirements, we will create samples. Additionally, we will negotiate with suppliers to secure a competitive price, ultimately maximizing your profit.

Step 4. Contract signing

Once the sample and product price have been confirmed, you can place an order, sign the contract, and submit the deposit, typically set at 30% of the total amount. Following this, we will instruct the factory to start bulk production.

Step 5. Production follow-up

We offer comprehensive production follow-up and inspection throughout the production process to detect and address any issues at an early stage. Simultaneously, we are responsible for closely monitoring and pushing the factory to ensure that the products are produced and delivered within the agreed-upon deadlines.

Step 6. Quality inspection and shipping

Once the production is complete, we thoroughly inspect the final products to verify that they meet your specified defect rate requirements. Suppose the products exceed the acceptable defect rate. In that case, we will take appropriate measures, such as compensation or coordination with the factory to rectify the issues. Following the inspection, we will arrange to ship the products to your designated address.