How to decision to hire a third party service provider similar to selecting a manufacturer
Here is how we answered a question about about how to decision to hire a third party service provider similar to selecting a manufacturer. As the answer is applicable to a wide range of products, I decided to blog about the Q&A.
Question about how to decision to hire a third party service provider similar to selecting a manufacturer:
When it comes to third-party service providers in China, you will see that many questions I received below and I have decided to make it a series blog to discuss and help you how to find, manage, and pay third-party supply chain service providers.
- How is the decision to hire a third party service provider similar to selecting a manufacturer?
- Why is it important that the third party service provider be independent from the factory?
- What is the main difference in the skill sets required for sourcing and inspection?
- What is the Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ)?
- Why is it important to avoid the inspection agents that charge you by a percentage of the Purchase Order (PO) value?
- The ideal shipping partner for you depends highly on the?
- What is the best way to go about finding the right third-party logistics company?
- Why is it important to have your third-party logistics provider to hold their shipping rates quote valid for a certain amount of time?
- What is the best way to avoid surprise charges?
- What is the risk of a double dip when you hire a purchasing agent?
- What is a tooling and die steward?
- What is the difference between a private investigator different from a firm that gathers business intelligence and carries out due diligence?
- What are the three tiers of lawyers in China?
Thanks for your email. There are important things that I would like to share with you on how to decision to hire a third party service provider similar to selecting a manufacturer.
How are you going know if they legitimate? When we talked about legitimate, do have proper licensing and experience? Granted, there’s no license to start a sourcing agency in China, but they need to show experience. Lawyers, yes, need to have a license. Quality control agents need to have a license. But it’s equally as important to see “Do you have experience providing the type of service that I as the buyer actually need?”
b) Ask for references
Do they offer any references? If not, the logical option is running away from a supplier if they can’t provide one or two references. The same for a service provider. If your lawyer can’t give you a happy customer, that’s not a good sign.
It’s also important to consider their focus. For example, some sourcing agents are generalists. They try to do logistics, and quality control, and engineering, and general sourcing, and negotiation, and payment processing, all under one roof. I found that it was hard to do a little bit of everything for everybody. So I like to work with third parties who are very focused on their specialty.
And also keep in mind that the website may say that they do it all, but just like factories outsourcing out the back door, third-party service providers do it too. So you hire someone you think is an expert at sourcing, and legal issues, and negotiation. When behind the scenes, they’ve got a partner with another law firm or they are outsourcing the quality control to somebody else. There is a lot of outsourcing. When there are many intermediaries involved, it gets hard to control. So I’d like to work with third-party providers who’re very focused on the service they offer to the buyers.
d) Well defined & transparent pricing structure and service agreement
Keep in mind, any professional service provider should have a well-defined and transparent pricing structure and a clear service agreement. You are crazy to do business with some service providers that just send you an e-mail and says “Pay me X amount of money per month, and I would do these, the following services.” What happens if they fail to perform as agreed? You have no way to exercise your rights in terms of taking them to court for compensation. There is no contract in place.
So work with a professional provider that will give you a proper contract, specify details about where they make money, how there are going to invoice you. These things are true for factories. There are true for service providers as well.
Long story short, don’t engage a third-party without a contract. Yes, I’m telling you that you have to monitor even the companies that are monitoring the suppliers for you.
In my next blog post, I would like to share about why is it important that the third party service provider be independent from the factory? If you have that question in mind, this post is for you!
Thanks again for your email. Hope the ideas above are useful to your planning. Glad to help and make introductions if you like.
ABL Blog: Sr. Editor and Primary Content Creator: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
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