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Pros and Cons of different ways to source.. and maximize each one [Podcast ep.32]

Pros and Cons of different ways to source.. and maximize each one  | Ep. 032

 

Click above to listen, and scroll below to read a full transcript.

This week I did an online master class, discussing the different ways you can source products.  We even included a slideshow if you are watching this on youtube.   

If you ever wondered which option is best for you, this episode will answer your questions, including: 

  • The Four Major Product Sourcing Platform options
  • How you can build your own network by owning your own data
  • How to keep process over emotion and why this is important
  • Why a Community Platform may serve your company best

    Simple. Free. Advice. No Obligations. 

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    Listen to all our podcast episodes here.

    Sourcing in India… Sourcing in China? Which is better? | Ep. 026

    How To Work The Canton Fair Like A Pro | Ep. 007

    See David featured in...

    • CNBC Made it, alongside titans like Shark Tank's Barbara Corcoran and Serial Entrepreneur Gary Vaynerchuk
    • Business Insiders David Hoffmann with Gary Vaynerchuk and other successful leaders on how to respond when employees royally mess up.

    Podcast Transcript 

    David - 0:00

    Hey guys, and welcome back to the GlobalTQM podcast. Today's episode is pretty cool because we have a new format. Firstly, I'll say a big hi to Kevin, my cohost. How you doing, Kevin?

    Kevin - 00:12

    Good to be back, David. I'm just quarantining away here in the States.

    David - 00:17

    I know, thank God for Zoom. We've been doing this on Zoom for years, but it is great that we can continue with some things like normal.

    Kevin - 00:26

    Absolutely, we're way ahead of the curve. We're way ahead of the curve.

    David - 00:29

    Before our time I guess.

    Kevin - 00:32

    That's right.

    David - 00:35

    So guys, today we did a little bit of a different format. If you listening to this, you won't be able to see it, but if you're actually watching this on YouTube or on our blog, you'll be able to see the accompanying slide there, which we thought were really great format to present this podcast because we'll bullet point everything out on the deck for you. And I know some people are visual and you can always kind of refer back to it or take some screenshots of important stuff. And if you like this format, let us know and we'll keep going with it. So today's topic is really a question I get asked a lot. And I thought I would address it and talk about it. It's really a discussion on what are the best sourcing methods to use. And it's quite a debated topic, but I'll give you my honest and frank outline and view on it. And of course, full disclosure, I'm extremely biased towards GlobalTQM and what we offer because that's why we offer it, because we believe in it. But to be fair, I thought let's talk through every single case and let's look at what those methods are because there is a lot of good in old methods and we also use old methods. So I thought I'd introduce you to that. Just some background for those of you who don't know me and kind of want some context as to why I'm qualified to talk about these topics or the subject is I've attended over 100 trade shows globally in probably about 20 different countries. I started like this in this business and this industry and I've visited tons, hundreds and hundreds of factories. I moved to China about 16 years ago and because of that all resulting from our need and requirements to source products. And we've shipped many famous brands in hundreds of millions of US dollars out of China. So all of that really has given me a deep insight into what the best sourcing methods are. And I'm gonna kinda walk you through each of them today. Kevin, you've got any questions yet?

    Kevin - 02:48

    No, we've just gone through the background and I am anxious to see the different sources that you're gonna go through.

    David - 02:55

    Great. So firstly, there's actually four main ways to source. There's your typical online platforms, which I think everybody's using now, things like Alibaba, Global Sources, Made in China and many, many more. And who can say which is the best one? Well, they've all got different benefits or slightly different strategies. We'll get into each one in a little bit more detail, but just generally, online platforms is one key way to source. And of course they do have their pros, they do affect their cons, but we use them. And I'll tell you how we use them. Then the second key way is trade shows. We attend a lot of the major trade shows in China. We attend a lot of major trade shows in Hong Kong. CES Las Vegas is a very well known famous trade show. And there's many different product categories and trade shows around the world. So depending on what product you're looking for, you would kinda determine which country is the best country to produce that category of product. And the other really important thing to consider with trade shows is some trade shows are designed for their local domestic market and other trade shows are designed for the international export market. So you don't wanna get caught up visiting a domestic trade show where the supplies can't export their product.

    Kevin -04:22

    Let me ask you a question really quickly between these two platforms real quick. So the online platform, is it normally cheaper than it is to go to the trade show route? Because the trade show is more in person and you have to actually have a presence there?

    David - 04:39

    It's very different. I've actually got a slide where I'm gonna walk through the pros and cons of online platforms versus trade shows. They're both, I wouldn't say one is cheaper than the other, but they both have very distinct advantages and of course some disadvantages. I generally find though, Kevin, it's a blend. I find it's a blend of the two 'cause it's all about the homework and research that you do.

    Kevin - 05:09

    And CES is Consumer Electronics Show, right? In Las Vegas.

    David- 05:14

    Yes, it's Consumer Electronics, that's right. And just after that they've got the SHOT show, which is like a military, apparel, clothing, gear show. If you just literally go onto their website for like CES, you'll see all the different product categories they do over and over and over again. It's the best way to find trade shows and I highly recommend trade shows. They're not the final answer, but I think they play a key, key, key role. And I think our business wouldn't be where they are today if it wasn't for trade shows. Kevin, the other two primary ways of sourcing is a lot of people use agents. So using an agent can be very good and helpful. They're often experienced in one specific area. They often have an existing network or relationship that might be helpful or useful to what you're trying to achieve. They're very often a one man, one woman show, which means that they can be quite honest, sincere, and loyal to you and very, very hardworking. And I find a lot of people that I know that use an agent, they find them online somewhere and they start working with them and they're kind of build an awesome friendship and relationship with them and that helped them bring a cultural divide. So agents can be helpful in specific circumstances and I do know people that have been successful with agents. Then the final way is really what I call a group as platforms and community sourcing. And that's really where we fit in and how we see ourselves. And I think one of the things with platforms and community sourcing is just that it's community. One of the key differentiators is it's often run by successful entrepreneurs. And that for me is quite important for a business that wants to grow. And I guess a disadvantage is that there is always a cost for the services and the information. It's not free like a platform. But there's a reason for that and we'll go into that. And typically a platform and a sourcing community is a much more robust process. So those are really kind of your four choices. You've got the online platforms, you've got trade shows, you've got agents, and then you've got kind of sourcing a community platforms like us which as you can imagine, leaves a lot of people wondering what's right for me, what should I be doing? There's pros and cons to have done for you service or a done with you service or some people just wanna do a course and figure out how to do it themselves. Courses normally aim towards the Alibabas and the onlines, how do you source from the online platforms? They're all real choices and you don't actually have to be exclusive to one. I find that all serve a purpose. But to kind of highlight a few of the key takeaways for me on how I look at them and how I view them and what I think people should be aware of and conscious of when dealing with them. We'll start with the online platforms. The first thing to remember with an online platform is their business model is to list thousands of factories. That is their business model. It's a platform that have got people dedicated to just getting as many factors listed as possible because that gives them scale, it gives them scope and it gives  them the perceived go-to-place for sourcing. Now some of them have got a vetting process where the suppliers can get better and accredited and badged, but it's a very clinical process. And what I'm gonna say  criticall for us and in our experience vetting a supplier is as much an emotional and relationship thing as it is a ticking off the boxes of a creditor. Do they have certain audits done? Are they a registered company? There's the clinical vetting process, which is important, but there's another hugely important factor, which is a nonclinical process, which is relationships, willingness, cooperation levels, the values, the philosophies of the management, that all matters substantially and should not be overlooked. I think the other kind of key point is these platforms charge the manufacturers. So while they're free to you to source, you have to understand that they do charge the manufacturers to list their products on there and the more manufacturer pays, the higher the ranking in tiers and status goes. So that kind of locks the factories in to keep their status. So if a factory wants to be a gold supplier, platinum supplier or whatever their ranking system is, there's a commercial aspect to that that costs the factory money and they have to keep paying to get it. And platforms will spend a lot of money and have teams just recruiting onboarding factories. And for me, that locks the substance of those relationships, the willingness, the attitude, the corporation levels or values of the company. And that's something I'll talk a bit about in more detail. The other really important thing to understand about online platforms is factories have to qualify customers just as we try to qualify the factories. And a lot of people say, "Ah, I went online "and I get such bad service, people don't come back to me. "And it's just so frustrating." I go, "Well, what do you think?" These guys have like thousands of factories. They are getting tens of thousands or hundreds of thousands and millions of people sending inquiries and RFQs to them and the factory deploys dozens of people to create these things out like widgets because they don't know who's serious and who's not serious. And that there is the key reason that people actually get such low standards of service often through these trading platforms because they're vetting the customers as much as you're vetting them as a supplier. And you can break through that using online platforms, but it just takes a certain character, a certain energy, a certain persistence and consistency. And if you're asking the wrong questions or things like that, they're gonna pick up straight away, if you're a serious buyer or not a serious buyer. So that's just something to be aware of. The other thing that makes it very difficult is it's really hard to benchmark and gauge.

    Kevin - 12:16

    Yeah, I would imagine.

    David - 12:18

    Yeah, you can imagine people are just sending you quotes and offers and prices fluctuate so much, but you really have to figure out a way to benchmark those quotes and make sure you're comparing apples with apples. And I talk a lot about vetting other training programs I do. So I won't get into too much. But the biggest thing to be able to benchmark and gauge which quotes are comparable and which are not because there could be changes in materials and specs or just even a misunderstanding on the way you can really go to requirements. So those are kind of the things to keep in mind with the online platform. Now, many people have been super successful sourcing from online platforms. I have in certain circumstances, not in all. So it certainly is an option. And it is a way to go, but I think it's very important to understand how they work, understand these things that I've just laid out now and work within that space. Understand the space and navigate it accordingly.

    Kevin - 13:18

    Let me ask you a quick question before we go to the next slide that it looks like to me that when you were talking about factories have to be locked in to keep their good status and it's almost like an SEO process of trying to rank on the pages of these online platforms for specific products. The problem is that it doesn't speak to quality at all. It just speaks to the amount of money you've spent to I guess acquire that ranking.

    David - 13:46

    100% correct. And the guys that are good at that will rank higher, get the RFQs. And it does, it becomes a statistical number game. And from my experience when you're sourcing a product, to avoid frustrations, relationships, and willingness are as important as the factory's ability to rank high on an online platform.

    Kevin - 14:12

    Exactly.

    David - 14:13

    Yeah. But you do get to talk to them. You do get the supplies context and if you have that, and that's why I end off Kevin with saying is for a certain type of person. Some people will hop online, reverse supplies all day long every day and talk to them and get to know them and build that relationship through the initial contact they made on the online platform. So it's not to say it doesn't work, of course it works, but you have to know what time, experience and effort you have to put into it and do what works for you. That makes sense?

    Kevin - 14:49

    Exactly.

    David - 14:50

    Great. So trade shows is one of my favorites. The best thing for me about a trade show is you've just got all your suppliers in one place. And of course you can physically see the products. To me, there's just no better way to walk around halls in a couple of days and meet supplier after supplier and physically see product after product. Do you remember when I'm talking about online platforms, you can't see the physical product. It's hard to benchmark their stats whereas now when you can go to supplier, pick up a product, and go "Oh, yours is $10." You've got the next guy, it's $5. You go, "Well I can clearly see why."

    Kevin - 15:39

    I would also see the professionalism of the representatives themselves. I mean, if you see them in person.

    David - 15:46

    Exactly. It's much easier to build a relationship with them because you're talking to a human, you're connecting and you get a sense for their style and their willingness to help you. And that's really important. So I think trade shows bridge that gap for me compared to these online platforms. You get physical products, you get the speed of seeing people and you meet those people face to face which is huge. And they meet you 'cause remember what I said, just like you're vetting the suppliers, the suppliers are vetting you. So when they need you, it's your chance to build the reputation or build a rapport and make an impression, and they can take you seriously. I guess one of the challenges with trade shows is not all booths are run by factories. Sometimes there's a training company there and not the factory, but you can talk to them and figure that out. But essentially trade shows are great for all those reasons and I think that's kind of one of the highlights. I think where a lot of people fall short is misunderstanding the follow up work required after a trade show. That's key to success. And I know we're running tight on time, so I'll try not to repeat myself too many times. But just to touch on the last point, which I've kind of bundled together because obviously it's close to home, it's close to what we do. And that is using agents-versed DWU which I know you're gonna ask me what that means. It's done with you services like GlobalTQM. That's essentially what we are. We're a done with you service compared to a done for you service. So I just wanna kind of explain some of the key differences between a done with you service and agents because people get confused. And for me there's a very clear distinctions of lines. So firstly, teams are critical in sourcing. That's really important to understand. A one man show is very difficult to have the right experience. And I look at our sourcing and how we work, we always need the advice of engineers, of inspectors, of our compliance people, of our shipping people. We've got different people in different product categories and just being able to talk to those teams brings everything together. And what we don't know, we've got access to resources like labs or other third parties we deal with who have experience with that we can get the answers. And very often I find that's where agents fall short versus sourcing team. It's just that access and that experience. The other thing is process is crucial. Very often agents will work on a specific relationship they have and they'll be very emotionally attached to that. Whereas a sourcing team with the done with you service or platform, and it's not just us, there's others out there, full disclosure, process is critical. You gotta take the emotion out of it because if they don't follow certain processes, if they can't meet certain requirements, if they can't be vetted and accredited, it really becomes a problem. Whereas if you're emotionally invested in one or two contacts you have in your industry as an agent, you do everything to fight to make certain things happen and you can end up with blinkers on and it's really important to cast that net out wide. The other very important thing I find is that, the lack of formal commercial contracts and business practices. Very often a local agent will basically have a relationship and a simple PR, PO process, but they lack the kind of commercial documentation that you'd need to have in place to protect trademarks, to make sure there's in an in agreements and non-disclosures and non-circumvention agreements in place and certain things that are a bit more, what's the right word I'm looking for? Like compliance driven and kind of weed out bad suppliers. I think that's really important. And then of course you know the working experience with suppliers is critical and it's always better to work with people that are actually bought from suppliers, shipped from the suppliers. And I think that works for both with the platform and an agent both normally have that. I think one is just probably in only wider and higher volume. The big difference I think with a done with you service is that you get to learn as you go. You can run solo. If you're working with a good team, you gotta learn how they do it, how they work and you can end up doing a lot of that on your own. And the key, key, key point me is the only way to avoid mistakes is access to seasoned entrepreneurs. That have successfully run businesses like yours. And I said it to people over and over again. It doesn't matter whether you're working with us, an agent, a sourcing company online directly with the factory, there's just stuff that's gonna come up. It's gonna be weird things going on and it's gonna be decisions that need to be made. And if you've got access to an entrepreneur who runs their own businesses, sources products from China on their own for themselves, they've been through that learning curve and they can help you close that gap. There's a whole commercial gap in after-sales service gap. There's a lot of little gaps that you're gonna make sensible decisions because you've got access to the right advice. And that's really like what I feel the core fundamental difference is. Is that philosophy and attention to detail and then of course just the ability to communicate fast, smooth, rapidly in your language. Does that make sense, Kevin?

    Kevin - 21:48

    Absolutely. I was gonna ask you really quickly, is there a licensing difference between agents and kind of the community sourcing team? I would feel probably much more comfortable in the vetting process of a team versus just one individual out there, especially if we're dealing internationally over electronic media and I'm not on site anyway. I would feel just more trust and more, that there's a higher likelihood of being truly authentic and reliable I guess is a good word.

    David - 22:25

    Yeah. I think that comes down to like the process driven approach where not everybody can be an expert at everything.

    Kevin - 22:37

    Exactly, yeah.

    David - 22:38

    So for example we've got guys that are specialists at auditing factories. They look for completely different things to when our sourcing people go into factory. They are looking at the products and the categories and they get more excited about that whereas our technical guys are looking at the production facilities and so on and so forth. Everybody looks at things differently and there's a process to it all. So it is really the sum of the parts that make it good. So I thought I'd just kind of summarize the top five things to look for in your sourcing choice. And for me that really come down to learn as you go. You wanna make sure that whoever you're working with is teaching you what they do and how they do it and you get all those commercial templates so that you can use it by yourself later. The biggest point for me is owning your data. If you wanna work with somebody gives you a full supplier list, all of the offers received when they're working on your project so that you can build your own decks and your product library. Half of sourcing is building your supplier on a deck and your product library because you wanna do more and more products and you might give them a new idea and you said, "Oh, I already found the supplier before." So that transparency and building your own decks for products and suppliers is just critical and that's the way we work given and that's one of the biggest differentiators. I'm very proud of that. The third thing you wanna look for is you wanna work with somebody at scalable on demand, which means when you need their help you can reach out to them and get their help on any level, whether it's advice or whether it's to actually do something for you or whether it's to facilitate doing something for you. That's why I always say done with you, not done for you. So scalable on demand is important because you're gonna come and go. There's gonna be some parts of that project you run with on your own 'cause it's more cost effective, more efficient, whatever the case may be. You wanna make sure they've got a team for compliance and quality. You definitely don't want to rely on the same person negotiating the commercial terms or discussing commercial terms then being responsible at the same factory to check the quality and the compliance. It's too much for one person and the lines get blurred. And the last thing you wanna look for is make sure you've got the experienced entrepreneur or experienced entrepreneurs running it, that you've got access to because they're gonna just help you make those little decisions and get things over the line without you wondering whether you're making the right choices or not. So Kevin, I mean just very simply put, a lot of people find it frustrating, daunting, or simply time consuming. And for any of those reasons, it's always good to reach out to an agent, to a sourcing platform to reduce those frustration and to save time. Time and communication is probably one of the best things you save. Now I thought I would touch on this because a lot of people don't understand how to use a sourcing team efficiently and the process of sourcing. So you can use a sourcing team depending on the stage you're at. So sometimes you might just wanna do homework and research into product category. And I think I need back up when I say sourcing team, it might be you and your agent, it might be you and us, it might be you online using our platform. It doesn't matter how you can get it. The stages are the same. There's use it to do the homework. Homework literally means you've got an idea, you got a concept, you think this can work. You don't know. Don't assume. Every sourcing project doesn't end in success because you go through the homework to check the pricing, the feasibility, the willingness of people to cooperate and all that homework then tells you are you competitive? Can you get the right product you want, and as a school make sense to bring it? That's the homework, you can't do that, is the R'n'D side, which is if you're developing a product, there's a lot of working with manufacturers to understand technically what's the possible that you might have to do some pivotal changes and then is simply just building your RFQ from that information, which is outlining exactly what your final requirements are because they change and evolve over time. They might start here and end up here because of that homework and R'n'D that you're doing. Then you really start the heavy vetting of suppliers, the sampling, the benchmarking and all of that before you even place an order. So very often we just focus in on one of those areas because the project might be terminated at the homework stage and that's a perfectly reasonable conclusion to come to. That's why you do it. And I think a lot of people underestimate the amount of homework that goes into any sourcing project because I think if I started, I must be right and the conclusion must be success. But actually you're proving through the journey whether your product is viable. Does that make sense?

    Kevin - 28:03

    Yes.  Is there any stage that it's best to use a sourcing team in those stages? Like when is the best, you said you can incorporate a sourcing team at any stage there, but is there one level where you really, this is where you really have your highest value as a sourcing team in one of those levels?

    David - 28:25

    Yes, I think there's two cases. One is a very immature business. It doesn't matter if it's an online business or a bricks and mortar business, but immature business that kind of want us to take themselves to the next level, and grow maybe a new product range or their own private label brand, and need to do that quickly, should differently use a team and a company like ours because they're gonna need that full backup and that support and they need accelerate that and get it going. For the smaller guide or startup guide, it's a different reason. I think the smaller startup guide is gonna be time versus what they know about themselves as an individual. So is it gonna be, because there's a lot to learn. There's a lot to figure out and some people don't have the time to do that and they just don't maybe have the personality or character to deal with that. They'd rather have somebody taking that headache from them. Now they've got kids at home, they've got other lives going on, they're busy with other stuff. They just want someone to take care of that stuff for them. So then you kind of wanna have that team or infrastructure around you. I think the biggest thing, Kevin, that I want to end off on is very simply made what people have to understand is that we cannot replace you. No sourcing agent can replace you, no sourcing company can replace you because everything you're sourcing comes from you. The energy you have to put in, your requirements, your information, your expectations, it's all you. And no agent is ever gonna basically replace you. You have to still check your samples. You have still go to run through the microscopic details. You've got to do that. That's the input you have to put in to make any sourcing job successful.

    Kevin - 30:30

    If there was anything that touched on that has surprised me the most in this entire presentation is the ability for me as somebody that wants to source products in China to own my own data. That backend, like slide 10 or slide nine. That's amazing that you all provide that service.

    David - 30:51

    Yeah, yeah. Look, the biggest thing is that for me is, and like I emphasize this to people all the time is that we can't replace you. Nobody can replace you. If you've been on these journeys, you have to own your brand, you have to own your products. It's a reflection of you. You can have a team to help you to shorten the length of time, but it can't replace you.

    Kevin - 31:18

    What a great way to wrap up today. As you kind of close the session today, everything kind of culminated in this idea that you really, you said that's a done with you service versus done for you service. And that's exactly why you need to emphasize that in this last slide.

    David - 31:37

    Exactly. It kind of brings it home. So I think that wraps it up. Anybody's got any questions, feel free to reach out to us and I hope that was interesting and insightful and we'll see you in the next one or two weeks.

     

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