The sourcing agent model: buying through someone who represents you, not the factory

What you are actually engaging an agent to do

The useful scope is presence and local competence: identifying and screening candidate factories, arranging and attending visits, walking a specification through in the local language, pushing samples along, attending first-off runs, coordinating inspection and resolving the small daily frictions that stall a programme when everyone is asleep at the other end. What the agent should not be doing is holding the contract, controlling the payment, or being the only party who knows who the factory is. Write the scope down as a list of activities, because vague mandates produce vague accountability.

How the agent is paid determines what the agent optimises

A commission calculated on order value gives the agent an interest in larger orders and no interest at all in a lower price. A retainer separates income from transaction value and aligns better with honest advice, but requires you to fund the relationship before it produces anything. A fixed fee per project sits between the two. Whichever structure you choose, the fatal arrangement is one where the agent is also receiving something from the factory, because the agent is then serving both sides. Ask directly, put an exclusivity of interest term in the agreement, and expect to have to enforce it.

Keeping the factory visible behind the agent

Agents who conceal factory identity are protecting their position, which is understandable and still unacceptable for a production part. You need to know who is making your components in order to audit them, to qualify a process, to manage a quality problem and to keep supply if the agent relationship ends. Insist on knowing the manufacturing entity, on direct technical contact between your engineers and theirs, and on being able to visit without the agent present. An agent whose value depends on you not knowing the factory is offering opacity rather than service.

Where the agent's authority has to stop

Agents should not accept quality deviations, agree engineering changes, commit you to volumes, or approve first articles. Those are your decisions and they routinely get delegated by default because the agent is the person present. Set out explicitly what the agent may agree and what must come back to you, and communicate the same boundary to the factory, because factories will treat whoever is standing in front of them as the customer. Also address who holds the specification, the drawings and the tooling record, since all three should sit with you rather than in the agent's files.

Choosing between an agent, an own office and buying direct

An agent suits a buyer with modest volumes across several categories, no local presence and no appetite to build one. An own sourcing office becomes worth its overhead when volume in one market is large enough to occupy staff full time and when control of supplier relationships matters strategically. Buying direct works where the supplier is export-experienced, the part is well specified and the relationship is mature enough to survive distance. Many manufacturers move through all three in sequence, and the transition is smoother if the agent agreement anticipated it from the outset.

Frequently asked questions

How do we know an agent is not taking a payment from the factory as well?

You cannot know with certainty, so structure around it. Contract for exclusivity of interest and require disclosure of any payment received from a supplier. Obtain at least one quotation directly from a factory yourself to calibrate what the market looks like. Watch for behaviour that only makes sense on the other reading: reluctance to introduce you to the factory, resistance to changing suppliers when performance is poor, and prices that never seem to move regardless of what the market is doing.

Who is liable if goods arranged through an agent are defective?

Ordinarily the supplier, since the agent is not the seller and does not take title. That is precisely why the underlying contract with the manufacturer matters and cannot be left informal because an intermediary is involved. Make sure you hold a supply agreement with the producing entity, that your terms and specification are incorporated into it, and that the agent's own agreement covers what the agent was engaged to do — such as attending an inspection — rather than the conformity of the goods themselves.

When does an own sourcing office become worth the cost?

Broadly when the volume and complexity in one market would occupy people full time, when supplier relationships are strategic enough that you want them held by your own employees, and when the pace of engineering interaction makes an intermediary a bottleneck rather than a help. The cost is not only salaries: an office needs management, a legal entity, local employment obligations and someone senior visiting regularly. Many manufacturers start with an agent and convert one experienced individual into an employee as volumes justify it.