Story of Sourcing-4:“How Buying Agents Add Value in Your Purchasing”

My elder son, when he six years old, asked me one fine day: “Papa.. what do you do?” I proudly said “I am a Buying Agent.” Then came the question we are going to answer today. “Papa.. who are Buying Agents?”

Lets understand this category of people who as an industry are mostly unrepresented. Do a dirty job in the most sophisticated way.

1. BUYING AGENT IS BUSINESS PARTNER:

Once someone asked, “What does an agent do, just throw a business to an exporter and make money with no capital risk involved? This is just easy money!” I asked him to sit in my office for an hour for the answer. Within half an hour, observing the business process handled by my team, he replied back, “This is not easy. Your team’s entire focus is on Risk Avoidance and Risk Management. And your creative team is burning oil to make sure that new collection of products can hit the selection meeting before the deadline”. He needed no other answer to the question.

Buying Agent is not a middle men just passing orders from importer to exporter. A Buying Agent is representing Buyer, protecting his interest, which is at maximum risk when Buyer places the order in unknown country. Buying Agents do much more then just passing orders. The whole hand holding as Buyer’s representative involves lot of processes. Right from validating sourcing, factory selection, design support, product development, negotiations on quality, price and delivery, order management, quality review, logistics & lot more. Hence I will term him as an equal Partner who comes with his intellectual property of 'Expertise' in the field to minimize risk at the onset. And use his experience to sail the boat to port with least loss to importer and exporter if there is problem occurs afterwards. And Importer needs the Agent constantly to manage potential risk & to avoid delays/disruptions/disputes.

2. BUYING AGENT IS THE FRONT RUNNER:

Yes! You heard it right at the end of point #1. Delays/Disruptions/Disputes. All these words are strong possibilities. Which can actually happen to a shipment whose advance money is paid. When it happens, whats the first reaction? How will you fix this, sitting thousands of miles away in a different time zone. That's where Buying Agents comes as the front runner warrior in the battle to control damages.

It is the Agent’s prime role to ensure that risk is minimized by flagging all the issues right at the beginning. And with their field experience in the local terrain, he is the best person to judge & validate the risk. Even after his best efforts, if the order gets into a problem, he is still the best person to do the damage control.

3. BUYING AGENT COMES FREE:

I remember wise words from father of an exporter, commenting on Buying Agents, when his son was introduced to me. He said-“I always appreciate the Buying Agents for the job they do.” And he was very wise to say so. Because of Buying Agents, the exporters have an independent audit on the entire setup. Right from their initial response to managing the communication and at later stage, monitor the entire order. To keep it under committed time, consistent quality thereby making sure that least losses occur. And its provided free of cost to the export entity. Another good example is a case when the importer was not able to recover the losses due to poor quality goods landed at the warehouse. In his case, its the Buying Agent who went an extra mile in not only getting the refund from the exporter for poor quality, but also worked hard to make sure that business flow was not disrupted due to this issue. The Agent was instrumental in keeping the other orders in check while the crisis was also managed with his intervention.

Here, some of you might counter me by saying that nothing comes free. And anyway Agents charge a fee on the buying value. You are Right. Nothing comes free. The negotiations on price, delivery & quality that an able Buying Agent do for you as well as the cost of risk which can result in losses should be equated to make room for his fee. We will cover this point in my next Story on Negotiations.

4. BUYING AGENTS IS THE EYES & EARS:

“My agent are my Eyes & Ears for the business I do with Indian exporters. Pls trust them like I do”. This message was given to an exporter by one of our clients, when the exporter tried to cut back on our QC’s quality review report. And tried to convince the buyer that quality of his goods is perfect. While in fact, it was not at all ship able. Hence to have an effective use of the Agent, I strongly recommend the Buyers to trust in their partners. And abide by their observations.

Second most important role which Buying Agents play is giving the right picture of ground realities. For example, an exporter might hide his shipment status. As buyer not knowing the ground realities. Or give excuses of various holidays for delay in shipment delivery. Its the Agent who narrates true picture & how to handle it. Recently India introduced GST as “one tax one country” initiative. The change brought lot of confusion and chaos in change of billing and documentation. Few exporters wanted to make this also an opportunity to raise prices. However they were stopped charging the confusion cost to the buyer where ever a Buying Agent was involved. Because in reality, GST brought the prices down rather then made purchases expensive. Its the Buying Agents who reasoned with the Exporters to not charge extra for temporary disruptions.

5. BUYING AGENTS ARE RISK MANAGERS:

One of our buyers sells to a large retail chain stores. And he understands the importance of shipping error free shipment . “I cannot take risk with them and the factory who ships goods needs hand holding”. This was his request when he hired us as Buying Agents. Some will say-“why do I need to have a Buying Agent in the first place? Because if I cannot manage it myself, how will the Agent be able to do it?” Or “I am better placed to manage it myself.” To answer this, lets see how and when the Buying Agent becomes relevant to the importer.

It all comes down to Risk. Meaning how much and what kind of Risk is involved. Evaluate your business and risks it carry, if you have to handle it yourself. If you can manage or risk is not worth hiring someone, you may not opt for Buying Agent. However make sure that in this absence, you also loose a lot of above benefits. Sometimes hiring a Buying Agents for initial period till your business process settles down also makes sense. Alternatively you may seek your industry people suggestions on best way to go based on your business need.

I will be posting more articles every week. Watch out for article on "Negotiations with International Vendors" in next Story of Sourcing. Pls like, comment, share & send feedback on my thoughts above. I will love to hear back from audience.

Thanks.

Lokesh Parashar

President

Federation of Buying Agents

Director @ Adkindia LLC (NYC, USA)

Experience my Story of Sourcing Series at Linkedin and small videos on YouTube.

https://adkindia.me/

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