A supply chain is a network used to manufacture and distribute a specific product to the end consumer. This network entails many moving parts, pieces, and entities that can be divided into two categories; upstream and downstream. This flow illustrates how a product travel through the supply chain from conception to delivery to the final purchaser.
Upstream vs Downstream Supply Chain
Upstream supply chain involves the operations and parties involved in creating a product or products. This includes suppliers at every level, including raw materials, parts and pieces, and the manufacturer or factory. Downstream encompasses the operations and parties involved with storing and distributing the aforementioned product or products. As we walk throughout this process, you’ll notice that eCommerce and Amazon Sellers are referred to as “Buyers”. Generally, we would refer to these brand owners as the Sellers as they sell products to the end consumers. However, while the product is in production, the brand owner is purchasing components and services from the players in supply chain. Therefore, when speaking in terms of the upstream supply chain, brand owners play the role of Buyers.
Now that we’ve covered the macro players of the upstream supply chain, we’re going to dive deeper into the micro players. These are trade agents, sourcing agents, quality control inspectors, and freight forwarders. The buyer will work with someone within each of these roles to take their product from raw materials to reality.
Often listed on marketplaces like Alibaba is “manufacturers”, these folks are typically part of an agency that maintains a small network of factories specializing in products within a particular category. They’ll sell products that their factory has leftover with minor if any, customizations. For example, an agent may source cutlery, pots and pans, and cooking utensils within the kitchen accessories category. Their overstock sales model comes with the advantage of lower average minimum order quantities (MOQs). To a new seller starting out with a small budget or wanting to test the market, this may sound like an ideal solution! Unfortunately, trade agents often overpromise and underdeliver. It’s common for them to “ghost” buyers, depriving them of after-sales support.
Trade agents are great to work with if you’re just looking to test the market. However, the lack the after-sale support creates a transactional exchange rather than a long-term business relationship.
To spot a trade agent, you can ask for their address. If you see that their address is in a major city, it’s more than likely a trade agent. Factories often keep all of their offices in the manufacturing facility which isn’t typically in major cities.
Unlike trade agents, sourcing agents are hired to “flip every rock” until they find the right manufacturer for a buyer’s project. Think of them as independent contractors hired by the Buyer to find the perfect factory. Once the factory is found, the sourcing agent may stay throughout the entire process, or simply make an introduction. While they may not stay on board for the duration of a project, they often build a relationship with the Buyer to assist with future projects.
One benefit to sourcing agents is that they tend to have higher-level English skills. This is certainly helpful as many Buyers don’t speak the native language of their factory point of contact. Unfortunately, if a misunderstanding or disagreement arises with the factory, the sourcing agent is more likely to side with the factory. They sometimes have “hidden” commissions agreed upon with the factories, meaning they’re not always working in the Buyer’s best interest.
Sourcing agents can act as your eyes and ears in China to oversee production. They’ll help build the relationship with the factory, but will either charge you upfront or take a commission from both the Buyer and the manufacturer.
Sourcing agents can help businesses effectively scale up their business and act as a boots-on-the-ground contractor. The Buyer just needs to make sure they’re well paid and set proper expectations upfront.
Quality Control Inspectors
Quality Control Inspectors are often part of a larger Inspection agency. This QC team will visit your factory, inspect your products, and ensure that your quality requirements are being met. They’ll often ask for some key details about what the Buyer is looking for in their finished product, known as KQIs (Key Quality Indicators). They’ll also ask for clarification on what’s considered a minor, major, or critical non-conformity or defect in the product. After the inspector completes their inspection, they’ll send a QC report to the Buyer before moving onto shipping.
Whether it’s your 1st or 20th order with a supplier, you should always have your products inspected before shipping. Catching errors at the source can save you thousands, not to mention the headache of dealing with removal orders and returns. This can be seen as a security investment.
Freight Forwarders (FFs), come in all shapes and sizes. Your FF could be a one-man outfit or a large corporation that organizes imports and exports from one location to another. They act as the middleman between the shipper (in this case the Buyer) and various transportation services. This can be ocean shipping carriers, express air freight, rail freight, and last-mile trucking.
Going with the cheapest freight forwarder will always create more risk for your business. They often have higher probabilities of having rolled cargo, less transparency, poor coordination with the last-mile trucking companies, and last-minute accessorial charges.
Noviland’s Role in Upstream Supply Chain
Noviland is a full-service supply chain management solution, utilized by eCommerce businesses and Amazon Sellers to manage their entire supply chain. We oversee and manage the entire upstream and downstream supply chain. Our clients are kept informed on their orders every step of the way.
Through our free to use platform, users can source products from a network of over 4,000 pre-vetted factories abroad. Noviland oversees production from start-to-finish and sends push notification updates on all orders. Our quality control inspection team provides Buyers with a detailed report on every single order. Buyers can review these reports and chat with their care team to address any concerns prior to shipping.
Noviland works with a variety of trusted shipping carriers and manages logistics either to Amazon FBA Fulfillment Centers or one of your partnered 3PLs. Our platform’s advanced algorithm streamlines the process and takes out the traditional communication hurdles. We also offer 3PL services through bi-coastal fulfillment centers.
In a later blog post, we’ll be delving into the players and operations of the downstream supply chain.
Lisa Kinskey is the Marketing Assistant of Noviland, Inc., a rapidly growing sourcing & purchasing solution making sourcing from overseas factories simpler. Lisa has a background in sales, marketing, and event planning, and currently resides in Kennesaw, Georgia.