Sourcing Channels

Sourcing Channels refer to the channels and routes through which products are transmitted from the manufacturer to the purchasing enterprise, reflecting the flow route and direction of products, and the organizational structure of the circulation. Sourcing Channels are divided into long channels and short channels. Generally speaking, the more administrative levels the products go through, the longer the channel, the higher the cost of purchasing; conversely, the shorter the channel, the lower the corresponding cost.

While with the development of the market economy and the advent of the Internet Age, sourcing channels are also classified into two categories:

  • Traditional Channels
    Procurement is carried out by entities face-to-face, which includes purchasing directly from the factory of goods supply and purchasing from intermediaries, such as agents or franchisees.

    • Advantages: Face-to-face transactions give a sense of trust and reliability. They also provide commodity attributes that are easier to understand. The traditional channel is the main method to purchase goods at present.

    • Disadvantages: There are some limitations on the types of materials, and materials may need to be purchased from different channels, which is difficult to manage and inefficient.

  • Online Channels
    The definition of online channels includes the process of purchasing directly from the official websites and purchasing from intermediate online shopping malls, such as agents or franchisees.

    • Advantages: High procurement efficiency, allowing purchase to occur without any time restriction. Since in-person visits are unnecessary, you can save time and effort.

    • Disadvantages: Goods are usually kept in stock and regularly available, hence there is no obvious price advantage for stable and batch products.

In NexPCB, before every procurement process, you will be required to provide complete MPN and requirements of materials when selecting models. This provides guidance for us to quickly search channels and meet customer needs. While doing so, you could also share with us if you might have better channels.

As an enterprise in the IoT industry, we have diversified products with a wide variety of materials. Our materials are split into three groups: electronic materials, structural materials, and packaging accessories. We choose different sourcing channels for different groups of materials. Most of the structural materials are customized, and traditional channels are preferred because the technical requirements of products, the production capacity of suppliers, and quality stability are the main factors to be considered. Packaging accessories are sourced by combining the two categories of sourcing channels. On the other hand, since the electronics products we use are of a wide range of products, sourcing them involves a complex market distribution around the globe. Hence, the sourcing channel reflect the features of multiple channels and wide-ranging.

There are 3 main channels of electronic part sourcing:

AgentsPrimary agents, secondary agentsHave agent licenses, stable price and guaranteed supply, as well as the capability to stock up and control inventory for customersThe service provided to small and medium-sized customers is not comprehensive, there are requirements of MOQ, and the purchase lead time for materials in short supply is long
DistributorsAuthorized distributors, agent distributors, informal distributorsProvide merchandise on hand for small and medium-sized manufacturersThe sourcing channels are diverse and multi-layered, and the quotation is high and affected by market factors
TradersGeneral taxpayers, individual businessmenGoods available in stock, and be able to purchase unpacked materials according to customer demandThe price is greatly affected by the market, the sourcing cannot be guaranteed, the quality risk is high, and have no capability to stock up

Online Channels - electronic trading platform: sufficient supply and wide variety, which can facilitate quick inquiry and procurement. This method is often adopted to speed up the delivery of sample orders and small batch trial production orders. The qualifications of electronic trading platforms are uneven, with false publicity and untrue inventory. Please be sure to choose a platform with a good reputation, complete formal qualifications, and stable supply.

The large market scale with abundant materials is also accompanied by a huge hidden risks of quality. Then. how do we choose a safe and appropriate sourcing channel to ensure the there'd be sufficient goods supply with acceptable qualities? In our company, our procurement personnel have an excellent understanding of various channels and suppliers. They often conduct comparative analysis and economic comparison of sourcing channels, before select suitable ones.