Tag: ChinaManufacturing

  • Cut Out the Middleman? Good Luck With That.

    Cut Out the Middleman? Good Luck With That.

    Every few months, someone tells me the same thing: “Eventually, brands will just deal directly with factories. Middlemen are dying out.”

    Cute theory. Doesn’t match reality.

    Same River, Different Bank

    Let’s start with what’s true. A sourcing agent and a trading company are both just links in the same supply chain — neither one makes anything, both move product from a factory floor to someone’s warehouse. On paper, we look like the same species.

    We’re not.

    Whose side are you standing on? A sourcing agent is an extension of the buyer’s purchasing department. We’re hunting for what the buyer needs, on the buyer’s terms. A trading company is an extension of the factory’s sales department. They’re pushing what the factory makes, on the factory’s terms.

    Who do you actually answer to? A sourcing agent represents the buyer, inside the factory’s world. Our loyalty sits with the buyer. A trading company represents the factory, inside the buyer’s world. Their loyalty sits with the seller.

    Same supply chain. Opposite chairs at the table. That single difference changes everything about how a deal gets negotiated.

    So Can Goods Move Without Us? Sometimes.

    Here’s the uncomfortable answer: yes, in a minority of cases. No, in most of them. Which is exactly why the middle layer refuses to disappear.

    Take big-box retail. Some large retailers do source directly from factories — but look closer at which factories, and why.

    Big retailers are brutal to supply directly. Long payment terms, layers of certification, an endless list of compliance requirements. Someone inside the factory has to manage all of that — and very often, that “someone” is outsourced entirely to a trading company or agent, because the factory owner simply doesn’t want the job.

    I once met a factory owner with his own established brand. Getting listed with Walmart, he told me, requires you to sit down and study their entire supplier philosophy — a document thick enough to be its own textbook. His response? “I’m not reading that. I hand it to a distributor who actually wants to study how to get into Walmart.”

    That’s the real value of the middle layer. It’s not markup. It’s absorbing the operational weight neither side wants to carry.

    Now, the exception: if a product is genuinely irreplaceable — only one factory can make it, or the brand carries enough weight — retailers will open a green channel and negotiate factory-direct terms both sides can live with. Leverage buys you the shortcut. Everyone else pays the toll.

    What About Small and Mid-Size Buyers?

    Can a smaller buyer go straight to the factory? Technically, yes. Practically, it’s a steep climb.

    Problem one — the channel is already occupied. Most factories already run their sales through agents or trading companies. Want in? You go through that channel first, whether you like it or not.

    Problem two — volume is the entry ticket, and you don’t have it yet. Factories will talk directly to buyers who bring serious volume. But you don’t arrive at “serious volume” overnight. You build up to it — usually by moving through an agent, step by step, growing your order size until you’re a name the factory recognizes on its own. Try to leapfrog that process and go factory-direct too early, and you put the factory in an awkward spot too: annoy the existing channel for a customer whose volume isn’t proven yet? Most factories won’t take that trade.

    Bottom line: for very real, structural reasons — channel lock-in and volume thresholds — the middle layer rarely disappears entirely. The realistic goal isn’t eliminating it. It’s trimming it down to what actually adds value.

    The Question Nobody Wants to Ask

    Here’s what I’d tell any small or mid-size seller obsessing over cutting out the middleman: that’s the wrong fight.

    The real question is — is your product different enough that a customer will pay more for it? Is the quality actually solid? Is your service reliable? What’s the customer experience like end to end?

    Until your volume hits real scale, going to war on cost is a losing game. You don’t have the leverage to win it, and chasing it distracts you from the one thing that actually is in your control at small scale: differentiation.

    What “Trimming the Layer” Actually Looks Like

    If the middle layer isn’t going away, the real decision is which middle layer you’re working with — one that adds friction, or one that absorbs it.

    A partner worth keeping in that chair usually shares a few traits: registered, self-operated import/export status rather than a shell arrangement; its own physical office and warehouse, not a desk borrowed from someone else; enough years in continuous operation to have actually seen a factory relationship through its rough patches; and in-house engineers and QC inspectors who report to them directly, not a third party they’re hoping shows up on inspection day.

    That’s the difference between a middleman who’s dead weight, and one who’s actually doing the job neither the factory nor the buyer wants to do themselves.

    Some scattered thoughts from today, put into order. As always, happy to hear where you’d push back.

  • 500 Units, 13 Suppliers, and Nobody in Charge

    500 Units, 13 Suppliers, and Nobody in Charge

    I came across a job posting recently that I can’t stop thinking about.

    A founder was hiring for a very specific role: a manufacturing engineer to fly into a factory in Shenzhen and fix a tolerance problem. The brief was detailed — almost impressively so. Take measurements. Compare parts against CAD files and drawings. Determine root cause. Modify and test solutions on-site — sanding, machining, whatever it takes. Recommend design or tolerance changes. Coordinate those changes with suppliers. Get the product into stable production, fast.

    The product: a vaporizer. 500 units. Built from components sourced across 13 different factories, assembled at a 14th. Parts weren’t fitting together correctly, and the assembly factory — despite “troubleshooting this for a long time” with the founder — couldn’t solve it.

    On paper, this reads like a normal hiring request. Look closer, and it’s a case study in exactly how not to run a multi-vendor supply chain — and exactly why the more detailed and professional a firefighting job post sounds, the worse the underlying situation usually is. A healthy production line doesn’t need someone parachuted in to do all of that. If it needs all of that, something upstream already broke a long time ago.

    Let’s take it apart.

    Problem One: Thirteen Suppliers, One Assembler, Zero People in Charge

    Thirteen component suppliers. One assembly factory. Somewhere in that chain, someone has to own the job of making sure everything that arrives at the assembly line actually fits together. In this case, nobody did.

    The assembly factory said it plainly: “we are only responsible for assembly.” That’s not the factory dodging blame — that’s an accurate description of what they were paid to do. They quoted an assembly fee, not an engineering-and-coordination fee. If you don’t buy engineering, you don’t get engineering. Full stop.

    This is, frankly, one of the quiet reasons a lot of factories are cheap. Cheap often means “we don’t carry engineers on payroll.” No engineering staff means no one internally capable of diagnosing why a component from Supplier 7 doesn’t mate with a component from Supplier 11. It’s not laziness — it’s a cost structure. You got exactly what you paid for.

    So who was supposed to coordinate 13 suppliers and one assembler into a single working product? There’s only one candidate left: the founder himself. That’s the role nobody assigned — because it defaults to whoever placed the orders. He just didn’t realize he’d been playing it, and by the time tolerance failures showed up on the line, the coordination gap had already done its damage.

    Problem Two: Hiring a Firefighter to Patch a Structure That’s Already Collapsed

    “The assembly factory has been troubleshooting these issues with me for a long time” is the line that gives away how deep the problem actually goes. This isn’t a stubborn defect that needs one clever fix. It’s a symptom of a supply chain with no one holding cross-supplier authority — and hiring an outside engineer to parachute in doesn’t create that authority. It just adds a new person hoping to borrow it.

    Three risks come with this move, and none of them are small:

    Remote, short-term engagements don’t produce real oversight. You’re trying to substitute one person’s technical skill for a management structure that never existed. That trade doesn’t work — a single engineer, working remotely on a short contract, cannot replace what a properly structured supply chain does by design.

    500 units isn’t the kind of volume that attracts top-tier talent for the long haul. Good manufacturing engineers want ownership and a runway — a program, not a one-off rescue mission. The people willing to take a short, adversarial, low-volume gig are rarely the ones with the leverage or experience to actually win the fight that’s coming.

    And there is a fight coming. This role is inherently adversarial. The engineer’s job is to walk in, point out what the existing team got wrong, and demand changes — from a factory that has zero incentive to cooperate and every incentive to protect itself. Realistically, this ends one of two ways: the hire quietly goes along to collect a paycheck, or the existing factory relationships close ranks and push them out. Neither outcome fixes anything.

    Put bluntly: you’re not hiring an engineer. You’re hiring a referee for a match where the other side already controls the field — and the referee has no actual authority to enforce a call.

    The Real Problem Was Never Technical

    Tolerance mismatches rarely mean a factory “did a bad job.” They mean nobody, at the design or sampling stage, aligned 13 different suppliers to a single, enforced technical standard. This is the same root logic behind another pattern I write about often: when a factory’s MOQ suddenly jumps for what looks like the same product, it’s almost never the factory’s own limitation — it’s an upstream constraint the factory inherited and passed down. Tolerance failures work the same way. The defect shows up at final assembly, but the actual failure happened several steps earlier, when nobody was coordinating specs across the chain.

    A product only comes out of a fragmented supply chain in good working order when someone owns the whole chain technically — not just the final step of putting it together.

    The Fix Isn’t a Better Hire. It’s the Right Structure From Day One.

    This is exactly the gap a sourcing agent is supposed to fill — and exactly why that role shouldn’t be an afterthought bolted on after things go wrong.

    I’ve only seen this pattern play out clearly once, but it was instructive: a client running his own sourcing, hands-on, order after order. It worked, more or less, while volume was modest. But once he scaled up to 4–5 containers a month, the supplier coordination — chasing tolerances, chasing schedules, chasing accountability across multiple factories — became more than a founder juggling ten other priorities could absorb. He got worn down by exactly this kind of cross-vendor firefighting, and that’s when he handed sourcing over to a dedicated team.

    That’s the pattern worth noticing: founders don’t usually need convincing that they should own overseas supply chain coordination. They find out the hard way, at some volume threshold, that they can’t sustain it — and the tolerance issue in that job post is just an earlier, more painful version of the same lesson.

    Beyond the pure technical coordination, there’s a second layer founders often underestimate: overseas supply chains run on local relationships, unwritten norms, and the kind of situational judgment that takes years to build — not something you absorb by reading Alibaba messages between time zones. Everything below that layer is detail work: chasing samples, chasing invoices, chasing suppliers who’ve gone quiet. It adds up to a full-time job that isn’t actually the founder’s job.

    The workable answer isn’t to hire a firefighter after the fact. It’s to bring in a sourcing agent at the start of the program — not as one more vendor bolted onto an already fragmented chain, but as the technical backbone that ties the 13 suppliers and the assembler into one accountable system from day one. And when a chain is already this fragmented, that same agent is also the right party to take over the cleanup — tracing every mismatch back to its real source and rebuilding the coordination that should have existed from the start.

    What “Reliable” Actually Means

    Not every sourcing agent qualifies for that role, and bigger isn’t better here. The largest sourcing agencies often carry the most bureaucracy — layered approvals, account managers who don’t touch the factory floor, decisions that take a week to reach the person who can actually make them. That structure is the opposite of what a tolerance crisis needs.

    What actually matters:

    1. Registered, self-operated import/export status — not a broker riding on someone else’s license. This settles the compliance question before it becomes your problem.
    2. Their own office and warehouse — not a shared address or a rented desk. Physical infrastructure is what gives an agent the independent capacity to actually solve problems on-site, instead of just relaying messages between you and the factory.
    3. Five-plus years in continuous operation — not a team assembled for this one project. Longevity is the only real proof that a structure holds up under pressure instead of scattering the first time something goes wrong.
    4. In-house engineers and QC inspectors — not subcontracted out to a third party. If the diagnostic and inspection capability isn’t inside the organization, you’re back to exactly the problem this article started with: paying for assembly, and hoping engineering shows up for free.

    That’s the bar. Anything short of it, and you’re not hiring a solution — you’re just adding another name to the list of parties who aren’t quite responsible for the outcome.