Archive for March, 2010

Indian Sourcing office Cost Heads

Thursday, March 25th, 2010

 

Major cost-heads while setting up a sourcing office in India

  1. Recruitments of right individuals
  2. Office space & setup
  3. Salaries & incentives
  4. Audits

Further classified as below:

FIXED:

  1. Office setup (furniture, lighting, decoration, computers, laptops etc)
  2. Legal formalities (company registrations)
  3. Taxes
  4. Misc
  5. Insurances – (premises, vehicles)
  6. Office Vehicles
  7. Generators for alternative power (optional)
  8. Advertisements – to here professionals

FLOATING

  1. Property Rental – 30%
  2. Travel Expenses – 10% (also includes office vehicle petrol & other travel expenses)
  3. Skilled Professionals – 40%
  4. Utilities – 15%
    1. Electricity
    2. Water
    3. Telecom
  5. Misc – 2%
  1. Company accounting & charted accountants – 3%

The above cost is excluding any payments to NGO’S, 3rd party inspection agencies, surveys etc.

Buying Agents Exposed

Thursday, March 25th, 2010

 

If retailer hires a buying agent, the profit margins that are realized are much lower, than if it does direct sourcing, Explanation:

Depending upon the terms & commission with the buyer and also the responsibility of the agent,

 

Profit margins effect in those cases where a buying agent charges commissions from the supplier side, supplier will either reduce the quality or try to increase the price or both, on the other hand agent has to compromise in the quality also during inspections with the supplier due to the unwanted commissions involved, this directly effects the price & quality both resulting in loss of the buyer in terms of profit margins and customer satisfaction,

 

Another case is at the time of negotiation with the buyer during the fair, buying agent may try to influence the suppler to increase the prices with his markups and supplier will reimburse this markup in the form of cash after the dispatch of the goods.

 

We have seen here in Moradabad, QC’s (Quality Controllers) from reputed buying houses of Delhi charge commissions from supplier’s side with/without the knowledge of their senior merchandisers, most of the times these SM’s visit either once or twice leaving the merchandise on the inspection of the QC, generally these QC’s are locals and act to get the most profit out of each order from each vendor they are inspecting. Buying company prefer to appoint these local QC’s as full time employees of the company for large quantity orders so to save cost on travel expenses, hotel accommodations etc. These QC’s are the least paid individuals of the company; they try to gain maximum profits from the orders from different channels,

 

Yes if the agents are irresponsible – consequences will be bad merchandise, claims, decrease in profit margins, etc,