Outsourcing manufacturing to China
One challenge all companies face today is the need to get new products to the market as quickly and as efficiently as possible.
We are aware that China is one of those markets that offer the ability of manufacturing an extensive variety of products and at the lowest rates. While outsourcing is an attractive proposition, companies using outsourcing services should be aware of the pros and cons.
THE PROS OF MANUFACTURING IN CHINA
Putting your manufacturing unit in China can be advantageous in many ways. To maintain international competitiveness, be strategic. Strategies can be positioned around reducing component costs in existing or future product lines. For American companies the emphasis should be on strategic engagement in manufacturing with Chinese partners, making the investment into people and structures and determining involvement based on indirect as well as all direct costs.
One of the key benefits is that outsourcing enables companies to cut operating costs For instance, training costs can often cut into profits. This is especially the case in high turnover jobs such as customer service call centers. Lower salaries are a part of this benefit, though the benefits go much deeper. For instance, each employee that does not work “on site” means one less computer, and no extra or costlier maintenance costs, so outsourcing may provide a better option.
Cheap Manual Labor
Manpower is possibly the most important resource in any company, and is also one of the largest expenses. By outsourcing to China you can reduce costs by between 30 and 80 percent depending on the labor intensity of the product. These outstanding rates will lower your cost of production exponentially.
Outsourcing production of a new product can allow you to get to market sooner than if you had to build your own factory, acquire equipment and hire employees. In addition, it can bring production closer to Asian and European markets, in case you’re looking to expand your global footprint.
Diversification of Business
When you have the manufacturing team based in China, you additional insights into foreign markets. Most companies who manufacture products in this country are likely to diversify their reach and try some of the common local products and this can help in improving your business growth.
The Asian market is growing at an incredible rate. When your manufacturing unit is in China, it becomes easier to sell into the Chinese market, which expands your global footprint and can lead to massive growth in your company.
THE CONS OF MANUFACTURING IN CHINA
As with any business venture, it is always advisable to analyze the pros and cons. Here are some of the problems you may encounter.
A big issue facing companies considering manufacturing in China is quality control.
China can appear very impressive on the surface in that many products look good, but the many standards and regulations differ from American ordinances. That’s why it’s important to have an agent in China that can make sure everything is up to par.
Low Quality Materials
Don’t rely on low quality materials just to keep your cost in check. Regardless of the amount of manufacturing you plan to do, using low quality materials is not encouraged because it’s going to impact the overall reputation of your business.
When you have your manufacturing base in China, you have to be very careful regarding copyrights, trademark and plagiarism. Ip law is very different in Asia, and you should work that into any contract that you and your business associates sign.
Most Chinese are not proficient in English. Your business operations could be hindered if neither speaks a common language. If that’s the case, you’ll need a translator or effective bilingual speakers who can help in establishing the right platform between the two teams. If you can’t deal with this problem, it couldlead to some serious issues for your business.
Manufacturing in China is both challenging and changing. If you are investing in China for the long haul, your business strategy needs to be driven by factors other than low costs.