Outsourcing production to China does indeed carry numerous benefits for a company, primarily involving lower costs and increased production speed and efficiency. However, these benefits do not apply to every company that chooses to outsource its production.
In order to ensure that this move is worth the initial effort and setup cost, it is important to analyze whether or not your company will benefit from outsourcing in the first place. If you are thinking of outsourcing your production to China, here are some important things to consider first:
Volume Requirements
China is well-known as a land of low-cost goods. This is a result of lower labor costs and a large land area that provides space for an abundance of factories. This enables production to be done in large volumes, resulting in a lower cost per unit.
As a result, companies that choose to outsource production to China are typically those that produce in large volumes. If you do not plan on doing the same, it is better to think twice about whether or not outsourcing is the most cost-effective option.
Logistics
With a country as large as China, it is not difficult for products to get lost in shipping lines along the way, especially if your supply chain involves two or more different cities.
There is also the need to consider the shipping between China and the country your product will be sold in, which comes with the concern of logistics, customs, and shipping time. Thus, it is important to consider logistics planning, detailing, and scheduling.
Familiarize yourself with the correct Incoterms, as well as the necessary customs codes and laws. It is also helpful to enlist a trusted logistics provider, especially for a large volume of goods. After all, what good is producing goods when they cannot be shipped out for sale?
Quality Assurance
Through the years, there have been numerous scandals involving tainted Chinese-made products made with low-quality material. The vital thing, therefore, is to be confident in your selected production supplier in China.
Research is key in selecting a supplier in order to check for quality products or a possible history of complaints. Personal inspections of the factory and the produced goods are paramount. Keep in mind also that your product should also meet international trade standards, so it is necessary to find a supplier who can deliver the necessary quality.
Language and Culture
Mandarin Chinese is one of the most difficult languages to learn, and many local Chinese still have difficulties communicating in English. The business landscape in China is also very different from the Western one, and understanding these differences is crucial when talking with a prospective Chinese manufacturer.
These provide serious considerations about communication that should be addressed before choosing to move production to China. If these barriers are too difficult to overcome, and a business relationship cannot be established with your supplier, outsourcing will prove costly.
It is important to consider the local business conditions and culture, so read up on Chinese business practices, consult with others who have successfully outsourced to China, or hire a local agent to help represent you. Learn what you are heading into before you take the first step.
While choosing to outsource production to China can bring great benefits to the company, it also brings a degree of risk. Only through careful research and planning can one deal with these risks and guarantee success in doing business in China.
