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For Companies Considering Sourcing Products in China
The Issues
- Sourcing products in China can offer substantial cost reductions. If your products’ Cost of Goods Sold has a sizable portion that is labor, outsourcing may be beneficial. Generally labor costs in China are 10 to 20% of the equivalent rate domestically. But this is not the whole picture.
- You have to get the products here. Moreover you have to find Chinese manufacturers who can reliably produce your product to your quality standards, do it on time, repetitively and who can be counted on once you have become dependent on them. Once you have diminished or abandoned your previous source (your own manufacturing or some other supplier) you are dependent on a new supplier and need the assurance that it (or they) can be relied upon.
- In addition you have all the supply chain issues to orchestrate. These might include many activities such as communicating, placing orders, confirming orders, organizing raw and component material, having a degree of flexibility to change an order—its start date or quantity, for example, transportation to a port, customs issues, freight forwarding, domestic port handling and transportation, insurance and many others.
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