• Realities v.s. Expectations: Offshore Manufacturing

By Robin | 13th January 2016

China has long been seen as the world’s premier destination for manufacturing services with the Asian country producing most of the world’s goods. But as manufacturing activity cools in 2016, business owners are wondering if it still makes sense to outsource manufacturing to Asia. Well, it definitely does – if you are aware of what offshore manufacturing in China really means. In this blog post, let us explore the differences between expectations and reality in many cases.


Costs:

Expectation: Some believe that offshoring in manufacturing still costs nothing. Others believe that with rising costs, it does not make sense to manufacture in China.

Reality: Manufacturing costs in China are not as low as they were in 2010, but they are still lower when compared to developed countries’.

In 2010, China claimed the throne to manufacturing dominance from the United States, becoming the world’s leading manufacturer. Some of the driving factors include high local and foreign investment as well as large-scale urbanization which meant more factory workers. Add in the fact that the cost of living is lower in China than it is in the U.S. and it seems almost inevitable that China would become ‘the world’s factory’. Since then, wages have risen steadily, foreign manufacturers have begun to downsize, and rival countries in the region, especially in South East Asia have become attractive alternatives for manufacturing services. As a result, it is not as cheap to outsource to China as it was a few years ago, but it is still significantly cheaper to do so than in other countries. With the automation of services to offset higher wages, as well as the slowdown of wage increases, China will continue to be a major player in manufacturing. China’s manufacturing industry is evolving, not disappearing, and low cost high quality products are still a reality.


Quality of product and service:

Expectation: Low quality products and poor service

Reality: High quality products; quality control can be assured by choosing the right manufacturers with quick delivery times.

There have been some cases and ‘horror stories’ of poor quality control in China which may have deterred potential clients from considering it as a destination for offshore manufacturing or contract manufacturing, but these issues can be easily avoided. First, ensure that your product is fully designed-for-manufacturing with your specifications clearly defined, then ask for the manufacturer’s references and check with previous clients about the company’s manufacturing processes. You should also have a good idea of the manufacturing processes involved. Checking a company’s background is an essential step that should be undertaken before embarking upon any business relationship, including past projects, client testimonials and their range of services offered. Also, you should visit the factory in person when possible, or delegate a representative to visit the factory to ensure that the company can make products according to your standards. Additionally, it is important to maintain regular communications and monitor the manufacturer closely so that issues can be addressed in real-time. Finally, clearly inform your potential manufacturing partner of your company’s standards and expectations. This helps to build up the relationship and makes it easier to resolve issues down the line. You can read more here.


Logistics

Expectation: Logistically, it is too complicatedReality: It is complicated everywhere

Manufacturing services anywhere in the world are complex. There are layers upon layers of regulations, standards, cultural barriers and sometimes, bureaucracies to navigate past. The challenge begins from the initial negotiations of price and quantity, to the overseeing of product design to the manufacturing of the actual products themselves. One must ensure extensive quality control and take legalities (such as licenses, certifications and work agreements) into consideration. Add in a language barrier when considering outsourcing, and offshore manufacturing can seem quite a daunting task indeed. So how does one overcome this? Well, companies should think about recruiting people who are “suited to cross cultural environments. (1)” If these language and cultural skills cannot be developed in-house, they can be outsourced. For a complete solution, engage a qualified sourcing consultancy firm to set up and manage your entire supply chain to minimize the risks and pitfalls typically associated with outsourced manufacturing.

Sourcing Overseas, with its award winning service and excellent track record works hand in hand with clients, ensuring high quality products at a low price without the hassles. Schedule a project consultation for free.


http://www.theguardian.com/world/2016/jan/01/slowdown-in-chinese-manufacturing-deepens-fears-for-economy

http://www.ch-ina.com/wp-content/uploads/2015/02/China-Integrated-Chinas-Production-Prices-are-Steadily-Decreasing-Year-After-Year.pdf

http://www.mckinsey.com/insights/strategy/what_might_happen_in_china_in_2016

http://www.businessinsider.com/how-to-conduct-quality-control-with-chinese-manufacturers-2011-4

http://www.ef.com.tw/competing-across-borders/

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