When it comes to outsourcing your project, China is an attractive option. With its expansive manufacturing capabilities and talented workforce, you might be tempted to jump on the bandwagon and outsource with a Chinese company ASAP! However, before you do so, you must ensure your project is ready for successful relocation in this foreign land.
After all, success relies heavily on understanding the nuances of bringing projects from overseas back home—with few headaches or hidden costs. Knowing what type of factors will possibly affect your projects is imperative to ensure that you don’t waste time and money in the long run.
Factors to Consider in the Decision-Making Process
Numerous companies are bringing their projects to China, and the number one reason is due to cost-savings. However, not all projects are suitable for outsourcing. There are many factors one must consider.
Factors to think about:
- Degree of Cost Savings
- Labor content of the product
- Volume of production
- Maturity of Design
- Quality of Drawings
- Clarity of Specifications
- Your Credibility
- Time to Market
- Sensitivity of Intellectual Property
Degree of Cost Savings
Considerable savings of about 20% or more is the typical percentage when you bring your projects to China. Since you have to consider the entire Cost of Ownership, that means several elements come into play, such as the following:
- Warehousing costs
- Cost of money
Sourcing from China means there’s an added risk since your money is tied for as much as 120 days since you’ll need to pay them 30 to 60 days in advance. There are always added stakes since the entire process lengthens the supply chain.
Labor Content of Product
According to author Tom Friedman, many costs are identical in a flatted world, regardless of geography. One great example is fuel since a barrel costs the same anywhere. Other examples are copper and plastic resin.
China is well-known for its low cost of labor. The lower the labor content, the higher the savings. For instance, you won’t have any savings if you purchase aluminum extrusions from China since extrusion is highly automated.
However, if you take the same extrusion and machine it, then build it into an assembly, you’ll experience dramatic savings compared to China. Even though cheap labor saves money, so does automation. In these cases, the U.S. can compete with China.
Volume of Production
In terms of volume, always ensure it’s enough for the manufacturer to take it seriously. At the same time, the project must also match the factory’s capability. Smaller factories are good with small orders, but bigger ones will also need high production runs to work on.
Maturity of Design
High-quality drawings are a must, which you should attach with your quotation.
Essential elements of your drawings:
- Must be done to international standards
- Fully dimensioned
- Fully toleranced
If your product is an assembly, then individual drawings for the products and the drawing of the assembly itself are required. Why? Chinese manufacturers will judge the seriousness of your request based on your product’s design quality.
Clarity of Specifications
There’s no room for misinterpretation when it comes to outsourcing your projects. You must be clear when providing specifications to prevent potential project errors.
As an American customer, establishing credibility should be a priority because Chinese manufacturers are swamped with orders. At the same time, they’re constantly receiving quotations from other companies. With credibility, you will be able to get their attention, so market your company to them, and they’ll quickly notice you.
Time to Market
Remember, sourcing from China takes time, roughly six months or more. If your project can’t afford delays, you might not be ready to take your project to them. You must determine whether it’s worth the wait.
Success Lies in Making the Right Decision
If you want your projects to be manufactured in China, the above factors should be seriously considered. Don’t be fooled by the low labor cost; you must also factor in other elements like logistics, money costs, design maturity, etc.
If you want to learn more about the entire process, contact us today so we can review your project. You may also email us at [email protected] for more professional advice and answers. We’ll be more than happy to help.
Good luck with your project sourcing from China!