Why China Is the Best Country to Outsource Manufacturing
Why China Is the Best Country to Outsource Manufacturing
China has been consistently leading the world’s top manufacturing countries for so many years now. It is also the largest exporter of goods, way ahead of the United States. In the last few years, many cities in China have become significant production centers.
According to the latest report by the World Bank, China produced $4.566 trillion of industrial output in 2016, of which $2.342 trillion are exported goods, and continued to grow by 6.6 percent in September 2017.
There is no stopping in sight for China from dominating the product manufacturing industry. Just as what industry experts believe in, China will continue the streak in the next couple of years as the go-to nation when it comes to product manufacturing, despite the fact that there are so many outsourcing destinations to choose from.
And you might be wondering: Why is China the best country to outsource manufacturing? We have a thousand points to show you, but we will condense them into three main reasons.
4.2.1 China has a highly skilled workforce.
Labor cost is often the main reason that drives companies in more developed Western economies to outsource manufacturing in China. Chinese labor might no longer be as cheap as it used to be years ago, China’s pool of technically skilled workers maintains its competitive advantage in the product manufacturing landscape at a still inexpensive price.
4.2.2 China has stable facilities and advanced technologies.
Although there are many other outsourcing destinations that offer cheaper labor, China’s stable facilities and advanced technologies have also been its winning edge, still at relatively low production costs. In comparison with its product manufacturing counterparts in Asia, China can deal with common problems that directly affect the product manufacturing workflow, such as power interruptions and unstable supply lines, among many others.
4.2.3 China has healthier political stability than its counterparts.
Political stability is another important aspect that product manufacturing companies in China can be proud of. There are no other product manufacturing destinations in Asia that have a strong political stability as China. As long as national laws and government regulations are met, product manufacturing companies and their partners need not worry.
4.3 Challenges of Outsourcing Manufacturing in China
Outsourcing product manufacturing to contract manufacturing companies in China is not without some challenges. China may be the world’s biggest product manufacturing country, there are lots of things you must reckon before finally deciding to outsource product manufacturing in the country.
Most of these challenges, however, are not exclusive to Chinese contract manufacturing companies. Companies may face the same circumstances in other product manufacturing destinations.
The good news is, these hurdles can be preempted if you do your part. One way you can meet these challenges head-on is to wrap your head around the process on how to manufacture a product that we laid out earlier in Chapter #2.
By understanding the NPI process and how to manufacture a product and meeting all relevant outputs first, you get to anticipate and prevent the cost overruns and other bumps later down the line.
By becoming aware of the process, product manufacturing (and the supply chain in general) can run like a well-oiled machine. It is important to note that, in supply chain management, the succeeding links are highly dependent on the preceding links.
In this chapter, we will present to you the major problems that you may face if you decide to work with contract manufacturing companies in China. Of course, we will not leave you battling challenges out without some recommendations.
And finally, in the next chapter, you will learn all the ropes of contract manufacturing in China–how to find a manufacturer that is truly capable; how to manufacture a product with the right contract manufacturer; how to request a quotation from your supplier; generally how to deal with contract manufacturing companies in China.
4.3.1 Lack of Capable Service Providers
While it sounds a little contradictory to what makes China the best product manufacturing destination, it is not. Let us explain why.
China is home to thousands of product manufacturing companies and millions of skilled factory workers. They know how to manufacture a product, of course. In spite of that, not all contract manufacturing companies in the country are dyed in the wool when it comes to quality control, prompt delivery, and customer service.
Many contract manufacturing companies in China have factories with fairly old equipment, processes, and workflows. And because of the pressure to lower production costs, some contract manufacturing companies would resort to substituting lower grade materials or assigning the product manufacturing process to a lower caliber factory where no quality control is done.
Failure to find the right contract manufacturer in China could mean less than expected service quality and even passing on the expected cost reduction or capital investment reduction.
In terms of quality control monitoring, you can leverage your ERP or any cloud-based business intelligence and analytics software to feed you with real-time or up-to-date feedback on your product before it reaches the consumers.
4.3.2 Lack of Interest in Small-Scale Production
You might have perfectly ticked off your checklist in finding the right manufacturer in China, it is not always a guarantee that the contract manufacturer will do business with you. In most cases, contract manufacturing companies are more interested in the revenue they will get rather than the amount of business you can offer.
Contract manufacturing companies determine this through volume projection alongside your product specifications and bill of materials. Often, contract manufacturing companies would gladly consider compromising short-term revenue gains if they see that your product will let them enter a new market with strong growth potential.
The lack of interest in small-scale contracts is not always the case. When finding the right contract manufacturer for you, make sure your business’s scale is on a par or in proportion to the contract manufacturer’s. This way, you are likely to pique the contract manufacturer’s interest.
4.3.3 Possible Assignment to Subcontractor for Smaller Production
In the selection process, contract manufacturing companies would always present to you that they have the best support team to make your product design happen. While it is hard to determine how many clients contract manufacturing companies are attending to at the moment, it is often more than you think of.
In most instances, contract manufacturing companies manage multiple demand streams, so they are more likely to accept whatever projects that come their way as long as they make money off them. In which case, they might have to assign your project to another contract manufacturing team or factory, which has less experienced or competent personnel.
Small-scale product orders and bare minimum order quantity (MOQ) are usually an easy target to get assigned to another contract manufacturing team. The same holds true when the contract manufacturing companies accept new, larger customers.
Be critical with contract manufacturing companies who present the best support team to you. Knowing that they have the best contract manufacturing team is not enough to guarantee that your product design is in good hands.
To avoid these kinds of scenarios, it is also important to start building a relationship with potential contract manufacturing companies right off the bat by making a positive impression.
4.3.4 Loss of Control
As the world’s biggest product manufacturing country, you can expect China to serve thousands of companies around the world. Product manufacturing delays is a common issue in China due in large part to the number of companies these contract manufacturing companies are serving.
Production delays are caused by a lot of reasons. A contract manufacturer could bump your order to give way to a larger client. Perhaps, a subcontractor failed to meet your contract manufacturer’s deadline, thereby affecting your timeline. Manufacturing errors are also possible. The list goes on.
These things, along with inconsistent service quality and communication issues, are inevitable and sometimes beyond your control. That is why it is ever so important to know the process how to manufacture a product and find the right contract manufacturer–one that suits your needs–and set boundaries and expectations first.
4.3.5 Minimal Commitment to Environmental Protection
When it comes to environmental regulations, new companies who are looking to outsource manufacturing to a contract manufacturer in China might know that a contract manufacturer is responsible for the compliance to the requirements of the government. It is true, but it does not necessarily mean that the hiring company is free from responsibilities.
Many existing companies have been slapped by complaints and violations either due to the fact that their contract manufacturers do not meet the environmental requirements set by national laws or they themselves failed to comply with them.
Ignorance of environmental laws could result in a great trouble that could lead to your company’s closure. Pressuring your contract manufacturer to provide proper product documentation and comply with laws and regulations is not enough. Note that you are also liable when your contract manufacturer screws up.
4.3.6 Lack of Overall Post-Production Review
If you become familiar with how to manufacture a product, you should be familiar with the post-production evaluation too.
Some brand owners and contract manufacturing companies are used to downplaying product evaluation, and they think they can get away with nasty consumer reviews. In fact, in the new product introduction process, this is the most neglected part.
There are so many contract manufacturing companies that do not take post-production assessment seriously. And it comes as no surprise to see the same bad product reviews over and over again.
Evaluating your production manufacturing allows you to know if the entire process is working or if there are holes in it. It allows you to identify areas of improvements and changes.
