While outsourcing your product development or manufacturing to China has a myriad of benefits, it is not a decision to take lightly. There are many pitfalls and even scams that unsuspecting businesses fall into year after year because they did not have the proper risk management procedures in place to ensure their success.
Every week, our team at Trans-Pacific Facilitators receives inquiries from product developers, investors and companies looking to outsource some or all of their manufacturing to China. Many are prepared with samples and are interested in knowing the next steps to product development, but are hesitant to make the leap. Perhaps the main item that is asked about over and over again is intellectual property rights.
Mitigating Risk … Intellectual Property Rights in China
The first two things that you will likely need are a Non Disclosure Agreement and a registered trademark in China. Many companies choose a Non-Disclosure, Non-Use and Non-Circumvention disclosure; an agreement that you typically use when trying to find manufacturers. You have the manufacturing company sign this agreement prior to showing them your product and it prevents them from stealing your design and from going around you to sell the product to U.S. consumers. If you’re not concerned with manufactures in China copying your design or product, you do not need this agreement.
On the other hand, before you use any of your trade names or trademarks in China, you’ll want to register them in China or someone else almost certainly will. There are many scams out there in which someone will register your trademark as their own, and then prior to your goods leaving China, they will contact you and request payment for the trademark. If you don’t pay them, it is likely your goods will never leave the country. An experienced and professional sourcing or product development company like our team at Trans-Pacific can assist you in protecting your intellectual property rights.
Negotiations and China Outsourcing Risk Management
In addition to intellectual property rights, there are many other ways that partnering with an outsourcing facilitator can be beneficial to your risk management in China. From assisting with contract negotiations to facilitating plant tours, from helping to source quality suppliers and raw materials to ensuring quality control and safety testing, your outsourcing partner should be someone you trust to promote and protect your best interests.
Below are some of the areas of risk management that your partner should be able to assist you with that you may have not considered…
Agreement Negotiations and Support
- Undertaking supplier negotiations for China sourcing, supplier scheduling and ensuring on-time delivery through relationship building to maximize benefits and profits.
- Developing and leading negotiations with suppliers and establishing strong contractual relationships, including clear Statements of Work/Service Level Agreements.
Client Services & Risk Management
- Advising the company on the value of, and risks associated with, new sources of supply.
- Conducting business with the highest level of integrity and regard for legal and environmental issues. Business information is kept highly confidential.
- Supporting day-to-day sourcing responsibilities for manufacturing operators.
- Developing and implementing supply strategies to reduce cost of key materials, components and subsystems, and to reduce material lead times, inventory requirements, and associated work capital requirements.
- Partnering with engineering, R&D, finance and manufacturing leadership to achieve cost reduction targets.
- Seeking client and supplier benefits, including cost reduction, revenue-increasing initiatives, and utilizing tools/identifying opportunities for processes to increase capacity and drive controllership.
- Providing advice on all significant matters involving sourcing impact.
- Providing turnkey services to facilitate transactions, such as translation, transportation and accommodations.
The Key to Your Successful Experience in China = Experience
The key to having a successful experience in China is partnering with a sourcing or product development partner who has the experience, knowledge and expertise needed to ensure your best interests are protected – this includes risk management. This is the key to the puzzle that many companies miss during the hustle, bustle and excitement that comes with launching a new product. Proper risk management can make your experience in China both smooth and successful.
Are you thinking about outsourcing part or all of your manufacturing to China? Why not call our team at Trans-Pacific to learn more about our risk management strategies? We look forward to hearing from you soon and to helping you explore the possibilities available to you here in China. Connect today!