U.S. businesses can today outsource virtually every aspect of their operations to countries around the world; this article focuses primarily on outsourcing manufactured products to China.
Your decision to outsource your product or product line is significant. Outsourcing can mean a substantial reduction in costs and vastly improved efficiencies, but if you approach it unprepared it can also be disruptive to your workflow and to your customers.
The primary reason to outsource is cost savings, including significant reductions in overhead. But there are many other considerations to weigh as you evaluate your company’s current operations and short- and long-range goals.
Benefits of outsourcing
- Reduce expenditures on facilities, staffing, benefits, energy, raw materials
- Concentrate far-flung manufacturing operations into a single facility
- Engage specialized manufacturers skilled in volume production
- Concentrate locally on critical core operations, such as executive, administration, sales and customer service
- Maintain round-the-clock operations unavailable locally
- Reduce risk
- Redeploy local space and resources for other functions
- Reduce environmental costs
- Improve design through retooling
- Diversify operations
- Introduce new products without disrupting current manufacture
Challenges of outsourcing
- Language barrier
- Time zone differences
- Travel distances and expense
- Legal issues regarding tax and trade
- Concerns about communications: Who do you talk to? How will you communicate?
- Assuring product expertise, personnel management, efficiency and quality control
With its enormous and educated population (95.1% of the total population over age 15 can read and write, according to the CIA World Factbook), China has, in the last two decades, proved its readiness as an outsourcing destination. Manufacturing centers now have years of experience developing, building and exporting products for U.S. businesses, with low overhead, ready access to staffing and personnel attuned to the requirements of international communications and trade. There is also reliable infrastructure to support transport of China-made goods.
What to expect & How to get started
Beyond language, culture and time zones, the biggest challenges for U.S. businesses outsourcing product manufacture to China are:
- Finding the right factory with appropriate tooling, skills, staff, experience and access to raw materials
- Negotiating the international contract
- Maintaining oversight of production, risk management, quality control and delivery
Factories in China are eager for U.S. trade. Finding the right one and striking the right terms can make or break a product debut, a product line or even an entire company.
Some businesses devote the time of an employee or a team to undertake these critical steps. Other companies work through a broker. Yet others “partner” with a company that has product knowledge, on-site personnel in China, and a full menu of essential support services, from factory search to materials sourcing to inspection, testing and delivery.
Making the right decision starts with asking the right questions. Ready to begin? Call the China sourcing experts at Trans-Pacific Facilitators right now.
Questions to ask regarding outsourcing
Whether your company intends to work with a partner, a broker or directly with a factory in China, here are some questions to pose:
- What is your manufacturing experience in China?
- Do you have specific experience with our type of product?
- Do you operate/work with a single factory or multiple manufacturing sites?
- Are raw materials available for our product?
- How will you source materials and manage inventory?
- Will our product’s specs need to change for manufacture in China?
- Do you have product suggestions for improvements in design or manufacture, streamlining or reducing environmental costs?
- Do you recommend any retooling to make our product more efficient or attractive?
- Can you help our company with the design of a new product line for China manufacture?
- How do you assure that our product specs and drawings are understood in China?
- Do you provide in-language on-site supervision?
- How do you handle on-the-ground personnel management and safety issues?
- When and how do you inspect factory operations?
- Will you provide product samples for approval?
- How do you manage contract negotiations and assure that terms are met?
- What risk management measures do you put into practice?
- How do you set pricing so our product is competitive in the U.S.? How will our costs compare to what we are currently paying?
- What assurances do you provide for product quality and on-time delivery?
- Do you handle testing and safety approvals such as UL or Energy Star?
- What is your recommendation and your system for consumer packaging for our product?
- Do you test products before they are shipped?
- How do you manage shipping to assure minimal disruption?
- What kind of accountability and reports do you provide? How often?
- How do you manage communications? For example, if our firm has questions, how do we communicate with you and what kind of response can we anticipate?
- How do you manage document control and other privacy issues, such as design, copyright and database information, to protect our product design and our company’s security?
- Will you provide our firm with contact information for several of your current or past customers?
- What other questions should we be asking?
Outsourcing to China is a big commitment. Before you risk your company’s security, talk with the China manufacturing experts at Trans-Pacific Facilitators.