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Should You Consider Sourcing from China?

Small to medium-sized retail or manufacturing companies are asking themselves if they should consider sourcing their products from China. It seems that nearly all of their competitors are either buying Chinese products or giving it strong consideration. Many of the better-known larger companies have already made the switch and seem to be doing well because of it.

One element that may help you to determine whether to buy from Chinese manufacturers is the type of products you need. Goods or components of goods which are made from templates are among the types of products that China does well. Appliances, electronic goods, toys and furniture seem to be good products to consider from Chinese factories. Telecom and biotechnology seem to be gaining strength and quality from China's manufacturers as well.

Another consideration is your company's future goals. Do you want to eventually begin selling your products in China, or do you intend to maintain strong sales only in your own country?

Some of the positives from sourcing from China include lower labour costs, flexibility in production quality, the nearness to producers of components, the lower capital outlay involved and a more favourable tax system in China than many other places.

There are negative issues as well. Among them are the delay in actually getting started, the distinct time difference between your country and China, China's rather chronic energy shortage problems and a serious problem of dealing with protection of intellectual property rights in China.

Cost gets involved in deciding whether to buy from Chinese producers. China has cheap labour costs, making the initial product costs lower than in developed countries where wages are much higher. There are other costs to be considered as well such as shipping and freight costs, duty payments and of course, the initial set-up expenses.

Some plans which can help to cut costs are using sourcing agents to represent you in China, setting up a representative office for your own company in China, partnering with a Chinese company or setting up your own foreign-owned company.

If you decide to begin buying from China, you must do research into companies and carefully choose three or more to contact. Do enough research to feel comfortable with the companies. If you set up a representative office, you can do a better job of overseeing the work being done on your products. Another option is to set up a sourcing coordination centre, perhaps in Hong Kong. This centre controls shipping and other aspects of the operation. One drawback to this is that it is far from the factory where the products are being manufactured. Some companies decide to set up a wholly foreign-owned enterprise (WFOE). It is usually more popular than partnering with a Chinese company.

No matter what route you take, maintaining good quality of your product will be your utmost concern. Quality control systems must be established and regularly used. Good communication with the manufacturer is a must in order to keep schedules accurate and quality high.

If sourcing to Chinese manufacturers is chosen by your company, you must always be ready to make changes whenever conditions change. Your company's ability to adjust to new ways and new ideas will influence your success in doing business with Chinese suppliers.

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