China Sourcing- Pros and Cons

Faced with economic uncertainties, several businesses including the import export business are forced to explore new ways of improving profits

. Short of selling company assets, downsizing the business or closing it altogether, companies need to come up with solutions to keep it afloat. They need to search for innovative ways of cutting down costs to increase profitability and make up for shrinking sales or otherwise to lower selling prices and increase sales. Staff reduction, overhead cost cutting measures, reviewing suppliers and manufacturing costs are being considered and done.

A review of current processes and sources can determine at what particular area costs may be lowered. One viable option would be to outsource and import products from China. China has become one of the largest manufacturers in the world today and with their doubled manufacturing capacity, can manufacture goods in a short period of time that will compensate for the transit time it needs in order to reach the market. A variety of goods are invariably cheaper to source from China than anywhere else like packaging materials, chemicals, casted parts and more. Because of cheaper labor and overhead costs, it is 40 to 50% cheaper to import products from China than it is to produce it in highly developed countries. Even with increasing China export tariffs and the reduction in rebates, the import export business in China is booming.

Nokia of Finland, the ABB Group of Switzerland and Microsoft USA are just some of the manufacturing giants who have opted to invest in big manufacturing facilities in China. The last couple of years have seen the surge of more capital and technology being infused into the China manufacturing industry.

China sourcing involves not only buying finished goods but purchasing parts and components that manufacturing facilities in UK, US and Australia need for their production process. Ford Motor Company of Australia sources many of its components, especially accessories, from China although the more sensitive components such as the brakes and engines together with the auto assembly are located in 3 Australian manufacturing and assembly plants. Reliable technology and quality control is the motivating factor that negates taking advantage of maximum cost benefits and prevents companies from moving out of home base and relocating to China.

The visible drawback of companies who import products from China is the geographical distance from headquarters making production supervision quite difficult. This raises many doubts on the relative quality of goods that are being manufactured in China especially in the food and pharmaceutical industry. Excellent quality and safety are crucial peg points for international product distribution. The best solution would be to position someone to strictly oversee the manufacturing process or otherwise have an independent quality tester to ensure that set standards are met.

On the same note, to be able to successfully import from China, an import export guide should be engaged during the negotiation and ordering process so that manufacturing information as well as quality standards are clearly communicated and committed to. A successful import business not only entails importing from China but ensuring that the goods being brought in are up to standards set by the country or by international standards.

China Sourcing- Pros and Cons

By: Harry Broadbent

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