Cut Production Expenses - Outsource To Chinese Manufacturers

Chinese manufacturers offer huge potential cost savings for American manufacturers

, and I'm going to reveal why in this article.

US manufacturers compute their selling prices as labor cost material cost overhead cost profit. This works very well in an up market, but whenever a downturn comes and shoppers only buy identified needs and very few wants, a long term survival tactic becomes necessary.

As a general rule, labor cost is the foremost cost component of any manufactured item. Workers prefer to have a good life along with some nice creature comforts, and their incomes have been growing. Again, in an ascending market that's not a problem. People accept price increases as a fact of life in a flourishing economic climate, so safeguarding profits isn't that tough.

In a tough economy, such as the fairly serious one we're currently experiencing, manufacturers are confronting not one but two pressures. The first is the employee demand for once-a-year salary increases and the second is the slowdown in product sales. It's simple mathematics. To be able to shield your profits, you either have to increase your price, or cut your cost.

It's time to look at outsourcing some or all of your manufactured products to China.

On the surface, it looks like you'll be trading labor, material and overhead for freight costs, but let's take a closer look. Chinese manufacturers pay their own labor force approximately 90% less than US labor costs. Material costs are low in China, and so are taxes. So, if cost = labor material overhead, then you have a low cost solution by utilizing a Chinese manufacturer.

Quality is high with products made in China because they have a large economy that now supplies the world. Wal-Mart, for example, is a large customer for items made in China. The lesson of low price and poor quality that once plagued Japan was learned well by the rest of Asia.

If you bring in your products in container loads, the cost per piece is ridiculously low.

If you outsource 100% of your manufacturing to Chinese manufacturers, you can turn your factory into a warehouse and recognize even greater savings.

by: Steve Cho

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