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Suppliers
For many manufacturing and product design
firms, China sourcing represents the greatest
presently-available opportunity to improve their financial
performance – in many cases by 100% or more.
However for many Western companies it
remains risky and costly to source directly from China.
Risks are commercial and technical, as well as quality-wise
and cultural. China's rapid industrial growth has created
vast differences in technical, professional and quality
levels. As new factories mushroom up, existing ones
disappear almost as quickly. In many fields there are
hundreds of poor or mediocre factories for every one that is
capable of meeting Western standards. An attractive website,
English-speaking sales personnel and aggressive promotions
are no evidence of actual professionalism or reliability.
Often the worst factories invest in the best promotions,
while the top factories don’t advertise at all. In such a
dynamic and non-transparent environment, only an
experienced, competent and locally-based industry partner is
able to consistently divide the wheat from the chaff.
Cost
Drivers
So how much can be saved by sourcing from
the best China OEM's? For many products, 30-50% savings can
often be achieved without sacrificing specifications or
quality. Savings come from cheaper labour and land prices,
which are both many times lower than Europe or North
America. Furthermore, these lower labour and land prices are
also reflected in materials and overhead costs. Taken
together these savings result in costs typically 30-50%
below those of Western suppliers. Cost savings vary
depending on factors such as labour intensiveness, transport
costs, and source of raw materials.
Manufacturing Feasibility
While China offers tremendous cost-saving potential for a
wide range of manufacturing processes, not all products can
be outsourced to China effectively. As a rule of thumb,
products that are mature, produced in high volume and do not
require the cutting-edge manufacturing capabilities, are the
best candidates for near-term cost-savings. For such
products it is easy to replicate the manufacturing process
in China, demand can be planned in advance, and a quick
response to market and product changes is usually not
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