Outsourcing & Buying from China

I don’t know anything about buying or outsourcing from China – How do I start? Well, you could do worse than contact either of our sponsors for advice! But advertisements aside, many people start by using an agent, often to buy or manufacture “commodity” type products such as pressings, turned parts or plastic mouldings. However, when outsourcing, I don’t think you can beat going out there and having a look for yourself. Websites exist, such as Alibaba or Global Sourcing, but I find these confusing to use and a bit of a lucky dip. Most people do start from the internet or by recommendation.

What can I buy out there?

Pretty much anything. People are often amazed at the manufacturing quality and quantity of China goods. Apart from large passenger aircraft, they make pretty much anything else.

What sort of price reduction can I expect?

Commodity prices are pretty much the same around the world, so what you are saving on when outsourcing is labour and overheads. Although these are rising in China, they are still much lower than the west, but then you have to add transport costs on. It goes without saying that the more added value you put in over in China, the better the cost reduction. For simple outsourcing, manufacturing, pressings and mouldings, you might get a 10-20% reduction over the UK, after transport and duty etc. This may not seem much, but can anyone afford to ignore such savings in these times? For a boxed product, combining various disciplines and using assembly time, savings beyond 50% are possible – think what that would do for your business. 

But I have heard some bad tales about quality, how can I ensure I get what I specify?

Quality in China is improving tremendously as competition increases. However, substitution of cheaper China materials and manufacturing for your specified ones is still a common practice and, after a good start, quality can often tail off. When outsourcing, good communication is essential. The supplier should be left in no doubt what is required, and regular visits are needed to inspect product, either by yourself or an agent you can trust. By the way – check your drawings before they go. Do they specify UK only materials or suppliers? Obvious but it often happens.

I understand that I can save much more by having finished goods made in China, but how can I protect my Intellectual Property?

Not easy. China has a perfectly good legal system but its basis is different to ours [see my comments on LAW] so protecting IP may not be straightforward. The Chinese Government is making big efforts to enforce IP rights for Foreigners but it is still not as easy as protecting IP under English Law. One way round is to establish a factory in China yourself [see my comments under MAKING IN CHINA] but, of course, this is a long and costly process. One simple way is to get everything but the clever bit made in China with the final assembly done in the UK. Sorry for another advert but CEJX offers a radical alternative.

There are a lot of difficulties mentioned so far – are you saying we should not buy from China?

Far from it. Your competitors will be buying from, or manufacturing, making in, outsourcing in, China or other low cost countries (my opinion is that China has the best balance of political, economic, social and commercial stability of any of the low cost countries). If you don’t match or better their costs, your company could struggle. What I am saying is be professional about it, commit time and resource to setting things up properly.

What else do I need to bear in mind when buying from China?

There is still a lot, hence there is a Your Question section on this site. Things you should cover when outsourcing are Payment terms, Tooling costs and Lead times. Things you should understand are CULTURE and LAW, covered later on this site.

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