There are six crucial elements that will determine if sourcing from China is right for your business. While every situation is unique, all businesses must examine their needs in light of these factors:
1.Is It Made in China Now?
2.Cost of Labor
3.Transportation Efficiency
4.Lead time and Inventory Risk
5.Design Considerations
6.Complexity
1.Is It Made in China Now?
The best indicator of economic feasibility is if your product (or a similar product from a competitor) is already being produced in China. If it is, odds are you should be getting your product from China as well. If you already source from China and need to find a less expensive supplier, Asian ProSource can help you find them.
2.Cost of Labor
For a product with a large labor component (i.e., 25 percent or more of the product cost structure), low Chinese wages represent a meaningful benefit. But for products with low labor requirements, China may not be the best option.
3.Transportation Efficiency
Since ocean transportation costs are essentially a fixed cost per volume shipped, economics favor China when smaller, higher-value items are involved. Asian Pro Source only works with companies that deal in large volumes of product.
Air freight on average is about 25 times the cost of ocean transport. Only product with very high packing density and high value per unit can support the costs associated with air freight.
4.Lead time and Inventory Risk
Ocean freight adds four to six weeks to the delivery time from China to Western markets. Aside for this scheduling pressure, purchasing in large volumes means larger inventory carrying costs, defect risk and potential obsolescence.
5.Design Considerations
Products with one or more design changes per quarter may not be suitable for Chinese procurement. Frequent design changes mean the supply chain could end up with a continuous run of obsolete inventory and force your production partner to struggle with a steep and costly learning curve.
6.Complexity
Manufacturing processes which require highly specific technical knowledge of product engineering or equipment design are generally not ideally outsourced to China. Products made with the least complicated, most mature technologies are the best choice to source from China.
