How to Get Your Product Made in China?
For many years, China has been the world’s leading manufacturing powerhouse. However, in recent years, the country has faced stiff competition from other nations, such as Vietnam and Mexico.
So why is China still so popular for manufacturing?
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Manufacturing in China: Why is it so popular?
There are several key reasons. First of all, labour costs in China are relatively low, which helps to keep production costs down. When margins are slim, reducing the cost of your workforce by 60% can result in a massively increased profit margin. Total production costs can be cut by 20-40%. This can stretch to 50% and above, depending on the market sector you are manufacturing for.
Secondly, the Chinese government provides a wide range of incentives and subsidies to encourage manufacturers to set up operations in the country.
Finally, China has an extensive infrastructure of roads, railways, and ports, which makes it easy to transport goods to and from Chinese factories. As a result of these factors, China is likely to remain the world’s leading manufacturing nation for many years to come.
Potential Opportunities: Chinese market
Production in China also puts you at the front door of the fastest-growing consumer market. As China’s economy continues to grow, so does its demand for goods and services. This provides a unique opportunity for companies that are looking to sell to the Chinese market. By manufacturing in China, you can take advantage of the country’s lower production costs while also getting your products closer to your target consumers. In addition, China is home to a number of free trade zones that offer preferential treatment for foreign businesses. As a result, setting up production in China can help you tap into one of the most promising markets in the world.
Common Misconceptions (Poor Quality?)
There’s no question that Chinese manufacturers have a reputation for producing shoddy work. This is partly due to Western companies outsourcing their manufacturing to China to make cheap products to sell in Western Countries. But, of course, not all Chinese manufacturers produce shoddy work. There are plenty of reputable companies based in China that manufacture high-quality products.
There can be bad quality manufacturers in any country, so you need to do your due diligence or find a company that does it for you, like ChinaDirect Sourcing Services.
Domestic vs. Overseas manufacturing in China
There are many factors to consider when deciding whether to manufacture domestically or overseas. One crucial factor is cost. In general, China’s labor and production costs are lower than in developed countries. As a result, companies can save money by manufacturing products in China. Another important factor is quality. In recent years, China has made significant strides in improving the quality of its manufactured goods. As a result, many companies now view China as a viable option for high-quality production. Finally, it is essential to consider a country’s political and economic stability when making manufacturing decisions. China has been experiencing rapid economic growth in recent years, and its political stability is relatively high compared to other countries in the region. As a result, it is generally considered to be a safe and stable option for manufacturing.
Here are some of the pros and cons of manufacturing domestically in Australia vs. manufacturing in China.
Pros of overseas manufacturing:
- Massively reduced costs
- Reduced cost of raw materials
- Direct access to new markets (if intending to sell in the country of manufacturing)
- Greater variety of manufacturers
- High volume production costs are reduced
- Different ideas and inputs that can improve product design
Cons of overseas manufacturing:
- Communication can sometimes be lacking due to language barriers (this is not the case as much anymore)
- Less hands-on oversight
- Shipping costs (can still work out cheaper than manufacturing domestically in Australia)
- Intellectual property rights are different (see: Protect your IP in China)
Protect your intellectual property in China
For any business, intellectual property (IP) protection is essential; and you must understand that manufacturing in another country means you need to consider IP protection and trademarks in that country, even if you do not intend to sell there.
Read more at IP Australia – IP Protection in China.
What Documentation is Needed?
You also need proper documentation, specifying everything from the materials used to agreements for Sampling & Production, Quality Control, and much more.
If you are looking to do this yourself, here are some templates:
- Product Specification
A product specification document is a document that contains the information necessary to build and manufacture a product. Read More…
- Non-Disclosure Agreement
Protect your intellectual property when doing business with China. Read More…
- Sample Making Agreement
The Sample Making Agreement contains a detailed product description, quantity, and cost. It also sets out specifically your and your supplier’s responsibilities in manufacturing the sample product. Read More…
- Supplier Self Assessment
The Supplier Self Assessment outlines all product quality expectations and puts the supplier responsible for checking the goods against these criteria. Read More…
- Purchase Order Agreement
Build strong, productive relationships with your suppliers. Read More…
- Manufacturing Agreement
Ensure consistent results and reduce risk of misunderstandings. Read More…
Do your Due Diligence
Doing business with manufacturers in China requires a certain level of due diligence. There are several factors to consider, such as the quality of the products, materials used, the manufacturing process, and the company’s reputation. One option is to have a factory audit done, yet this depends on the size/complexity of production you are after. Also, Chinese businesses are limited by the scope listed on their business license, which includes what they can produce and which industry sectors they can be involved in. So it’s essential to verify that a factory is permitted to manufacture the kind of product/s you want. Plus, Requesting a sample of the product(s) you are interested in is always advisable.
Get a Sample
This allows you to confirm the quality of the manufacturer’s work and get a feel for the product(s) before committing to a large order. You will need product specification documentation. You may even have a sample made locally or technical drawings to send to the manufacturer so they can create a sample for what they would produce if you use them.
Inspect the sample Thoroughly; once you’ve received the sample from the manufacturer/s, take some time to inspect it thoroughly. Make sure that it meets all your requirements in size, shape, material, and so on. If there are any issues with the sample, raise them with the manufacturer immediately to rectify them before production begins.
Minimal Order Quality (MOQ)
Minimal Order Quality (MOQ) is the smallest quantity of product a manufacturer or supplier is willing to produce/sell and is at a quality they can profit from. So when finding a manufacturer, you need to consider their MOQ and if it is too high.
Import Agents vs. Sourcing Manager
Import Agents are responsible for the import and export of goods. They work with a variety of different clients, including manufacturers, retailers and wholesalers. import agents typically have a background in business or logistics. They often have little transparency when it comes to their pricing, which may include high margins. Due to these margins, the cost overtime adds up to a considerable amount.
A Sourcing Manager is a professional who is responsible for overseeing the procurement of goods and services for a company. The sourcing manager ensures that the company obtains the necessary supplies at the best possible price, while also maintaining quality standards.
The benefit of a Sourcing Manager is better transparency on pricing, no middlemen margins and they work for you.
ChinaDirect sourcing is a Sourcing Manager; find out more here.