Is China Sourcing for you? Infographic

A Hot Tip about Sourcing in China

Posted on: 19 Jun 2013

Tool to perform a simple feasibility evaluation of whether China is the right place for you to source products of parts.

Is China the right place for me to source products? Many factors define whether or not sourcing from China is the right thing to do Good Feasibility Poor High Volume Low Higher volumes make it easier to develop a If volumes are low, bundling the purchase When volumes are really low or very sustainable quality business with Chinese of a family of parts or products often allows unpredictable, it is often not possible to suppliers. It also allows to engage in to generate enough business to keep a keep Chinese suppliers engaged and supplier improvement and supplier supplier well interested in your business. interested in your business. development. Investment in face to face contact helps. Long Delivery Leadtimes Short When end user delivery lead times allow for When end user delivery lead times are When end user delivery lead times are planned ocean freight, China is a good short but predictable or parts can be short or urgent and delivered products are option. For instance for project based stocked, it is possible to hold small stock not easily predictable, China sourcing is sourcing and for stable supply chain. on hand and “stock” in transit on sea. often not the right source. Ocean freight Remember to add 30-40 days shipment. Corresponding cost to be added to TCO. takes 20-30d to US and 30-40d to Europe Short Qualification Long Chinese supplier have a shorter time Qualifying time varies for each products Sometimes, qualifying a part or a product horizon then most Western companies. and parts in most portfolios. When requires months or years. Such lead time They understand you need to qualify their possible, allocate a set of short and long is killing with Chinese suppliers. Do not products but they will expect this to be cycle products to the same supplier in start with a supplier for products requiring done within 3 months if the buyer is order to start real business quicker. such extended and complex certifications. serious. Yes Design Flexibility No When design can be slightly modified to Most products have critical tolerances and Design & production process are fixed. No optimize China manufacturing, suppliers will specifications. They also have non critical change are allowed for technical or for deliver additional cost saving in ones. When a buyer is willing to organizational reasons. Often this lead to subsequent years. Changes incl. material, experiment limited modifications with its poor savings as part of China cost edge is relaxing non critical tolerances, … suppliers, benefits are worth often it. in the smart use of labor in production. Big Value Added Small Nowadays, China offers relatively skilled Between advanced machinery and plastic Simple metal or plastic parts with limited or and experienced technicians and workers cheap cotton socks, there is a wide range low skill labor are getting increasingly less for complex processing and assembly. of products where China is attractive. For attractive. Resource or energy hungry High added value products, when quality is best return, always leave more added parts are no longer encouraged and even controlled, offer the highest savings. value in China: assembly, packing, sorting . discouraged by tax and duty system . . Not Critical IPR Critical Key know-how hidden in well protected Protected IPR whenever possible but some The entire business relies on a few subparts and hard to copy. Buyer brings know-how cannot. Risk of idea theft exists, unprotected inventions or know-how. continuous innovation on the market. All even if not critical. It is most often possible Products is all about a single smart idea IPR are legally protected, incl. in China. to take practical and legal measure to that is easy to copy. Keep off China but be Keep in mind there is no risk Zero. minimize risks of theft and its impact. aware that you may be copied anyway. Expend Business Model Delocalize Business is doing well. Buyer wants to Buyer has identified parts and products Money losing business because of cost strengthen Asia’s position and setup an areas that start to seriously hurt margin. It pressure wants to delocalize to save it. industrial base in China and find a new takes the initiative to consider Chinese Plan to close or slim down home factories. supplier base. It also can benefit of good suppliers for these and takes the time to This seldom works as sourcing requires finds in China for ROW. find the right suppliers and develop them. initial investments in time and money.
Posted: 19 June 2013

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