Is Chinese Supply Still the Best Option 2016 and Going Forward?

In china, ecommerce by Chris0 Comments

Is Chinese Supply Still the Best Option?

With the manufacturing market becoming more competitive, many are questioning whether or not sourcing supply from China is still the best option. To put this question to rest, this blog is going to run through the advantages and disadvantages of sourcing your supply from China. First of all, let’s consider the disadvantages:

Lead Time:

As for sea cargo transportation out of China to other locations, find a rough idea below.

Note this is for the normal containers 20 foot and 40 foot 40 foot high cube other might be longer times due to availability.

The most substantial factor when considering China is the shipping time as this can be more substantial than sourcing from other regions. Furthermore, long shipping times can run up costs, especially if you have to ship by air- but faster shipping could make up for the lost sales if you had waited the potential 30 day sea transit shipping.

In terms of shipping costs and duties, you have to consider anti-dumping measures imposed on China concerning raw materials. However, if you manufacture a product or component with these materials, these charges are usually avoided.

Control and Quality of Product:
Depending on the type of goods produced, China sometimes is known for a lesser quality in manufacturing. Much of this is due to a language barrier that often exists between the factory and the client. While many Chinese learn English these days, you’ll find that many factories often speak a hybrid of English and Chinese (commonly known as Chinglish) which can often cause difficult communication, especially if technical conversation is required. Communication can be even more difficult as the simple time difference can be hard to manage.

Quantity of Product:
Most Chinese factories operate with lower profit margins than most regions in the world. Therefore, most of these factories will have a high minimum order quantity, so if you’re looking for small one off orders, you might want to look elsewhere.

HOWEVER:

While many might face these difficulties in China, there are those who bypass these problems by coming to companies like ours. A key component of our service is quality assurance which is conducted by British engineers who visit factories to make all necessary checks and inspections ensuring the quality of orders. Our engineers have extensive experience working in China and have comprehensive understanding of British standards which makes us proud to be able to ensure high quality and precise orders.

While sourcing from China does have its disadvantages, it also maintains substantial advantages over sourcing domestically which can benefit your business greatly.

Low Cost of Manufacturing:
Manufacturing is often a lot cheaper than anywhere else for a variety of reasons. One crucial factor is the accessibility to low cost raw materials. This makes the base price of the product lower than almost anywhere. Although some other Asian countries, Vietnam, Thailand and Indonesia for example, have lower cost labour than China, these countries do not have the same low cost raw materials. Moreover, they don’t have the same level of developed infrastructure China does, making the movement of materials and products more costly.

The Yuan is Pegged to the Dollar
In late 2015, China decoupled the Yuan from the dollar and linked it with a number of currencies. However, earlier this year China quietly pegged its currency back to the dollar. This has many beneficial effects for those wishing to source from China. This helps keep its exchange rate low, boosting competitiveness of its products as they are sold abroad. Investopedia use a sufficient example of a stronger Euro (EUR)/Vietnamese Dong (VND) exchange rate. As the EUR is much stronger than the VND, products like a t-shirt can cost a company five times more to manufacture in a European country compared to Vietnam.

All in all, China is still one of the best options a business has for manufacturing. While it has its problems (as any country does), its advantages are substantial. Moreover, many of the disadvantages discussed earlier can be easily avoided. Thus, in terms of manufacturing, China isn’t going anywhere.

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