In today’s business world, outsourcing has gone mainstream and China has become a popular country for outsourcing. As a matter of fact, China’s outsourcing market is growing 30% each year and manufacturing in China has created huge opportunities for new products as well as innovations.
The main benefit of China outsourcing is that it allows you to create a higher volume of product for a low cost. It’s quite common that if you outsource manufacturing in China, you can cut the price of your product by 30% to 50%, which will give you a big advantage over your competitors.
However, before you start China outsourcing, you should think about your business and really understand the pros and cons of outsourcing.
For China outsourcing, there are some facts and principles that must be known. Without a good understanding, you won’t be able to success. Below are 10 things you need to know about China outsourcing.
1. China outsourcing is not for everyone. While it seems like every company is doing it and talking about it, the truth is that China outsourcing is not for every company. Whether China outsourcing is a good option to you depends on your industry and your business model.
2. China outsourcing requires a lot of changes. Different resources are required. Different skill sets for your people are required. New training must take place. Different Communication methods are required as well. Different software tools are required for you to properly manage the projects. Different legal contracts and operational documents are required as well.
3. The majority of all outsourcing projects fail before they get started. This is due to the fact that most companies practice stupid outsourcing. They have no strategy or plan and have picked the wrong supplier. They have failed to do their homework in the beginning and have little or no knowledge of their own costs.
4. If you are dong China outsourcing simply to cut costs, you will fail.
5. China outsourcing is both a strategic and a tactical decision, which should be taken seriously. Companies must take their time in decision making and address all issues.
6. Understanding the costs is the key for China outsourcing. This is important before you start and after you start. It costs money to outsource. you must invest up front to save money later. Suppliers are usually good at hiding costs and confusing their costs. You should be fully aware of this.
7. The low-cost region as of today is getting more expensive every day as time goes by. Remember Japan in the 70s? Mexico in the 80s? Now everyone goes to China or India. What region is next?
8. If properly managed, China outsourcing can dramatically increase the return on investment for your company.
9. If you fail in China outsourcing, most likely the problem is in our practice, not the idea.
10. If you success in China outsourcing, you will win big. There are many successful companies today who have a business model heavily built on China outsourcing. It can be extremely successful but you must know what you are doing and understand China.
Remember that China outsourcing is not a magic cure for business today. I have seen many companies who have successfully outsourced and enjoyed major financial wins. On the other hand, we have also seen many companies who made mistakes during China outsourcing, resulting in disastrous results. Therefore, you should carefully think about your business and know the facts and conditions about China outsourcing to ensure you can succeed.