There will, of course, always be inherent risks in buying in and doing business in China, just as there are always risks doing business domestically.  Asian ProSource’s experience works to manage and minimize these risks.

Many companies wonder if they should be doing business in China, and there are six important factors to consider before making this decision.

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?

If your product, or one like it from a competitor, is already being produced in China odds are you should buy from China as well.  If you already source from China and need to find a less expensive supplier, Asian ProSource can help you locate one.

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.  However, for products with low labor requirements, doing business in China may not be the best option.

3. Transportation Efficiency

When smaller, higher-value items are produced, China is a great value, as ocean freight is fixed per weight.  Asian ProSource only works with companies that deal in large volumes of product.

Air freight fees, on average, are 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 requiring 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 choices to source from China.