9 Elements To Evaluate When Outsourcing To China

Published 18 April 2024

Outsourcing production to China can offer significant cost savings and access to a vast manufacturing base. However, navigating the complexities of outsourcing to China requires careful consideration of various factors to ensure a successful and efficient partnership. Here are the top 7 things you should keep in mind when moving production to China:

1. Price Point

Outsourcing to China often becomes a focal point in discussions between buyers and suppliers. To minimize unforeseen surprises or expenses, it’s important to recognize that price typically influences quality. This correlation is often driven by small Minimum Order Quantities (MOQs), which can discourage suppliers from investing extra effort to coordinate with sub-suppliers or raw material providers to resolve manufacturing issues—an aspect that requires constant awareness. The truth is, factory managers tend to prioritize larger orders for obvious reasons. Lowering costs often heightens the risks associated with on-time delivery and quality assurance.

2. Order Quantity

Order quantity plays a critical role in cost reduction and quality improvement when outsourcing production. Larger orders provide greater leverage and influence at the factory level, allowing for better control and attention to detail. Factories often rely on various suppliers and services within the supply chain, and smaller quantities may not receive the necessary focus to drive down costs and enhance quality effectively.

A fashion brand seeks a China clothing supplier to outsource custom-designed embroidered patches for new jackets to China. The patches require intricate details, but Chinese embroidery factories typically have minimum order quantities (MOQs) of 1,000 pieces due to setup costs. However, the brand only needs 500 patches initially. To address this, the brand must negotiate with suppliers for a lower MOQ or explore alternative options to meet their customization needs within budget constraints. This example highlights the challenge of balancing customization requirements with production limitations when outsourcing clothing manufacturing to China.

3. Order processing time

Shipping goods globally undoubtedly requires considerable time, and ensuring timely delivery relies heavily on effective purchase planning and forward-thinking project management. Be cautious of promises of miraculously short lead times, as they often aim to capitalize on your urgency and desperation to ship products promptly, ultimately leading to unmet expectations and delays.

BLND-Sourcing - 9 Elements To Evaluate When Outsourcing To China - Order Processing Time

4. Technicality & Advanced Manufacturing

The pricing of parts that are primarily machined or involve less manual labor tends to be less competitive in Asia. More intricate parts necessitate higher-level manufacturing controls, which are indeed available in China; however, depending on the complexity of the part, you may find yourself paying prices similar to those in Western markets in some instances. Whether it’s complex die-cast components or packaging for high-end skincare products, it’s essential to consider the level of product complexity when evaluating costs.

5. Quality Control Challenges

Maintaining consistent high quality when outsourcing to China presents notable challenges. While many Chinese factories have advanced capabilities, ensuring adherence to stringent quality standards can be complex, especially with language and cultural differences. Effective quality control measures must be established, including detailed product specifications and frequent inspections throughout the production process. Implementing on-site oversight or utilizing reputable third-party quality assurance services can help mitigate risks and address issues promptly. Additionally, fostering strong relationships with suppliers based on clear communication and mutual understanding of quality expectations is crucial. By proactively addressing quality control challenges, businesses can enhance product reliability and customer satisfaction in their outsourcing endeavors.

6. Intellectual Property Risks

Navigating intellectual property (IP) risks is paramount when outsourcing to China due to differences in IP laws and enforcement compared to Western standards. The risk of product designs or trade secrets being compromised or stolen is a valid concern. To mitigate these risks, businesses must prioritize robust IP protection strategies. This includes clearly defining ownership of IP rights in contracts, implementing confidentiality agreements, and registering trademarks or patents in China. Collaborating with legal experts specializing in international IP law can provide valuable guidance in safeguarding proprietary information. Moreover, selecting trustworthy suppliers with a proven track record of respecting IP rights and adhering to ethical business practices is essential. By addressing intellectual property risks proactively, businesses can protect their innovations and maintain a competitive edge in the outsourcing landscape.

7. Market Readiness

Is there an established market for your product already? We frequently receive requests to develop prototypes and produce very small sample runs for projects that are still in the early stages. These endeavors can be time-consuming and costly, often without a clear endpoint. Typically, extensive tooling modifications are required, leading to delays and increased expenses.

Our experience indicates that factory owners often have a short-term perspective, and such developmental projects can lead to supplier fatigue. Motivation may wane when faced with endless tool modifications, tweaks, and costly sample runs. It’s not uncommon for factory managers to seek evidence of future orders to sustain interest in the project.

The easiest way to your search for suppliers would be to collaborate with a Chinese sourcing agent to help you go through all sort of challenges (that we will go through later on).

BLND-Sourcing - 9 Elements To Evaluate When Outsourcing To China - Production Quality Control

8. Cultural Awareness and Communication

When engaging in outsourcing to China, it’s important to recognize that “understanding what was said” doesn’t always equate to “understanding what was MEANT.” Simply receiving a positive response from an engineer doesn’t guarantee that they fully comprehend your expectations or share the same interpretation of terms like “smooth surface finish.”

This isn’t to suggest any ill intent or deception on their part, but rather highlights a common communication challenge. We frequently observe individuals being misled by factory responses, which often stem from differing cultural perspectives.

For instance, when an American or European colleague asks, “can you do this?” it implies a higher standard of quality. However, this assumption may not translate effectively across different cultural contexts. Without shared cultural background, many of these assumptions can lead to misalignment and misunderstandings.

9. Focus on Core Competencies

Outsourcing non-core functions to China offers companies a strategic advantage by allowing them to concentrate on their core competencies and strategic priorities. By delegating tasks like manufacturing or logistics to specialized partners in China, businesses can optimize resource allocation and streamline operations. This approach enables companies to allocate their internal resources more efficiently toward activities that directly contribute to their competitive advantage and value proposition. For instance, a technology company can focus on research and development (R&D) and innovation while outsourcing manufacturing to China, leveraging the country’s manufacturing expertise and cost efficiencies.

Moreover, outsourcing to China provides access to a vast pool of skilled labor and advanced technology, further enhancing the company’s ability to focus on core strengths. This strategic alignment enables businesses to enhance productivity, accelerate time-to-market for new products, and adapt more quickly to market demands. By embracing outsourcing as a means to reinforce core competencies, companies can achieve operational excellence and sustained growth in a competitive global marketplace.

10. Chinese sourcing agent

A Chinese sourcing agent like BLND-Sourcing plays a crucial role in assisting businesses with the complexities of outsourcing to China. They conduct thorough market research to identify suitable suppliers and assess their capabilities, helping to navigate challenges such as quality control. The sourcing agent manages communication and cultural differences, ensuring clear understanding between parties to avoid misunderstandings in production requirements and specifications.

Additionally, BLND-Sourcing helps businesses address MOQ challenges by leveraging their network and negotiation skills to secure flexible terms with suppliers. They facilitate the coordination of logistics and supply chain management, optimizing shipping times and costs. The sourcing agent acts as a strategic partner, allowing businesses to focus on core competencies while delegating non-core functions to trusted experts in China.

Ultimately, BLND-Sourcing streamlines the outsourcing process, providing end-to-end support from supplier selection to product delivery. Their expertise and local knowledge minimize risks and maximize efficiency, enabling businesses to navigate the complexities of outsourcing to China effectively and achieve their sourcing objectives with confidence.