The Advantages of Direct Manufacturing Outsourcing in China

By: John Roker

In today’s global economy, attaining a competitive edge is vital. With many companies competing in crowded marketplaces, having to compete on price alone has become a reality for many companies. Ensuring that you are getting the best price possible for inventory is a vital process that should be equally as important to a company as ensuring quality is consistent and delivered on-time to customers.

With many global brands opting for to directly outsource manufacturing to China, other businesses are attempting to follow by both taking advantage of Asian markets and also ensuring they do not have the profit margins of a broker to contend with as well. Being able to locate and build relationships with direct manufacturers is becoming increasingly difficult with the rise in brokers in the marketplace, however when you do indeed manage to locate one; the advantages of building a partnership with them can be beneficial for both retailers, wholesalers and brand holders.

China versus Other Developing Economies

China has advantages when it comes to manufacturing over other Asian countries. One reason for this is the experience and education the country has in delivering products that adhere to the rigorous standards that are required by both western legislation and consumers. Chinese labor is also significantly cheaper than Indian markets for example, where rapid inflation is making it harder for Indian companies to compete on price alone.

Direct Outsourcing versus Brokers

When it comes to purchasing inventory, there are certainly more brokers in the marketplace than there are manufacturers. Some brokers will effectively manipulate companies into thinking they operate as a manufacturer, where as others will act as a legitimate broker. Either way, they will either choose to mark-up the price or charge a commission rate for the transaction. Contacting the manufacturer directly will cut out the middle man, allowing your company to save money on purchasing inventory.

Outsource versus In-House Manufacturing

In business we are always told that we should focus on our core competencies. What does that mean? You should consider what your business has that is unique over its competitors. Is it an idea for a product, an ability to offer cost-effective solutions or even an intricate understanding of a certain sector? Whatever it is that your business has core competencies in, it is important that your business highlights them in what it does in-house and out-sources the other aspects to companies that have special skills.

For example, if your company has spotted a potential market for a product, then they should take advantage of the opportunity that they have identified. However that does not mean they should manufacturer the product themselves. Ultimately, they should follow the path that will allow them to deliver quality at the best price; allowing them to focus on their core competencies.

Therefore, if you are manufacturing in a western economy then you should ask yourself why. Why are you using an in-house workforce that may be 10 times more costly than what a Chinese company may be able to pay? Why are you focusing on manufacturing when time could be better spent on sales, marketing and business development?