Why Outsourcing Manufacturing to China Is More Financially Reasonable
As your business grows, it’s likely that you’ll begin looking at outsourcing some of your manufacturing processes to other countries with cheaper labor costs, such as China. The problem with this practice in the past was the amount of time and money it took to hire workers overseas, monitor their progress, and then ship product back to your warehouse once they were finished. Today, contract manufacturing in China make all of these things easier, making the financial benefits that much more attractive.
Shipping Costs
Depending on where you source your goods, costs for shipping can be prohibitive. Before deciding to manufacture abroad, make sure you fully understand all shipping costs and regulations. In some cases, it’s cheaper to have a freight forwarder who specializes in international shipping do all of your importing from a single location, instead of importing from multiple countries with multiple carriers. On top of import duties, make sure you factor insurance into your cost breakdowns as well. If you’re not handling all shipping related tasks yourself, make sure you find someone who is qualified to handle these duties; if done improperly, shipping companies could lose or damage inventory which could lead to costly product recalls down the road. China’s labor forces are less expensive than other regions while its developed infrastructures mean that delivery times will be shorter because products will spend less time getting through customs. Many large retailers use Chinese manufacturers due to their central locations and short delivery times — many major ports in China are only a few hours away by ship — compared to other manufacturing locations like Mexico or Brazil, which could take up to two weeks for products to reach their destinations by sea.
Currency Conversion
One of the most common concerns about investing in Chinese manufacturing is currency risk. But RMB is very stable given the current climate. It has appreciated a mere 1.3% against the USD over the past year. And, looking back to 2005, when China joined the WTO and opened its borders to western-style investment and trade, RMB has only depreciated roughly 4%. There’s no reason not to be bullish on RMB for years to come. The currency is well-managed by the Chinese government (albeit with some nefarious strings attached), making it a very safe bet for dollar denominated transactions.
Freight Forwarder Costs
Freight Forwarders cost less in China, both in price and percentage of gross profit. Generally speaking, freight forwarders keep anywhere from 5% to 7% of a company’s gross profit as their service fee, but in China they can often cut that to 3%. For example, take a 4 million dollar shipment: A Freight Forwarder might only charge $80,000 instead of $200,000.
Quality Control Costs
There are many reasons why quality control services in China are cheaper but better than many other countries. Quality control services in China have been developed for years, and it has become mature enough. The cost of quality control services in China has been reduced a lot, and it’s much cheaper than other places like Hong Kong and Taiwan. Factories pay less attention on their manpower costs, they tend to hire more workers with less experience and skills, which makes the production lines much slower than before. Factories produce their goods with lower requirement of quality than international standard levels because they hope to sell them in domestic market easily, not paying too much attention on products defects caused by human errors.
Labor Costs in China
Labor costs are still lower than other countries despite rising and labors there are more skilled. While the rise may seem like it’s not worth taking a risk on an overseas location, consider that other manufacturing countries such as South Korea and India have labor costs that are double or even triple what workers make in urban areas of China. Furthermore, according to management consultant The Boston Consulting Group (BCG), labor productivity actually increased in 2013 by 18%, which means that wages have been increasing steadily while work conditions remain favorable for employers. Owing to its high-quality workforce, innovative industry and strong infrastructure network, China has built up global supply chains over time. Most companies choose to locate their factories there due to its strategic location connecting major Western markets. Despite being 3 times farther away from Europe than Mexico and almost 4 times farther away than Bangladesh, more products go through Chinese ports into Europe because Chinese coastal cities are closer.
How Does This Relate To My Product Idea?
You can focus more on renovating and marketing your product by outsourcing manufacturing to China. Since it costs less to manufacture abroad, you can put that money back into your product and save a bundle on quality control in China. If it doesn’t work out, you can switch factories easily without losing much of your initial investment. However, outsourcing isn’t right for every type of business and manufacturing abroad takes time to figure out—but if you’re willing to take a risk and have faith in your company’s vision, getting started with China production could be a smart choice for your bottom line.
With the British background and China base of Shield Works as well as our international bilingual team members and 3PL services worldwide, it is a great option to enjoy quality of China manufacturing and hassle-free process. Leave all your manufacturing troubles to us. If interested, please feel free to contact us.
5 Tips for Original Equipment Manufacturing
Original Equipment Manufacturing (OEM) refers to the production of equipment made to the specifications of another company or manufacturer. This business model has been applied by companies around the world and is very common in China’s manufacturing industry, due to its extremely competitive market and high-quality products at reasonable prices. However, there are several key factors that are unique to the OEM model that you must be aware of before beginning your venture into China’s Original Equipment Manufacturing market.
Original Equipment Manufacturer (OEM)
If you are new to importing and plan to start your own business, then Original Equipment Manufacturer (OEM) is a good place to start. OEM refers to products produced by other companies that are rebranded or sold under another company’s name. For example, if you own a clothing line, you could consider approaching different apparel companies and getting their apparels made with your branding on them and then sell them yourself. When looking at starting an OEM business it’s important that all parties understand what is expected of each other and how everything will work together in order to make sure it ends up as a positive experience for everyone involved.
Finding a Good Supplier
Finding a good supplier is probably one of your biggest challenges. There are literally thousands of manufacturers and suppliers out there, each with its own website, reputation, capabilities and pricing. The problem is that you can’t get to know every single one, even if you try. So what do you do? Find an original equipment manufacturer (OEM) with whom you can work long-term. This way, once your first orders start rolling in, they’ll be able to follow up on it without ever bothering you. Just make sure they’re easy to contact by email or the chat app everyone uses there, WeChat, to be specific—you’ll need them to be responsive because customer satisfaction is key when things go wrong or when there’s something that needs fixing or changing on the spot.
Factories vs. OEMs
While it’s important to understand how both factories and OEMs operate, each has its own purpose. Factories will typically manufacture products to order based on a minimum order quantity (MOQ). That is, they will produce your product based on however many pieces you purchase; with that said, there is no guarantee of quality. OEMs (Original Equipment Manufacturers) are different because they have a brand or intellectual property that gives them more autonomy over their manufacturing decisions; as such, OEMS will have stringent processes in place for ensuring quality control. With that said, choosing between factories and OEMs can come down to where your manufacturing budget aligns best with your business goals.
Outsourcing is never simple
Researching, scouting, and getting to know potential manufacturers and vendors is time-consuming. And when it comes time to find someone you can trust, it’s difficult to know where to start. At last year’s CES technology trade show in Las Vegas, there was a firm presented as a go-to manufacturer of devices that look like iPads but cost far less. But when we investigated further, we found that almost everything about them was false—they weren’t made by Apple; they didn’t even look like real iPads. The products were unlicensed knockoffs sold through some big retail chains in the US—which said nothing about them being fake or inexpensive.
Dealing with hiccups
A manufacturing hiccup can be anything from an underperforming supplier to a supply chain delay, but it can severely disrupt your production schedule. What do you do if there’s some kind of snag? Your first step is to identify what exactly has gone wrong. If you need help, ask questions and get as much information as possible so that you can resolve it quickly. Ask yourself: What is your problem really? Is there just one issue or several issues adding up? Is it something that you can solve on your own or is it something that needs additional resources and support? Next, figure out how important solving this problem right now really is—and decide what resources are required to get things back on track.
It’s a common misconception that manufacturing in China is expensive. In fact, it’s quite affordable, especially when you compare it to labor and material costs in other developed countries. But we understand your concerns regarding culture, communication and IP protection, as we, C2W, are a one-stop manufacturing solution provider founded and managed by British and based in China, with our own production facility and in-house bilingual engineers. If you are interested in getting to know more about how we can be of help with your product manufacturing while protecting your IP, please feel free to contact us.
7 Ways the Supply Chain Crisis Has Changed Outsourcing Manufacturing
The year 2021 was synonymous with shortages in almost every industry. Across the world, some product shortages meant that shelves were empty and the demand for products outstripped what was available.
This isn’t a problem that’s going away anytime soon. Experts have indicated that global supply chains could be affected for up to two more years.
This is changing the way that companies approach outsourcing manufacturing.
In this article, we will take you through the 7 ways that the supply chain crisis has changed outsourcing manufacturing and what options are available to businesses.
Read on to find out more.
1. Implementing Company Emergency Plans
Company emergency plans are in place for a reason. Supply chain disruptions or breakdowns in production lines can be costly for any business that relies on providing a product or service to customers.
It’s having the infrastructure and policy in place for those ‘what-if’ moments. A contingency plan for different scenarios is critical for those businesses that need to react quickly when something goes wrong.
Whether that’s changing your outsourcing manufacturer, or changing your shipping routes, a plan needs to be in place for every eventuality.
2. Looking Further Afield
The supply chain crisis has had businesses investigating new ways to increase outsourcing. Many companies were unable to rely on domestic assembly lines and factories in 2021 due to the number of workers that were sick or ill from COVID 19.
Booming manufacturing markets in China mean that companies can still get excellent results and products, just overseas.
You don’t even need to feel as if you’re on a different continent. With state-of-the-art technology, you can get direct video footage of your products being prepared in the warehouses.
This means you can have peace of mind when it comes to the quality of your products.
3. Assembly of Products has Become More Challenging
If a company is relying on several components in a supply chain, this is where problems can emerge. If there’s a shortage in one component or product, this slows down the overall build of a device or item.
If the delayed item is integral to the overall build of a product, this means the product can’t be completed and sold to the customer. If there are delays on several components, this can be detrimental to the supply chain.
This is why some companies are moving away from fragmented production lines and looking to streamline all of their product components with one company or warehouse.
It ensures that products aren’t being delayed any further than necessary and that there aren’t any vital pieces missing.
4. Ordering More Products Through Outsourcing Manufacturing to Store
It’s not just consumers that realize they may need to stock up more. Businesses and companies are ordering in and storing more items on a large scale than previously before the pandemic.
With demands for items at an all-time high, it’s important that companies have enough stock to last them for a longer period of time.
Problems in ports and unloading items have also delayed steps in the supply chain. The Suez Canal crisis was estimated to have held up $9.6 billion of trade per day of the blockage. It also affected global oil prices as well as global supply chains for weeks after.
Events such as these are rare, but they can’t be ruled out happening again.
If a company knows their busiest time of year is Christmas, it’s essential that they have the surplus stock ready for November and ready to be shipped domestically.
5. Redesigning Products for Streamlined Production
Some larger companies have gone to great lengths to ensure that they are able to keep up with their outsourced manufacturing. This includes redesigning their products so they don’t have to wait on supply chains for their different components.
Especially in tech products, this is a trend that will continue to develop in the next few years.
Businesses are weighing up their options and working out which is the most efficient way to build their products, without being held up in long supply chain delays.
If there are chip shortages, businesses are shopping around to see what the wait times and price points are.
6. Supply Chain Vulnerability Audits
Companies are trying to learn from their mistakes and supply chain errors of 2021.
Mistakes do happen and it was an unprecedented situation for many businesses, even larger ones that have the necessary capital and infrastructure.
Many companies are now carrying out their own supply chain vulnerability audits. This means that they can pinpoint any weaknesses and gaps and pivot to a more efficient way.
Whether this is changing their outsourcing manufacturer or ordering products on a larger scale, it’s important that mistakes can be used as a learning experience.
7. Adjusting Targets for Production
If your production and output were drastically down for 2021, that’s something that was true for a lot of companies the world over.
Nintendo, for example, was short of its production target due to supply chain issues. The simple fact is, you can’t finish a product if you don’t have all the pieces for the job.
Supply chain problems aren’t going away any time soon. It can be helpful to make reasonable adjustments to your production targets to combat this global issue.
Outsourcing Manufacturing: What Can You Do for Your Business?
The supply chain crisis is the result of a myriad of problems, in conjunction with the pandemic. One way to combat this is to reevaluate your outsourcing manufacturing.
Take a look at the services we can offer your company, from manufacturing to assembly to warehousing.
We’re a reputable manufacturing company with 16 years of experience in the field.
Fill in our contact form and one of our expert team will get back to you shortly. We look forward to making your outsourcing manufacturing a lot more straightforward.
Outsourcing Assembly: How to Use a China Assembly Service in Your Supply Chain Strategy
Despite recent uncertainty in the supply chain, China continues to serve as the second-largest exporter to the United States. For many companies, a partnership with a Chinese assembly service is essential for solidifying their full business potential.
Decision-makers around the world understand the importance of operating in a calculated and gradual way in China. With this in mind, how would you launch and scale your China assembly operations effectively?
Keep reading to learn more about outsourcing assembly and how to use a China assembly service.
Getting Off to a Good Start
Outsourcing production to China can serve as a vital part of your supply chain strategy. However, there are caveats involved when initiating business with China assembly services.
For instance, out-of-country interests typically have a modest local presence. They’re also unfamiliar with the nation’s bureaucracy and legal system.
Also, these firms must manage cultural barriers in the local business environment. Often, these companies make mistakes due to their lack of experience.
You can overcome these kinds of issues by working with a professional service provider that operates in the China market. You’ll find that this kind of consultant is aware of all local regulations. More importantly, they’ll help you operate efficiently from day one.
Managing Import Regulations
Companies often face another dilemma when starting business negotiations with OEM manufacturers in China. They face problems dealing with the local currency.
For some companies, doing business in China doesn’t justify the investment in establishing a local branch. On the other hand, some China service providers don’t want to accept payments in foreign currency. Some companies may not even have this capability.
By working with a China assembly service provider, however, you can enlist a consultant to perform these transactions on your behalf.
Finding a Stable Supplier in Uncertain Times
If ever an event represented uncertain times, the pandemic is definitive of this circumstance. During this and other market disruptions, companies must make operational adjustments. These adjustments result in a loss of time and risk-taking that are inherent to change.
Still, you can remain stable and flexible if you manage change properly. By outsourcing contract manufacturing in China, you can adjust to changes quickly.
Your business may have a sensitivity to these kinds of situations. If so, the benefits of working with a partner that always has their feet on the ground in China are obvious.
The Freedom to Focus On Growth
You need an efficient and economical solution for managing your business activities in China. With it, your sales managers can focus on finding more business.
Meanwhile, your company representatives can focus on other important business development functions. For instance, they can work on building your customer pipeline.
Tasked with managing your overseas interests, your team members could find themselves overwhelmed with China’s bureaucratic and operational requirements. As a result, they can struggle to find time to sell your products and grow your company’s presence.
Reducing Costs With the Right Partner
In most cases, it’s faster to have your products assembled in China. This is the exact kind of advantage your company needs.
China assembly companies can provide customized production facilities suited to your needs. These facilities serve as a cost-effective and fast solution for OEM manufacturing.
They enable you to operate your outsourced manufacturing processes responsibly. Meanwhile, your firm will continue to enjoy the benefits of a production operation that runs more efficiently versus one on your native soil.
Let’s have a look at a few more benefits of outsourcing product assembly in China.
Reduced Labor Costs
China has remarkably low labor costs. In China, the average salary is nearly half of that of salaries in the United States. This circumstance is a huge benefit for labor-intensive industries.
Outsourcing product assembly in China can help you to lower labor costs due to high turnover. You can also further lower labor costs by outsourcing to developing cities in China.
Reduced Product Costs
China is the home of the largest manufacturing sector in the world. In a single year, China produced nearly 30% of global manufacturing output. Furthermore, export growth in China at times matches the growth of all other export activities in the world.
What that means for your business is that there’s no need to import the many goods and raw materials needed for production. In turn, you can avoid import tariffs.
The Chinese manufacturing ecosystem is engineered to build products at lower costs. Chinese factories can easily access components, affordable labor, a strong technical workforce, and assembly suppliers.
More Efficient Use of Company Resources
China is rich in talent and resources. The country has a labor pool capable of handling your in-country interest in several areas, including:
• Accounting
• Customer service
• Information technology
• Manufacturing
You can save time and have more of it to concentrate on your business by outsourcing.
Meanwhile, your in-house team can focus on the core competencies of your company, such as team building, leadership, and product development. You can spare your company from using their talents wastefully on paperwork and other mundane tasks related to your manufacturing process.
Innovation You Can Count On
China ranks near the top of the global list of innovation among countries. It even outpaces countries like India, Japan, and the Philippines.
Premier China assembly services are on par with the best companies in the world. They can compete with companies in the US, Switzerland, and Sweden when it comes to innovation. In January 2022 alone, Chinese companies exported nearly $250 billion in goods.
Chinese companies have vast research potential. They can give you fast and easy access to technology. Moreover, their access to research can give you a considerable edge over your competitors in other countries.
A Legal Environment for Success
Each year, a growing number of companies import Chinese goods. The Chinese government welcomes foreign companies interested in assembly services. The country amends its outsourcing laws continually for this reason.
China works toward improving its infrastructure to ensure efficient outsourcing. At times, the country has spent ten times more on infrastructure development compared to the United States.
Yet, China’s improvements go beyond bridges and railways. The company has also developed its digital infrastructure, supporting the rapid transfer of vital business information.
Like any other industry, however, there are both good and bad elements in the Chinese market.
Challenges of Outsourcing China Assembly Service
If you choose the wrong service provider, you can find they deliver low-quality products. Often, these products won’t meet international standards.
Despite their affordable cost, they don’t offer much value. You must remain vigilant to ensure that your Chinese assembly service produces high-quality products.
You can achieve this goal by conducting regular quality control audits. Alternatively, you can hire a knowledgeable partner in China to conduct regular inspections on your behalf.
IP Protection
In addition, intellectual property rights vary around the world. With this in mind, you must research China’s copyright and trademark system. This task is especially important when a service provider has access to your designs, products, and other trade secrets.
The Chinese government and many national outsourcing companies have strict IP protection measures. Still, a service provider could make copies of your products and sell them at lower prices.
It’s prudent to draft non-disclosure, non-use, and non-circumvention agreements when working with product assembly services in China. These types of agreements will offer more protection compared to a standard non-disclosure agreement.
Verifying Assembly Services
When searching for a China assembly service, you’ll eventually develop a shortlist of potential providers. Before making a selection, however, it’s critical to verify their credentials. By verifying the credentials of a service provider, you can ensure they can meet your outsourcing needs.
For instance, you must check whether a supplier can produce goods according to your requirements. You must also investigate whether they can ramp up production if you choose to scale up your operation.
You must cross-check any information a potential supplier provides. For example, you may need to verify their:
• Business license
• Customs registration certificate
• International trade certificate
• VAT invoices
A reliable consultant can help you verify that any such documents presented by a potential assembly service are genuine.
Gaining an Advantage With the Chinese Assembly
If you want to launch an efficient operation in China, it’s in your best interests to partner with a local sourcing agent. An experienced consultant can help you to choose the right China assembly service. They’ll help you to avoid investing your money in the wrong provider.
An experienced consultant can also help you select a suitable city for outsourcing. They’ll also help you to source the legal guidance you need to successfully kick-start your China operation.
Expertise You Can Take To the Bank
A knowledgeable local consultant can help you in many areas. These areas could include:
• Accounting
• Logistics management
• Human resources
• Digital marketing
By partnering with the right consultant, you can lean on them for support in all aspects of your business. Meanwhile, you can remain focused on building sales and managing your native distribution channels.
Moving Forward With a China Assembly Service
Once you’ve selected a service provider, you must create an outsourcing agreement that defines the specifics of your arrangement. For instance, you might outsource product assembly in China.
In that case, the agreement should cover important details, like price per product, production value, and other important elements. You might also highlight terms for special services like just-in-time inventory management.
Your agreement might also cover minimum productivity, working hours, and KPI tracking. It should also specify ways to resolve disputes, dissolve your agreement, and other legal matters.
Most importantly, you must ensure that the meaning of your agreement doesn’t change when translated from one language to the other.
Defining Your Specifications
You must also clearly define your product specifications. This kind of clarity will help you avoid problems.
For example, you must explain exactly what you expect from your outsourcing partner. This explanation might include your product specifications.
You must list and explain even minute details. Furthermore, you must conduct regular inspections. They’ll ensure your service provider implements your instructions correctly.
Getting Your Team On Board
It’s a big decision to outsource your assembly to China. What’s just as important is getting your internal team on board with the change.
For example, you should explain why you decided to outsource assembly to China. You should also explain to every department how they’ll benefit from the transition.
In addition, you should clarify the roles and responsibilities of each team member. In this way, they’ll know how to manage their tasks related to your outsourcing operation.
Monitoring Service Provider Performance
It can prove challenging to monitor an outsourcing partner. However, this challenge becomes intensified when your base of operation is in another country.
It’s vital that your partner works productively. You must find a way to control absenteeism and distractions.
It’s helpful to use performance monitoring software. Companies of all sizes—from small startups to global conglomerates—use productivity management tools.
With this kind of resource, you can track the time that employees work. You can also manage employee performance based on real-time productivity reports. You can also use this kind of tool to assign projects and tasks to outsourced staff members.
Your Partner in Chinese Assembly Services
Now, you have a better understanding of how to use a China assembly service. What you need now is an experienced consultant with strong ties to the best service providers in the nation. Shield Works Mfg. can help.
We believe in building productive long-term manufacturing relationships. When we set out to deliver results, it happens.
Contact us today to learn more about securing your production interests in China.
5 Things You Should Know About Lean Manufacturing
In the past decade, Chinese manufacturers have embraced new methodologies and techniques to meet the increasing needs of the world.
Of all the new approaches, lean manufacturing may be one of the most commonly used.
Lean manufacturing helps organizations optimize their business process so they can speed up production to market products, cut costs, and improve quality.
As your company may begin to consider lean manufacturing, this article will explain everything you should understand before you jump into it.
1. What is Lean Manufacturing?
First thing first, what is lean manufacturing?
Lean manufacturing, lean production, or simply “lean” is a systematic methodology designed to minimize waste in a manufacturing operation while productivity remains constant.
In simple terms, lean manufacturing is an approach to managing manufacturing processes that aim to improve flow, eliminate waste and increase efficiency.
2. What Are The 5 Lean Manufacturing Principles?
Lean manufacturing was designed to optimize the use of materials, production lines, production processes and logistics.
There are five principles for lean production.
Identify Value
An accurate understanding of the value assigned to products or services is the first principle.
In this case, you need to keep in mind that:
-What are your needs and expectations?
-When do you need the supplier to finish your order?
-How much will you pay?
Map A Value Stream
As the ultimate goal of lean is to eliminate wastes, removing any wasteful practices by mapping A value stream is important.
Create Flow
Look at every step in your work process and eliminate points of making waste. If there are steps that do not create value as expected, remove them and redesign the flow.
Ensure a smooth process that can be undertaken with minimal delay or waste.
Establish a Pull System
In a pull system, units are produced based on current demand.
It sharply contrasts with a push system, in which items are produced based on forecast demand.
The pull-based system ensures that products will be produced as scheduled in needed quantity.
Seek Perfection
Continuously dig deeper and measure to achieve a perfect lean process.
3. The 8 Types Of Waste
The eight types of waste in lean manufacturing can be acronymized as “DOWNTIME”, which means defects, overproduction, waiting, non-utilized talent, transportation, inventory, motion, extra-processing.
Defects
Defects occur when the products are not fit for use.
This typically results in either reworking or scrapping the product. Both results are wasteful as they add additional costs to the operations without delivering any value.
Overproduction
In the paperwork stage, overproduction may involve extra documentation and reports, or too many meetings without action.
In the manufacturing stage, overproduction could include making more products than actual demand.
Waiting
Waiting means the waiting time between processes. It can be included as follow:
- Waiting for the actual operation
- Waiting for the materials or equipment
- The workers wait on the direction between tasks.
Non-Utilized Talent
Non-utilized talent or unused human talent means the waste of human potential.
- Do you train your people accordingly?
- Are your workers in the right positions?
- Are there any possibilities to improve your team in communication and efficiency?
Transportation
The waste in transportation includes the movement of people, tools, inventory, equipment, or products further than necessary.
Inventory
Waste in inventory means making and storing extra materials or products than needed.
Motion
The waste in motion includes any unnecessary movement of people, equipment, or machinery.
Extra-Processing
Extra-processing refers to doing more work, adding more components, or having more steps in a product or service.
4. What Are The Benefits Of Lean Manufacturing?
There are some across-the-board benefits of implementing lean principles. These include:
- Eliminate Waste
- Reduce Costs
- Improve Quality
- Shorten Time
- Improve Overall Efficiency
5. How Can You Implement Lean Manufacturing?
In an industry that is under tremendous pressure to improve productivity and quality while reducing costs, lean manufacturing is an everyday expectation. Shield Works is your perfect partner to assist you every step of the way.
With over 15,000 projects completed, our clients have full faith in us to help them improve their business. Contact us for more information.
9 Reasons to Outsource Product Assembly to China
As the name implies, product assembly refers to custom assembly that is so delicate it requires the use of precision tools and processes. The reason why you would outsource this type of assembly to China is because the precision tools and processes used in China are unmatched by anyone else in the world when it comes to cost-effectiveness and value. If you’re thinking about outsourcing your next product assembly project, here are 10 reasons why you should choose China over anywhere else in the world.
Affordable Prices
The main benefit of outsourcing product assembly to China is that it’s cheaper than having your product assembled in western countries. These days, you can get a variety of products, from T-shirts and baseball caps to umbrellas and pot holders, for a fraction of what it would cost if they were produced domestically. The comparatively low cost of living in China allows your company access to hundreds of skilled laborers who are willing and able to assemble products at a very affordable price. In fact, as much as it has grown over the years, labor costs in China are still much lower than they are in the west. Those savings can be used for higher-quality components or marketing and promotion so you end up with both an inexpensive final product and plenty left over for other aspects of your business.
Fast Delivery Time
When it comes to outsourcing, speed is critical. If a project isn’t finished on time, there’s a good chance you won’t receive any money from your client, and you could lose future business as well. That is why you want to be sure that when outsourcing product assembly in China, you are going with someone who can deliver quickly. Many Chinese factories with some of the best product assembly capabilities in all of Asia can get your parts out in less than 10 days when they are needed urgently, but they also have other faster shipping options as well. Assembling parts in China doesn’t have to take forever, but you do need to make sure that things are being done correctly by going with reliable manufacturers.
Quick Response Time
With China’s vast manufacturing and assembly experience, a proven system has been developed for shortening response times. You will get quicker quotations and better turnaround time on product samples and bulk orders. Most of the customers from the west comment that the quotes in China are extremely fast; many receiving them within 12 hours of first contact. It also depends on what needs to be made: if you need a simple design, then a quote can be given within 1 hour. If it’s more complicated, then it might take us 2-3 days. If everything is clear in your order details (material, dimension, quantity), your Chinese partner can send you a quotation immediately upon receipt of your order information or drawings.
Process-oriented Quality Control
Process-oriented quality control is very commonly seen in China now, where workers are given a certain amount of time (often just one minute) to assemble an item. If it takes longer than that minute, there’s something wrong with either their training or their tools and materials. Chinese firms have become experts at using very simple, easy-to-use products that can be built quickly and accurately. This type of approach could easily be used in other assembly lines nationwide in China—if you want your product built quickly and correctly, start by building a tool that makes it easy to do so.
No Surprises with Lead Times
You know exactly how long it takes for products to get from China. Since your goods are being produced offshore, you won’t have any unpleasant surprises about delivery dates either. You can choose from a variety of shipping options and will be provided with an estimated arrival date. And as long as you get things on time, no one will complain!
Diverse Product Lines
Diversifying your product lines is a good way to weather any economic storm. The U.S. auto industry’s reliance on trucks and SUVs is what brought them down in 2008; GM and Chrysler were making cars that no one wanted—not even Americans! Don’t make that mistake: Diversify your offerings, and you’ll be able to weather any storm that comes your way. China, with over 30 years of experience in manufacturing for the whole world, is a very ideal place for that with such variety to offer. Even when it comes to product assembly only, you can still be presented with countless options of industries.
Full-time Staff for 24/7 Support
Offshore outsourcing companies in China have full-time staff that are always available to provide assistance on your manufacturing project. There is no outsourcing night shift. You will be able to call them at any time and they will provide assistance with anything that you need. This is much better than waiting days for a reply from someone working at an office in another time zone, who may or may not understand what you want or be aware of specific details about your project.
More than 30 Years of Experience in Manufacturing Products for The World
People in China have been making things for a long time. And for good reason: it’s what they do best. You can count on China’s manufacturing capabilities, processes and workers, which has helped make them an integral part of supply chains and contributed to their high-value reputation. That makes outsourcing product assembly a very attractive proposition indeed.
A Wide Range of products Including Electronics, Medical Devices, Plastic Parts, etc…
Chinese manufacturers offer a wide range of products including electronics, plastic parts, medical devices, and much more. There’s a good chance that there’s a manufacturer in China capable of producing your product at competitive prices while focusing on higher quality products. This means that raw materials are relatively cheap and easy to acquire from nearby suppliers or imported from various countries around the world. No matter what type of product you need manufactured, there is likely an experienced factory in China ready to help you get it done.
Shield Works is one of your best choices with a self-owned IP protected, in-house bilingual engineering team and over 16 years of experience of manufacturing in China for clients worldwide, including product assembly. Please feel free to contact us if you are interested.
3 Tips for Protecting Your Intellectual Property in China
Many big corporations you can think of paid their dues when they first moved their manufacturing to China, a country that just had opened up to the modern world while blessed with a consumers market of 1.4 billion people. The dues included infringement on their IP rights. IP, back in the days, was still a very novel concept to the people in this country and consequently laws regarding its protection was not at all in place. Companies have learned the lesson the hard way by losing billions of dollars over knockoffs sold in a local market or some cheap commodities of bad quality in disguise of your brand with confusing spellings.
But the perks of manufacturing in China are undisputedly still very tempting compared with the risk of your IPR being violated. Does it mean it’s an either-or situation?
Not necessarily. Time has changed. China has changed. 40 years of economic development have made its mark on the progress of IPR protection, especially after China joined WTO with the promise of cracking down on IPR abuse. Despite the encouraging establishment of its IPR protection system, unfortunately, loopholes are seen and risks exist. Some self-help will still be needed on your end to protect your IPR when manufacturing in China.
Make good use of the system
The first thing you want to do is make sure you use a PCT (Patent Cooperation Treaty) country. This means that instead of having to file one application at home and then a separate application abroad, your patent will be applied for in an international system that covers all major countries including China. This eliminates additional costs when you are trying to secure patents abroad. In addition, it also improves your chances of being approved because one examiner reviews it rather than multiple examiners separately examining different applications in different countries.
Also just like in your native country, registration of your IP, including your trademarks and patents, is the legal foundation of protecting your IPR. Unlike many countries, China has adopted a file-to-file system as opposed to as a first-to-use system. So do it before you even start manufacturing there. China Trademark Office is not the only place you’ll need to register with. Don’t forget Chinese Customs. Your registration there will serve as the base for them to determine infringement and effectively block its export with adequate information provided, such as manufacturers and ports.
Keep a watchful eye
To make sure you understand what your intellectual property is—you may have a patent, trademark, or copyright without even realizing it. If you want to move forward with manufacturing in China, contact your lawyer to find out which of your pieces of intellectual property will be at risk and how you can protect them; having a legal agreement in place before you begin production will give you much more leverage than scrambling afterward.
Some extra help can be needed in terms of detecting possible infringement. Alibaba/Taobao, as the biggest e-commerce platform in China serving 1.4 billion people, cannot spare the chance of selling infringing products as much as they try. But correspondingly they have established takedown procedures in case you see anything abusing your IPR. If you are new to the market, you can even hire brand monitor service to help you monitor the internet for any possible infringement or even assist in takedowns.
Choose A Good Manufacturer
If you’re in China, finding a good manufacturer is going to be one of your primary challenges. Most manufacturers are new at dealing with IP issues, so they might not be receptive to your demands. In these cases, it’s probably best to shop elsewhere. This might not always be possible or desirable, but if you do have options it’s worth exploring them before deciding on a manufacturer. Once you find a reliable partner and have developed a working relationship with them, create an IPR protection plan that works for both of you.
Shield Works partners with Innopat a leading Zhuhai based IP industry expert to provide our clients with clear no-nonsense advice and IP protection services. We also have a seamlessly designed IP Protection Zone to ensure all your intellectual properties stay in our facility. What happens at SW, stays at SW.
Please feel free to send an inquiry today, should you have any questions.
Manufacturing Trends: The Just-In-Time Inventory Management System
You may not believe how much capital is actually tied up in inventory. Inventory, along with accounts receivable and accounts payable, is equivalent to 7% of the US GDP.
With so many resources tied up in inventory, it’s no doubt that businesses are constantly re-evaluating their inventory management system.
One of the most popular traditional methods is the just-in-time inventory management system. But after the pandemic changed the way many businesses operate, it may be time to consider a new method.
Below we have created the following guide explaining the importance of your inventory management system. We’ll also talk about finding the production planning sweet spot.
How Does Just-In-Time Work?
“Just-in-time” is a method of inventory management that means inventory arrives exactly when it is needed. It’s also commonly referred to as a “pull” system. This is because the system replaces supplies as goods are consumed.
Just-in-time inventory works based on the idea that materials arrive when you expect production to begin. However, they should not arrive before production begins.
Essentially, production can’t begin without inventory. But businesses using JIT don’t want to incur any storage costs for inventory that arrives too soon.
Many businesses have relied on JIT to keep production value balanced with inventory levels. This keeps capital free to use in other areas of the company while meeting production demand.
JIT works the best when a company has trusted suppliers. They provide consistent quality of materials at the expected times. Simultaneously, suppliers provide products in long-term contracts that mitigate price fluctuations.
Because this model relies on a smooth supply chain, unexpected supply chain interruptions can disrupt the entire process. Sudden shortages during the Covid-19 pandemic can have detrimental effects on the end production of a product.
For this reason, many businesses suffered. Over 60% of small businesses reported disruptions in the supply chain during the early pandemic.
Just-In-Time Inventory Used Successfully
However, this doesn’t mean that a JIT system isn’t effective. Just-in-time inventory management works well in numerous industries and will continue to be effective.
Take restaurants. Food preparation uses a just-in-time inventory approach because many ingredients don’t last longer than a day or two. Chefs will have to buy meat to serve every day by estimating what diners will order.
Fast fashion is a segment of the fashion industry that relies on just-in-time systems. Chains like Zara don’t order ahead for an entire season.
Instead, they’ll design and manufacture items with short turnaround times. Fast fashion brands will be able to keep up with trends as they happen.
You may have heard of dropshipping in the eCommerce world. Dropshipping only purchase products from the manufacturer when a customer places an order. The eCommerce seller carries no inventory and essentially outsources inventory management.
Based on these business models, just-in-time inventory management can be successful. Many industries will continue relying on a just-in-time system. But you may find it to your benefit to start mixing in other strategies for your inventory management.
Just-In-Time vs. Just-In-Case: Pull vs. Push
Companies use just-in-time inventory to prevent excess supply from building up. This will keep inventory low and cut costs as much as possible.
But what happens when the supply chain gets stopped? In 2020, 82% of mid-market manufacturers had to significantly reduce production or shut it down completely at some point.
This then affects sellers using just-in-time management. They won’t receive the materials and products for customers. Instead, they can only sell what they have.
With a JIT, businesses wouldn’t have a lot to sell. They would run out of existing inventory quickly.
At the same time, demand for certain products, especially health-related items, skyrocketed. Businesses in this industry could not keep up with the high demand.
Here’s where just-in-case inventory management comes in. It helps to facilitate growth by allowing companies to keep up with most demand.
JIC inventory management focuses on maximizing inventory by purchasing larger inventory orders. This helps to manage unpredictable demand and survive disruptions in the supply chain. This approach will no doubt become more popular in the wake of the pandemic.
JIC is referred to as a “push” system because inventory purchases are not based on current demand. JIT is a “pull” system because inventory is purchased to order.
The main drawback of JIC is the additional costs of holding the excess inventory. Businesses will place larger orders if they use JIC, which will increase the cost of the order and tie up capital in inventory. Maintaining the excess inventory will raise storage and management costs.
Finding the Sweet Spot
If the pandemic has proven anything, it’s that JIT can’t be relied upon alone. Supplier stability is returning closer to normal. However, the way that many businesses operate has changed forever.
Businesses are starting to realize that balance will provide the most benefits. Both JIT and JIC systems have positive qualities. Combined, they can create the most effective inventory management system.
Companies can create a hybrid inventory management model. In practice, it would use both the buffer of just-in-case and the conservative use of capital associated with just-in-time.
A hybrid system involves having some parts of the supply chain operate in a push model and others operate in a pull model. There needs to be more demand forecast involved than with JIC. But a hybrid model wouldn’t have standing inventory rest at zero like it would with JIT systems.
The main goal of finding the sweet spot is to address the needs of both long-term and short-term production. Inventory levels should be low enough to be cost-effective but high enough to survive production delays or higher demand.
You may want to consider using JIC for quick-turnover items. It can also be used for scarce items or items with long lead times. JIT inventory can be used for less popular items, like the customization of a certain product.
Leveraging the Right Inventory Management System
The right inventory system is all about balance. And when it comes time to choose your manufacturer, you want a team that understands how to utilize the best practices of different inventory management systems.
Shield Works is a managed precious assembly, manufacturing, and warehouse facility based in the heart of Zhuhai City, China. Learn more about our manufacturing services by contacting us.
14 Benefits of Outsourcing Electronic Assembly to China
It’s no secret that China is the world’s factory. The country’s economy has grown rapidly in the past few decades. In fact, its share in global manufacturing output has been growing steadily at around 2% each year.
Its manufacturing goes from textiles to clothing, machinery, electronics, and even electronic assembly. As a result, manufacturers are adopting new technologies that allow them to stay on top of the game. It’s for this reason that China has become a world-class outsourcing destination.
If you’re thinking of joining the bandwagon, you absolutely should. There are many good reasons why you should outsource your electronic assembly in China. If you want to know what these reasons are, keep reading to find the top most beneficial reasons below.
1. Unmatched Expertise in Electronics
Many people are unsure about why product assembly in China is so popular. The answer boils down to the country having access to the resources required for manufacturing. Most manufacturers based in China have been doing this for generations.
They have a wealth of knowledge that surpasses what most other companies from around the world can produce. Does your company need a certain level of quality for its products? Outsourcing electronic assembly work to China would be a good idea.
Their highly skilled workers and advanced equipment mean top-quality production. China also specializes in developing affordable and reliable electronic products. When outsourcing, you get access to a team of seasoned experts that have years of experience in this field.
2. Availability of Different Types of Equipment and Facilities
China is a country with a large number of factories that offer electronic assembly services. There’s a high availability of different types of equipment and facilities. Hence, your company will be able to choose the right manufacturer for your production line.
You can focus on meeting customer demands by offering products manufactured as per their needs. In China, it’s easy to pull off product assembly, whether you need commercial or industrial goods.
3. Large Amount of Products Ready for Shipment Within 24 Hours
The fast-paced world we live in today has seen consumers demand products faster than ever before. As a result, many companies outsource to China because it offers quick turnarounds.
In most cases, companies can have all their products ready for shipment or delivery within 24 hours. This is one of the most significant advantages of outsourcing to China.
4. A Wealth of Materials and Services
China has a large number of suppliers, contract manufacturers, and logistics providers, all of which are necessary for running an efficient production line. Your business will not slow down even if you plan to increase the volume of goods produced for sale.
Companies that outsource their materials to China also get to save on storage space. You don’t need extra storage for materials and excess products. This makes manufacturing in China one of the best strategies.
5. Accessibility and Eco-Friendliness
China has expanded its economy to make it more accessible to people all over the world. This is possible due to low costs and simplified processes through automation and mass production.
Electronics manufacturing is one area where this is very efficient. The best part is that it makes consumer goods available at affordable prices.
For this reason, many countries outsource labor-intensive jobs to China to cut down on labor costs. You see, outsourcing eliminates the need for companies to set up manufacturing plants.
Even better, it’s increasingly eco-friendly. You eliminate the carbon footprint and wastage of materials that would be a result of manufacturing.
6. Quality Assurance and Quantity Control
Outsourced manufacturers are held accountable for providing quality goods and services. This is done by testing every product before it leaves the factories. They ensure that they meet all quality standards during transit and after delivery.
With this system, customers don’t have to worry about receiving faulty units. China is packed with highly skilled professionals that ensure quality control.
Another benefit of outsourcing your electronic assembly jobs to China is quantity control. You’ll be able to produce goods in the exact quantities you want, whether it is 1 or 1000, depending on your budget. With this flexibility, businesses save thousands by not having extra stock lying around.
7. Time Savings and Faster Time-to-Market
Outsourcing electronic assembly to China enables businesses to launch their products faster. Manufacturers in China can meet deadlines due to working at a fast pace. Companies outsourcing to China will have the advantage of launching their products on time.
This means that they can start marketing their goods early and increase sales before competitors even get a chance to enter the market. Furthermore, the turnaround time for getting samples is very short. The process makes it easy for businesses to test products before placing larger orders.
8. Free Trade Agreement (FTA) Benefits
Many high-tech companies outsource their manufacturing to China because of the FTA benefits. These include tax cuts, tariff remissions, and stimulus packages. Companies don’t have to worry about dealing with one country’s tariffs.
No tariffs will apply if they pass through another FTA member nation. At the same time, companies also enjoy zero customs duties on goods sold. This results in higher market penetration compared to non-FTA members.
9. Diverse Product Portfolio and No Minimum Order Quantity
China has one of the world’s largest populations. As a result, they have developed numerous manufacturing hubs. These hubs make it easier for businesses that outsource to access diverse markets.
If there is an increase in demand for one type of product, companies can easily scale up production. In China, facilities are already readily available and production can start ASAP.
Outsourcing electronic assembly to China is also ideal for start-ups and small businesses. They can do so without having to worry about meeting a minimum order quantity.
This allows them to experiment with a new product or design. Moreover, it also allows these companies to create personalized products at affordable prices.
10. Learn from Others’ Mistakes
Outsourcing your electronic assembly jobs saves you from making costly mistakes when entering a new market. Chinese manufacturers have years of experience. They also handle quality control and shipping operations.
They would make minimal to zero mistakes and not compromise on quality. This allows you to benefit from their expertise without worrying about major setbacks.
They have also established long-term relationships with shipping companies in America and Europe. They can negotiate for further discounts when sending goods to your country.
11. Reduced Overhead Costs
Companies that outsource to China can save up to 50% of overhead costs. This is money they would have spent if they were assembling them in their own countries. Low labor costs combined with low operating expenses make outsourcing effective.
Manufacturing in China is also possible because of the logistical efficiencies available. This includes easy access to seaports, airports, railways, and roads.
They make it possible for companies to ship goods quickly. Even when orders increase at the last minute.
At the same time, you can monitor product quality through tracking systems. Tacking in real-time allows you to receive fast feedback on all your production.
12. Lower Capital Requirement
Outsourcing electronic assembly to China leads to lower capital requirements. This is a huge benefit compared with setting up manufacturing plants locally. Because of the inexpensive labor market, it’s possible to hire hundreds of people at once.
This means that large orders are processed with minimal capital outlay. On the other hand, local manufacturing requires large amounts of capital. You have to hire or contract workers individually instead of hiring them by batch.
13. High-Tech Equipment and Affordable Labor
Advanced technologies are available for businesses that outsource their assembly to China. This is because of the availability of high-tech equipment in transferable conditions. The latter allows lower labor costs.
Electronics manufacturing jobs are being replaced by automation. It allows manufacturers to reduce costs further. In this way, companies can keep up with the competitive market without spending a lot.
14. Competitive Advantages and Business Growth
Businesses find it difficult to compete with bigger companies. However, by outsourcing their electronic assembly jobs to China, they can gain a competitive advantage. This is because of lower labor costs and proximity to the market.
Lower labor cost means that businesses have more affordable products than larger competitors. Having a warehouse in China means selling products to competing businesses at lower prices.
Outsource Electronic Assembly to China
Outsourcing electronic assembly can allow companies to focus on developing new technologies. Companies that outsource product assembly in China are able to benefit from the country’s massive market while still complying with their own innovation demands.
Are you ready to outsource your electronic assembly to China? Shield Works is the answer. We offer high-end electronic manufacturing services to businesses around the world. If you need a quote, simply contact us here.
Outsourced OEM Production: Is It Always the Best Choice?
If you’re the OEM (original equipment manufacturer) of a design spec, then production is one of your most important considerations. Unfortunately, many companies stumble when it decides to make their OEM products in-house or through outsourcing. In most cases, outsourced OEM products are cheaper and quicker.
But, is this always the best course of action? In this article, we’ll explore whether or not outsourcing your OEM production is the best course of action. Let’s get started!
Outsourced OEM Production
Outsourcing your OEM production involves allowing another manufacturer to produce your product. You keep all the trademarks and intellectual property, but another company does the production.
Most often, this is done with multinational suppliers. Consulting companies with expertise in finding manufacturers will usually help you get in touch with the right company. Let’s take a look at some of the pros and cons involved in this method.
Advantages
The biggest advantage that comes with OEM production is cost. Since the outsourcing company is creating your product in bulk, you typically end up saving money on production costs. What’s more, the final product is generally of superior quality. As long as you have strict testing standards, then the outsource OEM firm should be able to meet them if they’re competent.
Many outsourced OEM companies also have specialized technology that allows them to create components you wouldn’t be able to create on your own. In the past, OEM production typically only worked for larger companies. However, this is beginning to change. Smaller companies with excellent design skills can take advantage of this type of outsourcing.
It allows them to avoid dealing with factory floor production skills, which take a lot of energy and money to manage. Instead, they can focus on more design and promotion while allowing a skilled workforce to handle the production.
Disadvantages
Unfortunately, there are some downsides to outsourcing your OEM productions. For one thing, you’re at the mercy of your supplier when it comes to quality control. As such, you’re responsible for any problems that might occur at the end of the day. Furthermore, you may have difficulty finding an OEM production firm that’s willing to take you on.
These companies generally only like dealing with clients that create a lot of demand. As such, smaller companies may have a difficult time finding multinational production firms, especially if their products are hard to make.
Finally, if you don’t go with a company that you’re sure of, then you may be at risk of property theft. This occurs when a manufacturer infringes or steals your intellectual property right. It occurs enough in the business, that you should inquire what the company is doing to fight against it.
In-House OEM Production
In-house production put vertical integration ahead of scale and affordability. Typically, in-house OEM production worked best for smaller companies. However, that’s beginning to change. Let’s take a lot at some of the pros and cons involved in this method.
Advantages
The biggest advantage to in-house production is the amount of control you get over your product. As the OEM, you’re naturally an expert when it comes to producing your work. As such, you don’t need to spend time teaching someone else to make it. In-house can also be more advantageous when it comes to scheduling concerns.
Since you don’t need to ship your product or parts over long distances, you can meet your scheduling needs more easily. In-house production also allows you to make more advanced components.
If your product requires a specific part that’s difficult to make, then you’ll have a lot of difficulties finding an OEM manufacturer to make it. However, with enough demand, you can find some custom manufacturing options.
Disadvantages
It shouldn’t come as a big surprise that there’s a huge shortage of skilled workers in America. Though this problem was a long time coming, it’s been exasperated by the COVID-19 pandemic. As a result, the New York Times predicts that two million skilled jobs could go unfilled by 2025.
As such, finding workers for your in-house production may prove difficult. Another big factor is that it will cost even more to make your product in-house. The sad reality is that overseas production is much more affordable than domestic. What’s more, outsourced OEM production is typically higher in quality than in-house. So, ultimately, you’ll be paying more for a potentially inferior product.
Why China Is Uniquely Qualified to Handle OEM Product Manufacturing
There’s a reason why the vast majority of OEM outsourced production goes toward China. China accounts for over 28% of all global manufacturing output. The advanced production capabilities in the country make it easy to meet huge product numbers at an affordable price.
In particular, clothing and electronic brands like Nike and Apple outsource their manufacturing work to the company. In the wake of the COVID-19 pandemic, China is poised to be one of the first countries to dive back into the manufacturing industry.
Despite being one of the early countries to be hit, the government has been able to largely contain the spread within the country. As such, China will have more skilled laborers than many other countries combined to meet OEM product demands.
Ready to Save Money On Your OEM Production? Contact Shield Works
We hope this article helped you learn whether or not outsourced OEM product manufacturing is the right decision for your company. Ultimately, the decision depends on your specific set-up. But, the right arrangement can allow the company to divide and conquer in ways that are simply impossible while maintaining an in-house division.
So, how do you find the right manufacturer? Look no further than Shield Works. Our British-owned company works out of China to provide you with affordable manufacturing solutions, as well as expertise in nearly every product category. But, don’t take our word on it. Contact us today so we can walk you through what we can do for you.