Contract Manufacturing

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.

Chinese trade has expanded at a breakneck pace over the last several decades. In 2018, China exported a whopping $2.49 trillion in goods. The value of China’s exports always surpasses their annual import cost. This makes them a powerhouse of manufacturing and industry. Chinese factories were not always positioned like this, though, and it took a lot of growth to get there. So how did that all change?

We’re going to break down how product assembly in China got to where it is today and why it is still leagues beyond anyone else in the world. Stay till the end to see where they aim to go from here.

The History of Chinese Factories

During the period from 1992 to 2002, China implemented a series of incentives that were very attractive to foreign companies and investors. This alone had a massive impact on the growth of China’s manufacturing sector.

The term “made in China” was first coined in the early 1940s and this was because of a boycott of Japan and foreign-made products. China’s economy lacked the structure for efficient industrialization and they wanted to change that.

Chinese citizens wanted more opportunities to grow domestically. Boycotting these foreign-made products gave them an opportunity to take part in what they dubbed the National Salvation Effort.

What Was the National Salvation Effort?

This was a movement that opposed the Nationalist Government and demanded a stronger resistance to the expansion of Japan. As a whole, the National Salvation Movement was a coalition of leftist groups, albeit a loose group.

It included members of the Chinese Communist Party, including those who were both open and secret participants.

Why is this relevant? It was a crucial step in positioning China as a powerhouse, and not just in the manufacturing sector.

China Is the Factory of the World

Cheap and plentiful labor primarily aided in China’s rise as the ‘world’s factory.’ Besides this, an abundance of raw resources and low environmental regulations made it easy for them to grow. And, lest we forget, China’s extensive workforce is only matched by the quantity of land at their disposal.

If we’re talking about labor, we must acknowledge that in 1980, the average Chinese annual salary was between $416 to $508. On the other side of the world, the average American was earning 40-50 times that amount.

This salary discrepancy was one of the biggest draws for global corporations, as it meant higher profit margins. Additionally, China’s proximity to the Four Asian Tigers made it easy for global industries to transition.

Economic Reform

China began a series of market reforms in the late 1970s that established the real groundwork for change.

Because of rural land reforms, farmers benefitted more from their produce, which allowed more people to seek work in major cities.

In order to entice foreign investors, the Communist Party began establishing special economic zones. These zones had market-friendly policies that massively benefitted businesses and traders.

With this reform came significant growth, and today, China has several of these manufacturing hubs. Each one specializes in various parts of the supply chain.

For example, Guangdong focuses on electronics. The eastern provinces near Shanghai specialize in daily goods, mechanical parts, and medical equipment. The cities of Wuhan and Chongqing are known for their production of chemical products and auto components.

Why China Is Still Considered the World’s Factory

China has two major advantages as a manufacturing power, both of which have been demonstrated in the last year. To start, China’s industrial foundation is unrivaled in terms of range and depth.

With the capacity to produce anything from low-cost footwear to high-end biotech, China’s grip on the supply chain is unmatched.

China’s combination of manufacturing hubs, improved factories, and first-class infrastructure has made them even more competitive. This is true despite recent wage growth.

The Top Contributing Factors

Despite a change in international trade policies, China still holds most of the world’s manufacturing power. This is largely due to a few, consistent factors.

China’s Business Ecosystem

Industrial production doesn’t occur in a vacuum. It’s supported by a network of suppliers and distributors, as well as component manufacturers, government agencies, and customers.

Through competition and collaboration, these groups all become involved in the manufacturing process.

China’s business ecosystem has evolved dramatically in the last 30 years and there are a few noteworthy changes that stand out.

First, some areas have remained hubs for production. Shenzhen is an example, as it produces a substantial number of goods for the electronics industry. Overall, this domination of the market makes it difficult for anyone outside of these hubs to stand out.

Second, China boasts a technical workforce that surpasses any other. They also have a chain of assembly providers that seem to exceed the bounds of human capacity, making them the powerhouse we know today.

Taxes and Tariffs

Another significant factor was the export tax rebate China introduced in 1985. They set this into motion to boost the competitiveness of its exports. It effectively abolished double taxation on exported goods.

Additionally, any customer-based products were exempt from import taxes if they were coming from China. These lower tax rates helped keep production costs low and attracted businesses eager to make low-cost items.

Currency and Wages

Despite the US’s concerns that China manipulates its currency for national gain, the weaker yuan does make Chinese exports more competitive. Or rather, they become cheaper to buy with other foreign currencies.

Predominantly, it is a win for consumers all over the world, as Chinese products become significantly cheaper because of this.

And, if we’re talking about money, we can’t disregard the impact that China’s law of supply and demand plays on its worker wages.

Because the supply of Chinese factory workers exceeds the demand for work, salaries remain low. Furthermore, until the late twentieth century, most of the Chinese population were considered rural or ‘lower to middle class.’

Internal migration reversed the countries’ skewed rural-urban distribution. As the rise of industrial cities made more work available, there was a natural pull towards urban living and development.

A Working Example

Let’s have a look at how the supply of face masks gave us a particular illustration of China’s strength. In 2020, at the start of February, it made about half the world’s supply of masks, around 10 million a day. Within a month of that, output increased to nearly 120 million.

It would become excessively costly if every country were to develop its own production capacity to match rising demand. Most countries simply do not have the infrastructure and resources.

China still does manufacture a bulk of the face masks required for the pandemic. Any country hoping to make its own masks needs companies with expertise in textiles, chemicals, metallurgy, and machining.

They also need a good, consistent supply of raw materials, adequate manufacturing space, and qualified personal. Never mind the money required to keep it all running smoothly. Because of this, it’s impossible to start from scratch, which is why China had such a good head start.

All those things we’ve just mentioned? We know they were already in place. The cogs of China’s manufacturing machine were already well oiled and geared up to take on the load.

How Does China Want to Grow From Here?

So, while we know China is equipped to handle anything thrown at them from a manufacturing standpoint, where do they want to go from here?

Based on everything we’ve seen, China aims to move into more advanced lines of production. The industries they’ve pioneered till now have simply been a springboard.

As education and salaries grow, as they should do, that initial cost advantage shrinks. The aim for China now is to focus on domestic consumption and leave the chore of mass-producing, cheap, and labor-intensive items to others.

This gives them the space to focus on their own citizens. There has always been an aim to grow socially and economically but they intend to do this while maintaining a hold on their manufacturing.

On pure scale alone, China remains unopposed. We’re likely to see a massive change in time, but China’s manufacturing power is likely to remain unchecked.

There is a considerable new focus on technology and automation in particular. With the promise of robotics and AI, there is room for people to concentrate on more skilled pursuits.

Automation will revolutionize the way we make goods, even if we’re not quite there yet.

Quality Contract Manufacturing in China

As an OEM manufacturer in Chinese factories, we have the knowledge and expertise to offer exceptional service and goods delivery. We know how the system works, and we are proud of the last 16 years of service we’ve conducted in China.

We value quality, innovation, integrity, and excellence in all things, and aim to always offer the same to you.

Contact us today to see how we can help you with your OEM manufacturing, fulfillment, and precision assembly needs.

Choosing the right manufacturer for your business will play a significant role and how much revenue you are able to generate. For this reason, most entrepreneurs tend to work with a Chinese manufacturing plant.

However, not everybody understands the benefits that they can experience from doing so. Let’s explore the key details you need to know about China manufacturing.

Lower Overall Costs

As you might assume, one of the primary benefits of outsourcing your manufacturing to China is the lower labor costs.

This is simply due to the fact that Chinese facilities have much less overhead to work with. Additionally, they also have fewer training costs. When manufacturing domestically, facilities need to allocate a significant amount of money to cover these expenses.

This leads to businesses of all types outsourcing instead. Of course, wages in China are also lower than those in the United States.

This allows each dollar you spend to go much further when outsourcing. Keep this in mind when moving forward so that you can take advantage of the utility Chinese product assembly can provide.

Larger Production Volume

Not every business needs to manufacture thousands of products within a single order. However, large organizations often find it difficult to find a domestic facility that can satisfy their needs.

Chinese factories produce goods for a substantial number of countries on Earth. This means that China has typically created facilities that are capable of high-volume production. In fact, even the average Chinese factory could drastically outperform most facilities within the United States.

For companies that need a massive supply of their product, there is simply no better alternative than outsourcing to China. In many cases, doing so is also the only way to hit your target metrics.

Diversification

Part of long-term success involves scaling your business.

This can occur in a multitude of different ways. For instance, you might introduce a new product line to customers in order to generate additional revenue.

Or, you may break into growing markets in order to establish a niche. Regardless of how you do so, Chinese manufacturers can help you diversify your business opportunities. Creating new products, in particular, is one of the primary ways in which they can help.

In some circumstances, choosing a Chinese OEM manufacturing plant could be what helps you set yourself apart from your competition.

Quick Changes to Product Design

Domestic facilities can’t always accommodate design changes. More specifically, it may take them days or weeks in order to implement your new ideas.

As you can tell, this can easily cause issues with your sales numbers. Your current product might not be something your customers would be satisfied with. Delayed orders due to design changes also carry the risk of having your audience turn to competitors instead.

Chinese facilities are always ready to implement required changes. In fact, all you need to do is get in touch with a representative from your manufacturer and convey what you need.

More often than not, the facility will begin manufacturing the revised products immediately. This is a crucial factor to consider, as it can often mean the difference between whether or not you maintain your brand reputation.

Intellectual Property Protection

Interestingly, many people are unaware of the fact that many Chinese factories prioritize intellectual property protection.

This means that they painstakingly work to avoid any sort of infringement that could land you in legal trouble. For example, let’s assume that you sell a product that is highly similar to that of a competitor.

A reputable manufacturing facility in China will go out of its way to ensure that no copying or reverse engineering has occurred. As with any other manufacturing industry, there are shady facilities that employ the above tactics.

The good news is that you can research the reputation of your prospective factory to ensure that you avoid working with ones that use underhanded tactics. Otherwise, you may find yourself in a situation that is difficult to overcome.

Overall Efficiency

Not only are Chinese factories capable of mass production, but they can also do so at a notable rate.

These facilities have the newest and most efficient equipment that makes them capable of meeting virtually any production standard. This also allows smaller organizations to compete with larger ones.

Under many circumstances, small companies simply can’t keep up with the rate at which larger companies produce goods. Without the right manufacturer on your side, there’s a strong chance you can’t remain competitive.

How Can I Find The Factory Right for Me?

It can seem overwhelming to find a Chinese manufacturer. Not only are there time zone complications, but the language barriers in place often deter entrepreneurs from doing so. Working with a professional will help get you in touch with the facility that is ideal for your business.

These individuals will serve as the liaison between you and the other party. So, they will handle nuances making agreements, conveying production needs, etc.

You can check out this resource to learn more about how you can benefit from doing so.

China Manufacturing Can Be Game-Changing

So, be sure that you keep the above information in mind when determining whether or not this decision is right for you. From here, you’ll be able to leverage China manufacturing if it’s appropriate for your business.

Want to learn more about what we have to offer? Feel free to get in touch with us today and see how we can help.

Have you ever thought to wonder about outsourcing your business internationally? There are quite a few benefits to outsourced manufacturing, especially during the last few decades. One of the main benefits is how cost-efficient it can be for businesses, thereby allowing you to save money and resources while providing a living to skilled individuals.

Another benefit to outsourcing is that your business can provide specific solutions to specific issues for your customer and give you a wide range of tasks to delegate. This gives you the time and energy to focus on the core of your business without worry.

Finding experts in their trade is yet another positive in the realm of outsourcing. You can find a whole host of people skilled in their craft and willing to provide that expertise to your business.

There are many different industries that are benefiting from outsourcing their manufacturing. Interested in learning more?

Keep reading, as we’re going to show you why you should consider it and the reasons to outsource.

Outsourced Manufacturing In Retail

Though considered to be at the bottom of the distribution chain, retail can gain as much benefit from outsourcing as any other company. As a result, the practice can boost profit margins and cut costs to customers by outsourcing for cheaper alternatives to products the store already carries.

Benefits include multi-channel customer support, through phone, email, live chat, and social media. And outsourcing, in turn, assists with multiple customer inquiries across the many channels at once. 

Retail outsourcing can also gain flexibility in staffing needs during busier seasons. And the extra staff takes some of the burdens of the heavy workload when numbers are high and questions need to be answered quickly.

Another great benefit to outsourcing is data analysis and collection in retail, such as online shopping. The results include showing which items are most popular to the items that are mostly being returned, supplying valuable feedback.

Overall, the process comes together to create a better customer experience, able to handle a variety of customer problems, and the likelihood of resolving those problems becomes very high.

Up Next With Pharmaceuticals

Manufacturing in pharmaceuticals is yet another way that outsourcing can benefit important, essential companies. 

Outsourcing provides a wide spectrum of services like preclinical development, drug discovery support, contract manufacturing, and clinical trials. Outsourcing helps the world of developing medicine go quicker and easier.

Pharmaceutical and biotech companies receive outsourced assistance in the care of sick, elderly, and everyday consumers to maintain their health. This results in securing a trusting partnership for the ultimate good cause.

The end result of outsourcing is saving money in bringing in medicine, and for the consumer to not have to spend so much to take care of themselves.

Tech & Software 

Did you happen to know that manufacturing domestically is more expensive than outsourcing it? Not a lot of people do.

Saving costs is the top reason most tech companies usually outsource to either China or India. They outsource due to the lack of raw materials available as well as lack of sufficient labor in the US.

In a nutshell, that means that saving money on manufacturing has the added benefit of also saving money for the consumer. Essentially those software companies save on costs and as a result, so do their customers. 

The resulting experience is that everyone remains happy in the long run.

Time Is Definitely Money

In the current US economy, being a one-stop-shop for all of your business needs is now more of a pipe dream than anything else.

Unless you’re running the smallest business known to man, outsourcing is not only a wiser choice but a smarter one, too. The result helps you create profits and growth even in hard economic times.

One of the main benefits of outsourcing is obviously saving money on company costs which results in even longer-term cost reductions and ensuring the survival of your company.

Time is money and you don’t want that time to cost much of that money in manufacturing stateside, and it allows you to spend more time creating and less time stressing.

Focus On The Important Stuff

Snowballing from the section above, being cost-efficient in the long run can have a positive effect on your company when you outsource. Namely, allowing you to focus on the company you’ve worked so hard to get off the ground.

Saving money is important, but so is taking care of your business, free of unnecessary headaches that extreme worry about costs can bring. 

Savings can increase sales and revenue, giving you the time to focus on core areas of your house. Those areas being marketing, research, and development, instead of being concerned if your customers aren’t getting the service they need.

All in all, outsourcing contributes to a bigger, more robust bottom line for you and your workers. Saving you the money and hassle for a hopefully long time.

Being More Efficient

Another outsourcing benefit, aside from saving on costs, is definitely finding experts who are masters at their trade. Thus, ensuring that all of your bases are covered when it comes to customer service.

Any outsourced expert who can do their job the best is naturally very useful to any company worth their salt in providing a quality product for their consumers.

If you want all your customers to receive answers to any query they pose, having someone with proven expertise is always pivotal. Outsourcing lessens you of all the stresses of whether your people have all the necessary answers at hand.

Less stress, along with increased productivity and efficiency contributes even more to your company’s bottom line. And it gives you more confidence in the resources you acclimate along the way through time. 

The main point here is that having outsourced experts on the payroll is a setup for all kinds of success in the future.

Check Us Out

We hope that this has been a more than interesting read for anybody wanting to try outsourced manufacturing in the near future.

Why not start here, at Shield Works?

We can help you with any outsourcing knowledge you need as well as provide you with our company expertise to assist you in your outsourcing. As a result, it allows you access to our resources to walk you through outsourcing for your company.

Whether you need answers to your questions or simply want to acquire our services, please check us out right over here. Can’t wait to hear from you!