In spite of rising manufacturing costs, China remains attractive to many US & Canadian companies who wish to keep their production or finished goods costs at a minimum and gain greater market share at home. This will likely be the case for at least another generation because of China's skilled labor pool, its state-of-the-art technology and delivery capabilities and the relatively favorable margins it still offers. Yet it has never been more difficult to do business in China than it is now. Wider government regulation of light industry, new labor laws, RMB valuation, nationalism - these are just some of the obstacles that US & Canadian companies face nowadays when they make product in China.
Sourcing in China
Effective sourcing in China requires a firm understanding of your own product and costs. It also requires the ability to evaluate vendors not simply on cost and/or quality, what so many small businesses do, but also on vendor responsiveness and attitude. If you are having problems while you are developing samples these problems will only get worse during production, when the stakes are much higher. Therefore, you should have good systems and people in place to evaluate your vendors before you do business with them. At the same time, you need to show respect to your vendors and be patient when problems do arise, as they often do when you source overseas.
The two most common scenarios:
A small company in Ann Arbor, MI. has a popular line of kitchen soft goods. The company has one supplier in Dongguan, China making their product but costs keep rising while product quality is inconsistent. The company realizes that it must find alternative suppliers in order to maintain quality and margins. Yet no one in the Ann Arbor office speaks Chinese or has spent any length of time in China, and the company's management does not know how to extend its reach in China.
A childrens’ products company in Columbus, Ohio has a large order from a Big Box retailer. The order will put the Columbus company on the map, but the Key Accounts Sales Manager is apprehensive because some of the samples from China have not been good and communication with the vendor has left much to be desired. As the production date nears, the Sales Manager is not confident about what the vendor will load into the container. She thinks it would be a good idea for someone to go to China to oversee production. However, no one in the company has ever spent much time in China and the idea of sending someone over to spend two weeks at a rural factory is impractical.