If you are outsourcing to China the production of your orders, there are a few strategies you can choose from. Different strategies work for different companies depending on their size, industry and the level of product and vendor requirements, and you need to make sure you choose the right strategy for you.
Outsourcing to China all or part of the functions related to producing your goods depends also on your management style and corporate culture.
The decision what function and which process to outsource is an important one.
If you outsource the wrong functions you may risk your IP leak and fall into the wrong hands, or lose control over your quality and shipment schedule.
If you don’t outsource processes you should outsource, you will find yourself trying to deal with challenges you have no resources to deal with, piling costs and customers complaints.
How do you know which process to outsource?
It all depends on your strengths and resources.
As we all know, the best thing you can do is focus on your strengths.
If your strengths are in purchasing and negotiation, you may want to outsource sourcing and logistics and focus on dealing with the vendors yourself.
If your strengths are in supply chain, you might want to do the sourcing yourself, but leave quality management and the commercial side to someone else.
If you feel you are not familiar with how things work in China, maybe you want to consider outsourcing the entire vendor sourcing and management to people who know how to handle manufacturers in China.
In any case, you should keep for yourself the flexibility to decide and change the processes you outsource.
Following are some common outsourcing to China strategies for you to read and consider which strategy is most suitable for you.
Outsource it all
If you want to focus on areas other than supply chain, manufacturing, and quality in China and focus your time on development and sales, for example, this strategy is right for you.
You can choose to work with one manufacturer or a trading company that will give you an end to end solution to all your needs. They will take your list of requirements and do all that is necessary to source, manufacture and ship your goods to your destination country.
The advantages are clear – You will have professional people taking care of all the China-related details for you allowing you to focus on other areas in your business.
The disadvantages are
They are not going to do it for free. They will charge you for that service by adding the service fee to the unit price. And they will keep on doing that for as long as you will buy from them. However, that may work for you as you won’t have to spend any resources dealing with any task performed in China.
They will make decisions that will impact some details of your product as it is their responsibility to deliver your product on time. Again, that may be fine with you, but do keep in mind that if you are not involved in the decision-making process there is no way your maker will know how each and every one of their decision could impact your customer satisfaction.
In case your supplier is a trading company, this company has a set of agendas that is different than yours and the manufacturers. It means that it will consider its own risk and benefit before yours and the interest of the factory. This may sound reasonable, however, if you do not have access to information about what is really happening in the factory, and there is a conflict between your agenda and the trading company’s agenda, the trading company will make decisions that will benefit itself and work again your own good.
Third-party service companies
If you choose to outsource all the decision-making process in China, sooner or later you will realize that putting yourself out of control will not work out for you. You will realize that no one knows your business as well as you do and there are some decisions that you must make by yourself. As you demand from your vendor to let you make more and more decisions by yourself, you will see that the more you want to know what is going on, the more your vendor will have to give up the freedom of taking actions without consulting you and the more information they will have to share with you. It will come to a point that sharing information with you and not being able to take actions freely, will work against the vendor interests.
Why? Because there is a built-in conflict of interests between you and your vendor.
The same way that (in principal) lowering the unit price works for you but does not work for your vendor, there are many other areas of conflicting interests.
The more you know and the more decisions you can make by yourself, the better you can protect your interests, guaranty your customer satisfaction and your companies reputation.
But if you want to make decisions you need real-time and reliable information. To get that, you need to have someone on the ground whose interests are as similar to yours as possible and for that reason, they will want to send you that information and allow you to make the best decisions at the right time.
Take control over your business
At the end of the day to get your goods made and shipped to your home country there are few main tasks that need to be done:
Source and audit a suitable supplier.
Negotiate with your suppliers the best deal for you.
Set up the quality management system that will monitor the suppliers’ quality.
Manage your vendors before and during the production process.
Handle the export and shipment.