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The Pros and Cons of Manufacturing in China

 

Outsourcing manufacturing to China can unlock value for your company and help bring your new products to market quickly and efficiently. It offers unrivalled capacity for manufacturing a wide range of products at the lowest prices.

However, as this industry has grown and matured, so have the pitfalls that come with it. Any company looking to outsource manufacturing to China must navigate a veritable minefield of potential problems. Navigating them successfully is the key to a successful outsourcing strategy.

Here are the biggest pros and cons of manufacturing in China.

Pros

Lower Costs

The economic argument for manufacturing in China is the most compelling one. Cheap labor has been the bedrock of the Chinese manufacturing sector and despite rising labor costs, production costs in China remain orders of magnitude lower than in the West.

This is because in addition to the cheaper labor, China now has a well-formed ecosystem with readily available human capital and physical infrastructure that create beneficial economies of scale.

This translates to cheaper production in China, cheaper ancillary services like warehousing and shipping, and significant savings at home with lower spends on inputs like labor and real estate.

Rapid Prototyping

These economies of scale also help companies achieve proof of concept faster through rapid prototyping processes using state of the art techniques like CNC prototyping to bring your products to life exactly as designed and envisioned.

Quicker Scaling

Once you go into full-scale production, the ecosystem in China is well suited to expanding the scale of your output as demand grows. This model can be quite flexible and, with a well negotiated minimum order quantity, it can also help you weather downturns in demand.

International Expansion

Manufacturing in China also gives you the advantage of geography by placing your products near fast-growing Asian markets, which can be a huge advantage if your business plan includes selling in these Asian countries.

Quality of service

The ‘Made in China’ label has been associated with cheap and poorly made products, and often with good reason. However, this reputation isn’t entirely accurate. High-end companies like Beats by Dre, Apple and Sony also manufacture many of their products in China.

They key over here is to rise above the mass of high volume, low quality producers and seek out the right manufacturing partners that will do justice to your products. Choose wisely and you will reap the benefits for years to come.

 

Cons

Finding a local manufacturing partner

This is the first and sometimes greatest challenge faced by companies who want to manufacture in China. Online searches reveal horror stories and dire warnings from those who have been exploited and had their IP stolen by unscrupulous partners.

The process of selecting the right partner can be arduous and time-consuming but cutting corners at this stage will only lead to unfavorable results.

Language and Cultural Barriers

The Chinese language is inaccessible to the untrained and the level of English spoken is China is often very poor. This communication gap can be a major barrier and even well-known international brands have fallen prey to miscommunication in China and other foreign countries, sometimes with hilarious consequences.

In addition to the language barrier, business cultures can differ greatly between China and the West. Well-intentioned gestures can be completely misinterpreted by the other party without proper context. Learning to bridge this gap is essential for any successful partnership in China.

Quality Control

Chinese production standards are not always the same as the west. A perfectly made prototype does not guarantee the same quality on the final order. Foreign firms can be left holding the bag for entire consignments of sub-par product if rigorous quality control is not maintained throughout.

Sometimes this happens due to miscommunications and differing expectations of quality. Other times it can intentionally and maliciously done by profit-hungry Chinese factories. The only way to avoid this is to be proactive and take responsibility for ensuring quality control for your products.

IP Protection

This is the biggest concern for many foreign firms when entering China. Cautionary tales about firms getting screwed out of their IP are all over the internet. Foreign companies often overlook this crucial aspect in their haste to bring their products to market, only to suffer the consequences later.

It is certainly possible to protect your IP when manufacturing in China. In fact, IP protection is probably MorphoMFG’s best-selling service and we have maintained a 100% success rate in this area. However, the process does require painstaking attention to detail and familiarity with the (sometimes inconsistent) legal system in China.

Shipping and Logistics

Once your product is manufactured and ready to go, you must face the challenge of transportation to your final market and proper warehousing wherever needed. These logistical challenges can increase costs significantly if mismanaged. Special care must be taken with this process in order ensure that the product reaches its intended market in a cost-effective manner.

These challenges, while significant, can definitely be overcome. The solution requires the foreign companies to take initiative in educating themselves and be proactive throughout the manufacturing process. Working with the right local partner can greatly help in this.

At MorphoMFG we have over two decades of combined experience in helping foreign firms enter the Chinese manufacturing sector. Having been on the product side of the business before, we recognize the pitfalls that lie before our clients and have the local network and expertise to help them sidestep these issues. With the right precautions, manufacturing in China can be the step that takes your business to the next level.

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