What are the Benefits of Outsourcing Manufacturing to China?
American companies benefit from outsourcing manufacturing to China
The most common reason for outsource manufacturing is the reduction of cost. American companies outsource manufacturing to China to have their goods assembled, or completely built overseas, at incredibly low costs.
China accounts for one-fifth of the global manufacturing, making it the largest manufacturing nation in the world. Shanghai will remain the manufacturing center of quality electronic devices because they have the skilled labor, as well as the excellent engineers required to produce high-quality products, while many other regions specialize in other types of manufacturing, such as plastics, automotive, textiles, etc.
Starting a business is an expensive venture; it can cost a significant amount of money and the risks are great. Hence, many people consider cutting costs by outsourcing their production to countries like China.
Some of the most significant benefits of outsourcing manufacturing to China are:
Labor remains one of the biggest costs of any manufacturing company. Keep in mind that outsourcing labor costs don’t always mean moving the production to another country. Companies can outsource labor simply by using workers from temporary agencies. Your staffing becomes much more flexible when it is outsourced.
In China, you get high-quality products for a mere fraction of what you would expect to pay back home. Chinese factories provide discounted rates for bulk orders; therefore, you get more for your money.
Factories are very particular when it comes to quality, however, regulations vary between provinces and often differ from American laws. Nonetheless, it is also advisable to be very hands-on for the first month or so. This will help the company you choose create exactly what you want. Since Chinese factories aim to please their clients, you can expect high-quality products and prompt delivery.
With the production outsourced, the company can now focus its resources, both human and financial, on the areas that increase revenue and profit. Generally, outsourcing reduces manufacturing costs, so if the company increases its revenue through a better focus on sales and marketing, it increases its profit margin as well.
Due to a huge population, manpower is abundant in China. With a high ratio of potential employees, Chinese factories have no reservations about hiring more people, depending on the amount of business you give them. Therefore, you are assured of a faster production rate.
A Wealth of Materials
One of the best reasons to outsource your production line to China is the diverse amount of parts and raw materials available. Keep in mind that if you have a design they do not have in stock, most factories will be willing to make them based on your specifications.
Contract manufacturers might produce goods for two or more companies, and even for competitors within the same industry. Since the contract manufacturer has more production capacity than the original manufacturing company, they can typically respond to increased production requirements faster than the original manufacturer.