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China Sourcing for SME’s: Why SME’s produce in China

By Raj Abbacus
June 29, 2015
SME


Manufacturing in China

 

In the majority of times small medium enterprises (SME’s) are at a disadvantage comparing to large multinationals. They cannot benefit from the economies of scale that the larger multinational firms can. SME’s more or less, have to follow the market and increasingly the market is looking towards china.

 

Low-cost country sourcing (LCCS) isn’t exactly a new concept. Major sportwear companies such as Adidas have be sourcing from Asia from as early as the 1960’s. For the majority of SMEs this is unknown territory, this is derived from a variety of factors including the language barrier, cultural differences, currency and exchange rates and not to mention the huge geographical distance between buyer and supplier. LCCS therefore has remained a rather daunting task.

 

 

Why small medium enterprises are sourcing from China

 

China is one of the best countries for companies to try sourcing form a low-cost country. China has become relatively low risk for companies what are new to LCCS, this is due to the fact that big businesses cleared the way 50 years ago. There are a number of factors which makes China perfect for sourcing for SME’s and today we will cover some of the most important.

40 years ago, big companies started to move to China, which made China a very mature and stable supply chain with a comparably low risk choice for companies that are inexperienced with low-cost country sourcing. There are many reasons for China to be a good sourcing fit for the risk averse SMEs. We have the most important factors are listed here.

 

Skilled labour force

China’s labour force is highly skilled. China’s manufacturing has shown to be extremely diverse ranging from automotives to electronics to toys. Especially when it comes to technical and industrial products, there is simply no equivalent low cost competition to China. Apart from the high level of complexity in which China can produce, another factor that makes Chinese manufacturing so appealing is the speed in which goods can be processed. For the majority of products China is able to produce goods better and faster than any other low-cost country.

Raw materials and sub-suppliers

Due to the large sub supplier market in China, low cost countries are able to source materials there. If a European computer company decided to outsource its manufacturing to India, there is a high possibility that India would source the single components necessary for the computer from China. Cotton and many other raw materials required for manufacturing come from China. The ability to source everything locally reduces cost as well as delivery times. By reducing the number of countries involved the level of complexity reduces as well.

Mature supply chain

China has the skilled labour, the sub-suppliers, and due to years of experience it has a good understanding of the export market. As a result of the huge infrastructure investments, China has the necessary logistics to support the global manufacturing market. After many years of experience, China can ensure quality throughout the entire supply chain from sub-suppliers, manufacturing, materials, logistics and such. This is a key factor for why China has become the leader for low-cost country sourcing.

Do you think that sourcing your manufacturing could benefit your business? We at China2West have over 10 years experience of helping clients to manufacture their product in China. Whenever you are looking for supply chain management to product development, do not hesitate to contact us at China2West for your manufacturing needs.