FAQ for Outsourcing Manufacturing in China
1. What can happen if I do not proactively investigate the benefits of outsourcing manufacturing in
If your competitors successfully outsource manufacturing in China and can offer prices to your customers
that are 30% to 50% less than they are currently paying you, you’re going to lose customers – in a hurry.
Most large companies, including Wal-Mart and GE, are already asking their suppliers to set up
manufacturing operations in China, and many of your customers are likely to follow suit in the near future.
2. How long does it take to outsource manufacturing in China?
For most products, unless they are highly technical, it takes approximately 12 months from start to
successful outsourcing. Many U.S. businesses will be in danger of losing significant market share in that
3. Why should I consider outsourcing in China?
Almost any manufactured item can be sourced in China. The products that will provide the most savings are
those with high labor content, raw material content and relatively low transportation costs (low weight and
4. Should I use an agent in sourcing products in China, or should I deal directly with the
There are benefits and disadvantages to both approaches. A company must acquire a set of basic capabilities
for outsourcing, such as the expertise to evaluate a supplier’s ability to meet requirements; test
preproduction prototypes; create samples; and fulfill logistic activities such as setting up a bonded
warehouse. It is very common for a company to work initially with U.S.- or China-based agents until the
internal staff is trained to deal directly with the Chinese suppliers. Nevertheless, if your company sources
more than $100 million a year in products from China, it makes economic sense to have a unit that can go
directly to the suppliers. However, certain agents are skilled at handling complex product categories, and a
healthy flow of agents can provide useful information about changes