Businesses around the globe share a common challenge of developing and introducing their products to the market effectively and on time. However, manufacturing a large number of goods requires a heavy investment in production sites, machinery, and labor. For businesses that don’t have the operational capacity to carry out these processes in-house, aim to reduce costs, or increase production, outsourcing to countries such as China can be highly beneficial.
China has secured its rank as the world’s leading manufacturing country for the 11th year in a row, accounting for nearly 30% of global manufacturing. Hence, it is no surprise that even the biggest brands worldwide continue to outsource their manufacturing efforts to Chinese factories. They get the benefit of having their goods built overseas at incredibly low costs, and in many cases gain access to the booming Asian market.
Compared to many of its neighboring countries, China has throughout the years retained its position in the low-end industry segment. However, Chinese manufacturers are also known for the production of higher-value products across industries, high-quality product development, including industrial design, research and development, and prototyping. In fact, many renowned product developers turn to CNC machining China-based services since few other countries can provide the same efficiency conditions regarding quality and cost.
Below we have summarized the top five benefits of outsourcing manufacturing or product development to China.
Labor is without a doubt one of the largest expenses for manufacturing and is, therefore, one of the main benefits of outsourcing to China. The costs of labor in China can drop by as much as 80% compared to the costs in a company’s home market, leading to a dramatic change in profitability.
Apart from lowering labor costs, outsourcing to China can help you realize significant long-term cost reductions. By outsourcing your production, you outright eliminate the need for a production plant, which requires a substantial initial investment for the building and equipment, along with continuous real estate maintenance costs, such as property taxes, insurance, utilities, and other expenses. For small or medium-sized companies, investing in in-house factories, such as CNC machining facilities, is usually not a cost-efficient option.
The production cost of your products will directly impact its price, which is a common factor that consumers consider when shopping. If your product is of the same quality as your competitor’s, but it comes at a lower price, you will likely attract more consumers. That way, outsourcing allows you to have a certain level of favorability in the market that you would otherwise not be able to attain.
Due to its huge population, China is abundant in manpower, and, as mentioned before, has cheaper labor costs. Compared to domestic factories in other countries that are limited in capacity and time, Chinese factories have a high ratio of potential employees at their disposal.
Especially for mass-market products, being able to hire more people to meet volume-demanding production will ensure that you have enough supply to maintain your projected sales. This is also true if a business decides to have shorter production cycles, in which case a manufacturing facility in China can deliver higher output in a shortened time frame.
For a business to grow or maintain its competitiveness, it needs to remain flexible in its offerings. However, to offer new products before its competition, a business must have the time and resources to invest in innovation. Outsourcing product development can provide the necessary skills, abilities, and technologies, without the need for hiring new labor or machinery.
Similarly, the provided flexibility to scale up or down in response to demand is another benefit of outsourcing manufacturing to China. If a sudden increase in demand requires increased production, your business can quickly respond with larger production volumes. This will allow you to manage your supply chain effectively to meet consumer demand and retain your competitiveness in the market.
By having a flexible and scalable approach, your business can successfully adjust to the ever-changing conditions of the market, and respond easily to changing business priorities and requirements.
Due to years of experience in efficient and high-volume production, you can certainly expect Chinese factories to deliver quality results. They will work closely with you to make sure the entire process meets your standards.
Firstly, the managers responsible for establishing the production process will be familiar with all of the local regulations and operation requirements, enabling non-local businesses to operate efficiently from day one. Secondly, you can expect utmost reliability from the Chinese plants when it comes to their supply chain and operations, as well as their highly trained employees that will be familiar with all the work requirements. All in all, Chinese factories aim to please their clients, so you should expect high-quality products and prompt delivery.
China is also known for industry specialists that conduct product development in the country. Well-established companies have been employing award-winning industrial designers with significant experience in the China manufacturing process.
Market Expansion Opportunities
With the world’s largest population, China offers the undeniable advantage of a booming economy where consumers are hungry for all kinds of products. Entering the Chinese market can be difficult, but an outsourcing agreement can significantly reduce that difficulty.
Since China is passionate about brands that cross its borders, relationships in the local market significantly increase the likelihood of success for companies that outsource their production there. Businesses can therefore diversify their reach by establishing a supply chain and local marketing efforts. They are also able to hire experienced local employees that can assist with bureaucratic and operational requirements that they will otherwise have a hard time tackling.
Another important factor to consider is that there will be no need to ship the goods from overseas because your production facilities will already be in China. With over 1.4 billion potential consumers in your proximity, there is a huge opportunity for business growth and positive returns.
With China being the global leader in manufacturing due to its highly efficient production, many businesses already reap the benefits of having their manufacturing or product development outsourced to China. The top 5 benefits of outsourcing production efforts to China include:
- Lower costs;
- Enhanced efficiency;
- Production expertise;
- Market expansion opportunities.
Although outsourcing your production efforts to China may not necessarily be the right option for your business, it is important to take into account the factors mentioned above. Whether you are manufacturing consumer goods or carrying out CNC machining for product parts, outsourcing your efforts to China is likely to bring long-term benefits to your business.