There are many
benefits to outsourcing your high-quality metal or plastics manufacturing to
another country such as China or Vietnam but there are many potential pitfalls
too.
There isn’t space here to go into all the details but here
are three essential things you need to think about before considering outsourcing
to a foreign nation.
1.
Make
sure you understand the country
Every country has its own ways of doing business and you
really need to go into any commercial relationship with as great a familiarity
as possible with specific beliefs, cultures and modus operandi of the people
you will be working with. Understanding the country can also involve getting to
grips with the financial side of things – do you understand China’s VAT system,
for example, or its export tax and delivery terms? Do you even know the current
exchange rate? Do you know whether the country is undergoing a period of
economic growth or is it in stagnation… or even decline? And precisely what is
happening on the ground?
2.
What
is the country’s relationship with the UK like?
Obviously, it doesn’t make business sense to be working
closely with a country if there is a fractious relationship with the UK. Even
though relations with China and Vietnam are perfectly cordial, you still need
to be communicating with the UK Foreign Office and UK Trade & Investment as
well as the British Chamber of Commerce. You also need to be able to speak the
local language – or at least have someone representing you who can.
3.
What
kind of sourcing do you want or need?
Outsourcing is outsourcing, right? No. You can have non-contact
sourcing, which is fairly self-explanatory, or semi-contact sourcing or you can
deal with the country through a separate sourcing company such as ChinaSavvy or
VietSavvy. You can also connect via a sub-contract manufacturer or set up your
own representative office. Do you want to be involved in the final quality
checks and inspections, who is going to carry out all quality audits, and who
is going to draw up the contracts and manage purchase orders, invoices and
payments?
Of course – just as there would be if you were selecting a
sub-contractor in the UK – there are plenty more key issues that you must take
into consideration, not least the quality and skills of the engineers who will
be working on your customers’ products. Is it possible to make the parts in
places where costs are even lower than in China – such as Vietnam – without
compromising on quality and while still taking advantage of China’s incredible
engineering supply chain? Are you in a position to make an informed decision?
Lots of things to ponder, then, before you take the plunge!
This post was written by Christopher Devereux, managing director of ChinaSavvy HK and vice chairman of the British Chamber of Commerce, Guangdong, China. Find out more at www.chinasavvy.com, Twitter @Chinasavvy1, Facebook @Chinasavvy or LinkedIn.
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