- Published on Tuesday, 27 March 2012 13:23
by Dan Harris in 'China Law Blog'
Had lunch the other day with a long-time client who has been involved with international outsourcing for more than twenty years and involved with sourcing product from China for at least ten. We talked a lot about what separates companies that do well in sourcing product from China from those that fail.
He sees the following as determinative:
- Those who go into China to save “small money” fail. They go in to save ten percent, but that ten percent gets eaten up “pretty quickly by either quality control problems or greater than domestic monitoring costs. He is of the view that one should not even bother sourcing product from China unless the savings will be at least “15%, probably more.”
- Those who go into China “half-way” usually fail. If you are going to outsource your product to China, you must spend the time in China making sure your product is being manufactured correctly there. Spending time at your China factory will itself go a long way towards convincing the Chinese factory that you are serious about quality. That in turn will increase the chances of your receiving quality product.
- Those who require their Chinese suppliers to sign “real contracts” are also more likely to succeed. He sees this as further evidence of seriousness. “If you are not taking the relationship seriously, why should your product supplier.”
- Those who think of China as “both a place for manufacturing and a place for selling” are more likely to succeed
- Those “who never stop monitoring quality, teaching quality, and demanding quality” are more likely to succeed.
Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes ChinaLawBlog.com as a source of China legal and business information.