Pros and cons of sourcing products in India vs. China

What are the relative advantages of China over India, when it comes to sourcing products? The China Law Blog came up with two different posts covering this question… And a reader called Joel Waldman came up with very interesting comments that I am going to reproduce in this post.

From what he wrote, he has been living in India for 30 years and spent all this time sourcing from there. He has started sourcing from Chinese suppliers about 5 years ago.

1. Challenges of sourcing in India

First, here is why he “strongly disagrees that India is in any way, comparable to China”:

Logistics is a joke in India. It takes 3 days to unload/load a container ship in Mumbai. I have “lost” containers put on a train in New Delhi which somehow are missing when the train arrives in Mumbai. Yes, containers disappear from trains.

The Mumbai High Court has ruled that proven theft (proven in court) is not sufficient grounds for firing a worker. To close a company/factory with more than 90 workers requires government permission, which has till date, never been given.

India manufactures what China, for a variety of reasons, chooses NOT to manufacture: too labor intensive, too short production runs, primarily for the domestic Indian market where there are tariffs protecting the Indian manufacturer.

The real cost of Indian labor is 2-3 times the cost of China labor when you take into account productivity, Indian workers need for excessive/extensive supervision, and the costs of benefits. This is why Chinese construction companies choose to import Chinese labor to India, for projects they are working on in India, and why, till very recently, there were 40,000+ Chinese workers in India doing construction.

I am fully aware of the problems of sourcing in China. Nevertheless, India’s costs and logistics make it the second choice for any product currently available in China.

With the poor response to call centers in India by American consumers/customers, I also expect China to shortly (as English in China becomes more widespread) become the destination of choice for out-sourcing.

These are all strong obstacles to sourcing from (and manufacturing in) India. On these issues, there is no doubt that China offers better options.

I remember visiting a large garment factory in Tirupur (in the Tamil Nadu province). They exported nearly everything to large US and European brands. The workers were paid about 60% of what an equivalent operator would get paid in a Guangdong factory.

BUT they were much slower to do the same job, they were very poorly organized, and their days were much shorter. When I told them that a Chinese sewing girl often worked 11 or 12 hours a day, a manager looked a me and said “are you killing them, or what?”

I can also see a few other reasons why China has been more successful than India for attracting foreign buyers:

• Chinese suppliers are good salespeople. They will put a sample in your hands and promise you that’s what you will receive. Everything looks easy.
• China has set up factories to make about every kind of product, whereas India’s industry does not have the same breadth of offer. This “one-stop sourcing” is a huge benefit for buyers trying to optimize their time and find everything they need on one trade show (be it in Hong Kong, Guangzhou, Yiwu…).
• For a buyer, going to China is “like going to Las Vegas”, as Whit Kelly puts it: good food, nice hotels, plenty of booze and beautiful girls.

2. Advantages of India over China

In a later comment, Mr. Waldman wrote that “there are some good things about sourcing from India”:

1. Indian exporters, having been very exposed to Western buyers/culture/business for a very long time, are much more understanding of Western business assumptions: they take their responsibilities more seriously than Chinese exporters. They understand that they are responsible for quality issues, even when a consignment has been inspected by the buyer. They understand that delivery on schedule is critically important, and understand that they need to compensate if a consignment has problems, or is late. This is not generally true of Chinese exporters.

2. They truly understand long term relationships, and are not so focused on the profitability of each consignment. More so than Chinese exporters, in my experience, they focus on the long term.

3. There is not really a cultural or language barrier: yes is yes, and there is a no: a very clear no, when appropriate; not, a maybe/let’s see what happens/its possible.

4. There is a greater widespread understanding of their customers’ customers: What is acceptable to consumers in different countries in terms of packaging, quality, hidden manufacturing defects, safety issues (lead in paint/trace metals in children toys),

5. Indians, overall, are more creative than Chinese factories. New designs/items are created and plugged into their potential markets. Creativity is real, in India, and they are not looking to copy, but to create something new. IP issues are dealt with in a more “normal” way. Copying is not appreciated. The legal system in India is frustrating slow (I am involved in a property dispute which has been in court for 28 years), but the laws are very similar to English/America laws, which is still not true in China. Contract law works, is enforceable, and predictable. Consumers and businesses are protected from both suppliers, and the government: be they domestic or international.

6. Everyone speaks English, and many, better than I!

7. By and large, exporters say what they mean, and mean what they say.

8. China and Vietnam are the only two countries I know of who try to control which companies can export (through the need for an export license). The original theory that this would insure only quality shipments, has not worked in either China or Vietnam, by the setting up of both state owned and private trading companies. In India, anyone can set up from scratch an export company at a cost of less than USD $ 500. This seems to be a better system, and is ultimately less expensive for the buyer.

9. With all major international banks having branches in India, and very professional Indian banks, international trade is much more efficient than in China. Buying without L.C.’s or a 30% deposit, is much more prevalent in India today, than in China.

This all sounds true… Some of my clients simultaneously source apparel from China and India. I see three types of reasons:

• In some cases, if they could, they would buy everything from China, for convenience. But some fabrics and embroideries are just not possible to find in China.
• In other cases, it is a “China plus one” strategy (i.e. avoiding to rely on China for 100% of procurements) on the part of the purchasing company.
• In rare cases, India has a real cost advantage. However it seems like Bangladesh is the place to go for the “cheapest needle”. Pakistan is also an option for some product categories.