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Etienne Charlier, at Procurasia, just had a very nice infographic designed. It is presented as a list of criteria to be followed by a company BEFORE starting to buy in China.
According to Etienne, sourcing in China is a good idea for your company if…
- You can purchase large volumes at a time
- You can afford to place orders months before getting the products
- You can find competent manufacturer, confirm their fitness to your needs, and start production, all within a few months
- You can accept to adapt your product to the local production methods and to the materials commonly found in China
- You intend to buy products that undertook significant machining and/or assembly transformations
- You are not at a big risk of creating competitors or of getting your designs knocked off
- You want to build extra manufacturing capability, rather than replacing what you are currently making domestically
Here is the infographic:
I can think of a few extra elements:
- The decision is still economically justified if the FOB price is 20% higher in two years.
- You purchase a high mix of products. Chinese factories typically have a lower level of automation, which means higher flexibility to make a wider range of goods (within their area of competency).
- You can adopt a project management organization, and micro-manage what happens half-way around the world.
What other criteria would you add?
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Maybe “Have a high tolerance for failure” or “Willing to fail repeatedly until success is achieved”
Oh yes, good point… No strict deadline, and ability to devote first order(s) for supplier testing.
Hi Renaud, great additional points. Especially the level of mix and the ability to “micro-manage” or what I would call “hands on” manage the supplier.
Regarding the price, one of the point of design flexibility is to try to reduce the impact of expected price rise withing 24 months of the first purchase.
If you do not mind, I will incorporate these points in a future version of the infographics in a few weeks. I am collecting feedback from people in several LindedIn forums.
Sure.
I would actually make 2 infographics: one for very price-conscious importers, and one for importers who need to qualify suppliers’ capability & reliability first.