Benefits of Outsourcing to China - Still worth it?

Recently, rising Chinese wage levels and changes in the geopolitical climate have led to an increasing number of headlines concerning the feasibility of outsourcing manufacturing to China. However, the complexities of supply chain and manufacturing setups are not always fully addressed in many of the discussions concerning the future of Chinese production in the global marketplace.

We have put together a few points on the benefits of sourcing and outsourcing that we believe still hold true for many companies.

VIDEO: PRODUCT DEVELOPMENT, SOURCING AND MANUFACTURING WITH SINOSCAN

Lower Costs

Lower labour costs are one of the top benefits of outsourcing manufacturing. Although average manufacturing wages in China have been increasing by around 12% each year since 2001, they are still generally much lower than in Europe and the US.

Similar to labour cost savings, outsourcing can also save significant amounts in terms of overhead costs. Many manufacturers may find themselves expanding or responding to demand such that they are outgrowing capacity, but renting or buying larger spaces can prove to be costly when factors such as insurance, utilities and maintenance are taken into account.

By outsourcing different processes, you could greatly improve your production capacity and in turn, improve productivity and efficiency.

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Core Focus/Strategic Optimisation

Often a business’s lack of expertise, or dedication to non-core tasks, can result in lower morale and ultimately poor performance. Outsourcing could make sense for your manufacturing needs because it can help to shift the focus from peripheral activities to strengthening your core business processes.

Not only could this improve your business’s time management, but it could also raise the bar in terms of quality products too.

SINOSCAN STAFF - CLICK TO GO TO OVERVIEW

  • Jens, Engineer, SinoScan Denmark
    Jens, Engineer, SinoScan Denmark
  • Jane, QA and Documentation Dept. Manager, SinoScan China
    Jane, QA and Documentation Dept. Manager, SinoScan China
  • Mai-Brith, Logistics, SinoScan Denmark
    Mai-Brith, Logistics, SinoScan Denmark
  • Detlev, Engineer, SinoScan Germany
    Detlev, Engineer, SinoScan Germany
  • Gu Hao, Product Dept. Manager, SinoScan China
    Gu Hao, Product Dept. Manager, SinoScan China
  • Flemming, CFO, SinoScan Group
    Flemming, CFO, SinoScan Group
  • Nick, Engineer and Peter, General Manager, SinoScan UK
    Nick, Engineer and Peter, General Manager, SinoScan UK

Closer Proximity to Resources

More often than not, an outside country may be in closer proximity to additional resources you need. It’s no doubt that although China’s economy may be slowing, the country is still clearly a manufacturing powerhouse and would provide more in terms of economies of scale.

Outsourcing production to China could be the answer to reducing both costs and lead times in your production processes.

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Chinese Companies on list of Fortune Global 500 Companies in 2016

Access Expertise and Technologies

Another benefit of outsourcing manufacturing to China is that you instantly gain access to increasingly competitive and sophisticated research, science and technology.

Many large companies enjoy the technology and expertise that is constantly developing, but outsourcing also gives the opportunity for smaller businesses to access this too. You can outsource processes to specialist vendors who are bound by contracts of certain levels of service and quality, and will have the specific equipment and technical expertise to carry out tasks more efficiently.

These resources provide the potential for the development of your products from initial design, prototype manufacture and test, through to full production.

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of all undergraduate degrees in China were in engineering in 2015

Production Distribution

If your business is serving worldwide markets then it can be advantageous to utilise the ability to ship complete products directly from factories to international distribution centers or end customers. Hence, investigating the potential of manufacturing complete assembled and tested products in China could lead to additional benefits, particularly if the aim is to sell into China.

Choosing where to house your manufacturing operations is an important choice for all businesses; many succeed when manufacturing products on home soil, but there are good reasons why outsourcing overseas in China is a viable and popular option. If you are looking to find out more on how outsourcing could benefit your business, contact SinoScan on +44 (0) 2392 272707, or email info@sinoscan.com.

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Estimated number of Chinese upper middle-class and affluent households in 2020 (Source: Boston Consulting Group)
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Delivery and Quality Metrics - Last 12 months

At the crux of the services of any off-shore supplier are timely deliveries, consistent quality and cost-efficiency.

We strongly believe that one of the fundamentals of a successful supply chain partnership is clarity for all parties involved. This is why we have decided to publish our delivery and quality performance track records on a monthly basis.

This graph shows our total performance over the past 12 months.

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