Golden rules of Manufacturing in China

1. Take time to build a sound relationship with your Chinese Counterparts

Absolute trust must be established, since the Chinese have limited faith in the system they have. It takes time to develop trust. Plan on this stage of the process taking at least six months of continuous dialog. Establish the right business structure for your relationship in China.

2. Establish the right management structure for your relationship in China

The road to China is littered with companies that have tried to go at it alone and failed. There are a number of ways to do it including turn-key operations, using several different types of joint ventures and owning your own factory, using companies like Source in Asia Limited. As you proceed through this list, the savings increase, but so do the risks.

3. Look for a Chinese partner with strong quality and process control

You cannot depend on certification from the ISO – the International Standardization Organization. QS Certification (used in the automotive industry) is more dependable.

Find out whether your potential partner can be quickly qualified to manufacture to your standards. If your prospective manufacturer is too far below your required standards, the time required to get up to speed could be prohibitive.

Conversely, if your potential partner is too large or too quality-focused, and if you would not represent a significant part of their business, you might not be able to get the attention you need. You don’t want to become a “low priority” client for them.

The best match is when you find a small manufacturer just achieving your level of quality control. Source in Asia Limited Chinese Supplier Network will assist you in the process.

4. Engineering is needed on both sides

Examine the high tech capabilities of manufacturers. Look for their Web and CADD-Cam capabilities in particular, along with toolmaking facilities.

5. Plan on routine trips to China

You will need to go at least 4 times per year to get the “face time” that builds and maintains relationships in China, unless you are looking for a “turn-key,” “hands-off,” arrangement.

6. Understand the logistics

If you will be shipping by sea, for instance, expect a 6-8 week allowance for delivery of products. Therefore, just in time inventory systems may not work. You will need to maintain a higher level of inventory to support your customers.

7. Understand the Rules of Thumb for costs of manufacturing in China

For example, labour costs are typically £2.00 per hour and the labour content of manufacturing costs is typically 8 -10%. Generally, your manufacturing costs can be reduced by 30% to 50%, depending on the structure of the relationship (see paragraph number 2). Similarly, the costs of raw materials can be dramatically lower in China.

8. Recognize the importance of family relationships in China

Business networks are based on familial ties (i.e. the father owns the factory and eleven relatives work in it). An entire family might be involved in the factory, which helps them diminish the impact from the sudden loss of a key employee, but might not always be the most productive organizational structure. While you might find it inefficient, it’s a fact of life – not a problem you can fix.”

To build these types of relationships with Chinese Suppliers, Source in Asia Limited can help you do it, so why not contact us today.