FBA Issue 16: September / October 2007
A better solution for small business sourcing from China
by CHEN Yi
According to a Boston Consulting Group (BCG) report, manufacturers in China benefit from an enormous pool of workers, flexible working conditions, and an average hourly wage of approximately US$50 cents vs. US$2.3 dollars in Mexico and 80 cents in India. In addition, raw and processed materials are often cheaper in China, yet frequently match global standards for quality. Overall, procurement costs generally run 20 to 50 percent below costs for comparable goods in established markets. In the animal feed industry, buying micro and macro ingredients from China is becoming a compelling option.
Unlike larger companies, which profit more from locating their manufacturing or sourcing materials in China because of their scale economies or financial strength, small businesses might find it more difficult to design a China sourcing strategy. How are you going to locate a qualified supplier from among hundreds of Chinese manufacturers? How will you avoid getting ripped off by unscrupulous ones?
How will you conduct QA & QC to make sure that the products you bought are safe (consider the recent headlines about how tainted pet food from China caused a spate of cat and dog deaths in the US)? How will you protect your intellectual property in China? How do you grapple with the language and cultural differences that make doing business in China so challenging? Finally, given the aforementioned challenges, how will you properly manage your supply chain to ensure that purchases are delivered on time?
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