Previously, companies considering reducing costs by moving production facilities to China were cautioned to be wary of inconsistent quality-control standards. However, as the world recovers from the 2007-2009 Recession, China, too, is improving its’ processes and the opportunity for improved economic growth makes accessing Chinese production and manufacturing facilities very intriguing again.
Not unlike other international suppliers, China has had its share of challenges when it comes to providing contract-compliant goods. Contracts haven’t been fulfilled; the goods purchased weren’t up to par; production agents mysteriously disappeared right after pay-day. But China has responded to these complaints and is working very hard to eliminate the causes of those concerns.
In the past decade, China has been improving internal controls, and establishing Chinese standards that are much more closely aligned with western standards. The result is a production-minded country very much interested in successfully working with international companies.
A challenge still very much present to Western companies is their lack of in-depth knowledge about the Chinese manufacturing industry. It’s only been since 1979 that China opened a door to international commerce. Even though it has been widening ever since, the Chinese industrial culture can be very confusing to a Western mind. Even travelers who are familiar with the social or cultural customs of China can be perplexed about how the various regions of industrial production facilities work in relation to each other and the rest of the world.
Western companies that are serious about transitioning some or all of their manufacturing activities to China will seek out a reputable on-the-ground partner specialized in China operations to assist them with the process. An on-the-ground-partner specialized in China is skilled in how the market works, and can steer the international buyer towards facilities and materials suppliers that will provide the best service for the contract. Selecting the right manufacturing plant and materials suppliers for any job is not an exact science, so having input from a partner who understands not just the big picture but also the nuances along the way can cut costs and reduce delays and certainly remove a level of frustrations most first-timers experience.
One way to cut costs immediately is to identify production facilities that are already verified as being in compliance with relevant standards. The verification process can be a long one, depending on the people and facilities involved. The goal is to ensure that the facility is properly built and maintained to produce the selected goods, and that it holds the correct licenses to do the work. In China, a business can only legally deliver services and goods for which it holds licenses to produce; so correct licensing is key to a successful match. The pre-verification process gives the international producer a quick step into the process, and confidence that the end product will meet their contractual standards. After the verification is in place, the on-the-ground partner will look for evidence of further standards compliance, especially in regard to ethical and security standards. When the process is complete, the international buyer will be able to move forward into the sector, confident that the initial steps have been taken to ensure that the chosen facility is competent and compliant.
Even with the challenges, China remains a strong producer of international goods that pass international muster. In fact, it is because of these challenges that the “on-the ground partner industry” has developed – to assist international companies’ access the benefits of the Chinese manufacturing opportunities while avoiding most, if not all, the problems previously reported. The trick is to know the questions to ask to find the right on-the-ground partner for the project.
Because of the potential for high economic return on Chinese-manufactured goods, it still makes excellent business sense to seek out Chinese manufacturers to produce international products. A skilled and qualified on-the-ground partner can provide Chinese factory verification that any specific facility will be qualified to accurately and ethically produce the selected products, based on internationally accepted social standards, quality controls and security concerns. But before choosing a partner you trust, it is advisable that you visit China, scout it out, and try to gain insights from others. A good place to start is also reading my book, Red Flag – Your Guide to Risk Management When Buying in China, which is based on my experience being the in-between partner, helping overseas buyers mitigate the risks associated with sourcing in China. You can find it here.
