How suitable your product is for sourcing in Asia?Many importers turn their attention to Asia seeing this region as a low-cost market for almost any product category and as a production heaven. However is that so when you take a closer look?
Based on experience of our clients, there are key questions that indicate how reasonable it is to manufacture in Asia. Certainly you will still be able to find a solution, however make sure that your production requirements meet these criteria:
Labour-intensive China stays one of the leading low-cost manufacturing centers with a huge population. However, since they are traded globally, raw materials costs (such as plastic and metals) are about the same in China and in the West. Even electricity and land costs in some urban areas are on par with West. Thus, if your product is not time consuming, then you may not achieve expected cost savings.
Simple hardware requirements If you are launching production using highly specialized production methods, ask two key questions:1. Are there similar technologies in China?2. Can the product be manufactured using more labor-intensive production methods without sacrificing quality, price and lead time? Look at your competitors. Do some of them import similar products from China successfully? Explore the availability of technology providers in China, not necessarily suppliers of this product.
Well prepared specification Not all raw materials and components (available in the West) will be readily available in China. Most manufacturers in the West provide a specification that defines the raw materials and subcomponents to be used. However, your supplier can interpret these components very freely, therefore, if your product has a quality-and-price-sensitive specification, you must do your homework before transferring production to China:- Contact the supplier of raw materials and find out whether it is available in China and whether the price is more or less the same as in your country.- If you are using a local equivalent, know how the material will react to a certain temperature or environment. Ideally, plan to conduct a performance test to confirm the material performance in your environment.
Appropriate PO value If your product already exists on the market and in production, the supplier may be interested in accepting a smaller MOQ. But if your product is a new concept or requires a high level of customization, then expect to pay a premium price per item for orders that the supplier considers small. It depends on the industry, but $5,000 and below can be considered small in China if the product needs to be customized. If a major supplier is willing to take on your small MOQ, watch out as there might be an alternative reason – a desire to explore the details of your design so that they can sell it to other buyers, or perhaps a desire to demonstrate that they do business on your particular market.
Not shipping a lot of air freight You may have a labor-intensive product at a great unit price. Factory, but if the goods are bulky and heavy, then the cost of delivery may reduce the potential profits you were counting on. Your product should a higher cost ratio per cubic foot For example, things like compact electronics are great as many unites can fit into one container without extra unoccupied space. Furniture, on the other hand, will require more analysis to see if the project is profitable.
No prohibitive fees or tariffs Confirm that there are no significant trade barriers to your market entry. Depending on how well your government publishes such information, it may be accessible online or via a government hotline. But since most governments do not really provide a comprehensive consultation on that, it may be easier to deal with a local shipping agent or customs broker. Want more useful tips how to organize your RFQ and estimate a certain project? Contact us and receive your free templates and consultation