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Contract Manufacturing in China: Top 5 Pros and Cons for Western Companies

There is no doubt that making products in China can be an excellent choice for western companies to save more money and increase margins.

Due to the low costs of labor and natural resources, production costs are relatively low in China when it’s compared to other western countries.

But wait, do you think that everything is just perfect in China? Keep in mind that one cannot simply judge something based solely on the good points without knowing how many bad points exist as well.

In this article, we will explore the top five advantages and disadvantages of manufacturing in China so that you can evaluate whether it’s suitable to outsource your production to China or not. Let’s get started.

Advantage: Lower Operating Costs

Manufacturing costs often differ depending on many factors, including the availability of labor, raw materials quality, production techniques, and shipping routes. With cheap labor and abundant natural resources available in China, manufacturing companies can make products at a cheaper rate than Western companies.

As a result, many American or European-based businesses are willing to move their production to China due to this competitive cost advantage compared to their home countries.

Advantage: Supportive Policies

The Chinese government is always working to provide the most favorable cooperation conditions for foreign businesses. A good example is the ongoing “Made in China 2025” initiative, which aims to upgrade the country’s manufacturing sector.

Furthermore, the government offers lucrative financial benefits to create an attractive environment for Western-based businesses. These include reductions of taxes on profits made from patents and copyrights as well as subsidies for R&D projects.

Advantage: Well Developed Infrastructure

In the past decade, China has made significant progress in developing and improving its infrastructure around the whole country, and there are many projects still in construction.

Now, China has a comprehensive network of roads, railways, bridges, airports, and seaports that can support all kinds of manufacturing and even heavy industries like steel or aluminum production. There are many reasons why foreign companies should consider outsourcing their production to Chinese contract manufacturers but one important thing to note is how the country excels at quick delivery times due to the state-of-the-art transportation system it now has in place.

Advantage: High Flexibility

Production of goods within the Chinese manufacturing industry has undergone dramatic changes throughout the past two decades, moving away from a one-size-fits-all mentality towards a more customized approach. From raw material purchasing and fabrication to assembly as well as delivery, manufacturing in China is becoming more and more flexible than ever before.

The high flexibility of making products in China makes it possible for different companies around the world to have opportunities to produce goods that are made specifically for their target market.

These would be ideal circumstances for any company looking to introduce a new product. Companies can work on designing, prototyping some models, and then modifying the products until they are perfect enough to be released into the marketplace.

Advantage: Professional and Friendly Cooperation

Although there may be a few scammers among China’s manufacturers, for the most part they are highly trained professionals who have years of experience under their belt. They are always more than willing to accept your new ideas and take it upon themselves to make sure you will be completely satisfied with the end product, going out of their way to make sure that everything is done right.

This is because now more and more manufacturing companies understand the significance of having a good reputation in the field and they feel no need to cheat on others. Instead, these businesses want to create long-term relationships with their clients.

Disadvantage: Different Standards

The first disadvantage that Western companies are afraid of if that the standards in China are very different than what they’re accustomed to. Whereas an overseas brand might have certain safety requirements, testing procedures, or regulatory guidelines, these things might not be as prevalent (or enforced) in China. This can lead to problems with the final product quality if you don’t confirm carefully before cooperating with a contract manufacturing company.

If you’re going to outsource production to China, make sure you check for any laws or policies that would prohibit your business from doing what they need. Furthermore, you should stay up to date with any relevant regulations pertaining specifically to your industry so that there aren’t any legal hurdles holding back progress for your project.

Disadvantage: Quality Control Issues

Western companies often experience quality control problems when outsourcing the production of their items to a random factory in China. Problems are common with defective or damaged products and there is no easy way for these companies to rework or repair them, which leads to major losses.

Thus, as many foreign buyers are starting to adopt more stringent quality standards and techniques and work with more professional suppliers, this problem is gradually being resolved. Also, it’s now much easier for an overseas brand to rely on a third-party quality control company to conduct full inspections before and during the production process, especially if they’re paying upfront.

Disadvantage: More Controllable

Production scheduling is a necessity for all manufacturing operations. Foreign importers often find that it’s more effective and controllable to keep production close to home so long as they can maintain high levels of product quality and production timeline.

Producing in China can be challenging because of how fast things change. A perfect example of a sudden change could be when an essential machine stops working without warning, which can cause the whole production schedule to fall apart. So, it’s always important to make sure you’re prepared for anything before starting something new.

Disadvantage: Intellectual Property Theft

Protecting your intellectual property is a major concern when considering moving your manufacturing project to China. The country used to have notoriously lax copyright laws and it is not uncommon for Western companies to have their designs stolen or copied by their manufacturing partners or in-house employees.

If you are serious about protecting your IP and the brands that represent it, try to work with someone that can offer IP-right protective agreements before cooperation.

Disadvantage: Lack of Transparency

Many foreign-owned brands are unused to the lack of transparency in China’s manufacturing process. They prefer to meet with engineers in person to adjust their production methods or monitor quality.

Furthermore, with lower wages in China and government subsidies for manufacturing facilities, many export-oriented service providers may make an additional markup if you don’t negotiate price quotes with them. Especially when you don’t speak Mandarin or Cantonese, you could run the risk of paying more than what was originally quoted.

Is Outsourcing Production to China Right for Your Business?

When evaluating whether to move your production to China or not, you should review what will work best for your business in terms of costs, product quality, and quantity. There are advantages and disadvantages to each side, but whatever option your company decides on, it must remain committed to maintaining high levels of quality control because this level of commitment will be shown to yield higher profits in the end.

If you are ready to work with contract manufacturer in China, then look no further than Shield Works.

As a British-owned and operated company specializing in contract manufacturing and product assembly, we offer reliability and consistency while adhering to the highest standards of workmanship. Reaching out today so we can tell you how we can help with your project!