The Chinese government is on a mission to produce 70% of the world’s electronic components. When you think about it, that’s an ambitious goal.
However, electronics aren’t the only thing manufactured within its borders. In fact, China manufactures a considerable share of the world’s goods.
If you’re considering outsourcing products or services to China, however, how would you manage risk? Well, with some insider insight, you can safely reap the benefits of product assembly in China.
Keep reading to learn more about how to secure supply chain risk for product assembly services in China.
Understanding Supply Chain Risk
Global supply chain risk is one of the biggest concerns of the world’s shippers. You never know when your supply chain could become exposed to an unanticipated vulnerability.
These occurrences can lead to increased costs. Even worse, you could end up with unhappy customers. It’s critical for you to mitigate these and other supply chain issues.
More supply chain stakeholders are turning to supply chain risk management for this reason. The term refers to the processes, strategies, and tools used to reduce supply chain risk. They can help you to identify dangers that could affect your supply chain.
The Benefits of Managing Risk
Your company could enjoy considerable benefits from a supply chain risk assessment. For instance, a risk assessment can help you reduce profit loss. It can also help you to ensure peak efficiency in production, fulfillment, and delivery.
This kind of evaluation will also improve the speed and effectiveness of your company. It will help you to respond to emerging situations that could affect your supply chain.
A risk assessment will also help you keep up with regulatory issues and maintain compliance. Moreover, it will help you create a reliable process for managing unexpected interruptions in your supply chain.
Even More Benefits of Effective Supply Chain Management
China’s assembly companies have unmatched expertise in putting together complex goods like electronics. Still, regular risk assessments can help you protect the reputation of your brand.
They’ll help you increase your competitive advantage. Also, risk assessments will help you improve customer satisfaction.
Most customers take for granted that you’ll deliver products whenever they need them. In reality, however, supply chains are quite fragile. For every activity and every level of your supply chain, there’s a risk of disruption.
The Importance of the Risk Mitigation Process
Your supply chain might only have one supplier. Alternatively, it could have thousands.
Imagine a pharmaceutical company that needs a third party to supply pill bottles. It may also need another supplier for the external packaging. Meanwhile, this company might also need an additional supplier to handle labeling and other aspects of product packaging.
You may have your own employees who manage various tasks, like taking orders. Yet, you more than likely use a third-party credit processing company. In turn, that company might contract with another firm to perform credit checks.
Any point in this supply chain is subject to vulnerability. The reliable, timely delivery of your goods would depend on all these suppliers. If any of them fails to perform as expected, you might not have the ability to deliver your goods on time and at the right price.
Effective Risk Management Matters
With a risk management process, you’d start with identifying the parties in your supply chain. You must emphasize the most critical suppliers.
Next, you’d assess them for regulatory compliance. You can then go on to assess your suppliers’ suppliers.
You must review every supplier for insights into past performance. You must also assess their potential risks to your supply chain.
If you discover issues, you must address them immediately. It’s important to resolve your findings as quickly as possible.
In the end, you should set up a monitoring system with real-time dashboards and up-to-date reports. This kind of system allows for continuous monitoring of your suppliers and notification of any critical changes.
Key Risk Management Points to Consider
There are four primary steps in this process. They include:
You must identify the risks that can impact your supply chain. You must also identify where you can find these risks in your supply chain.
Next, you must estimate the potential financial, operational, and reputational impact of these risks. Then, you can develop strategies to offset the negative impact of various forms of supply chain disruption.
Finally, you must figure out how quickly you can respond to a disruption. You must also assess how long it would take your company to recover from this kind of event.
Product Assembly Services in China
Suppose you were to hire a product assembly company in China. In that case, you must perform robust due diligence and risk mitigation. You must uphold the integrity of your imported goods.
In the United States, for example, there’s growing interest in countering controversial business practices. With this in mind, the US government has issued an advisory about potential exposure to these kinds of activities in certain regions. United States lawmakers expect companies to perform robust due diligence to combat allegedly unwelcome business practices in these territories
Protecting Your Interests in China
Furthermore, this advisory is an interagency effort. Involved organizations include the following:
• Department of Labor
• Departments of State
• Homeland Security
• Treasury Commerce
• United States Trade Representative (USTR)
These agencies are working together to draw attention to supply chain risk to US businesses related to areas of special interest.
The advisory warns that US businesses must have an awareness of their legal exposure. They must know whether partner entities in the area are linked to companies that maintain disputable business practices.
If so, decision-makers in these firms could face liability for criminal statutes and sanctions. Meanwhile, their companies could face export controls and import prohibitions.
Areas of Special Concern
Again, many companies are deemed responsible for these allegedly disputatious practices have headquarters in specific areas. In these areas, it’s implied that many cases of aforementioned business practices occur. These companies participate in various industries, including:
• Cell phones
• Electronics assembly
What Can You Do?
If you believe you’ve become exposed to liability, you must increase auditing and other supply chain due diligence practices. In the above reference, for instance, you’d monitor for warning signs of a potentially disreputable business partner’s savory business practices.
This would become especially important if you were to continue doing business with a possibly distasteful company. In this case, you’d closely watch a company that hides the origin of its goods or ownership.
You’d also practice extreme caution with a company that has high revenue but a low reported number of employees. You could evaluate this circumstance by reviewing the company’s contributions to China’s social insurance program.
You could also monitor for a company’s use of terms that seem to indicate that a company is spinning its unfair practices. This elevated level of due diligence is essential when dealing with suppliers to ensure the integrity of your company’s brand and reputation.
As a business operator, it’s also important to stay informed about developing sanctions and Withhold Release Orders (WROs). You must also monitor goods highlighted by the Department of Labor. The agency maintains a list called List of Goods Produced by Child Labor or Forced Labor.
The list includes the names of products and companies subject to WROs. You should also monitor for names on Department of Treasury lists. These documents include Specially Designated Nationals (SDN) and Blocked Persons lists.
Conduct Independent Audits
There are anti-sanction laws in China. As a result, you could find it’s difficult to secure reliable and independent information from native entities. You could even have trouble eliciting accurate information from your legal aid in China.
Accordingly, when working with a service provider in China, you should also conduct independent, on-site audits when possible. This practice promotes increased supply chain transparency.
Your Responsibilities as an Importer
You can’t defend yourself from liability by claiming a lack of knowledge. For example, you could find out the first or second level of your supply chain in China has disappeared.
It’s counterproductive to use lack of knowledge as a defense. This kind of defense will set you back if the Chinese government engages your company.
This position will make it much harder for you to gather an origin to destination paper trail. You’ll need this information to satisfy any inquiry or detention notice from the Chinese government.
Doing Your Due Diligence
You must remain prepared for a government inquiry, especially if you suspect foul play on the part of a supplier. In this instance, you may need to gather supporting purchase records.
You might also need to gather production documents. You could also need to collect labor documentation.
Overall, you might gather the same information you would need during an unfair trade investigation. These types of investigations might include antidumping or countervailing duty verification.
The Big Picture
When you partner with a reputable OEM manufacturing service provider in China, your biggest benefit is cost savings. The assembly service will create your products in bulk. As a result, you’ll save money on production costs.
Furthermore, you’ll find that the products are of superior quality. Still, it’s vital to maintain strict testing standards. If you’ve hired competent OEM manufacturers in China, they can withstand your testing.
Leveraging a China Assembly Service
There’s a good reason why OEM manufacturers in China provide the most outsourced production in the world. China has advanced production capabilities.
These capabilities make it easy for companies to meet massive production numbers. More importantly, the companies can do so at an affordable price.
It’s true that China is one of the first regions hit by the pandemic. Yet, the government has been able to contain it largely within the region.
It’s for these reasons that large brands like Apple and Nike outsource their contract manufacturing to China. In light of the pandemic, the nation’s positioned as one of the first countries that can dive back into full steam manufacturing.
Partnering for the Win
Some companies couldn’t exist without China’s assembly services. China service providers have specialized technology that allows them to create components that many companies couldn’t produce on their own.
When outsourcing product assembly services, you allow another company to produce your product. Yet, you’ll keep all intellectual property and trademarks.
Still, another company manages production. In China, this process often takes place through a network of multinational suppliers.
It’s vital to locate and secure an agreement with a China assembly company that you can trust. An experienced consulting company can help you to do just that.
Let Us Help You Safely Navigate Your Importing Risks
Now, you have a better understanding of risk when working with product assembly services in China. If you need to find a reputable China service provider, Shield Works Precision Mfg. can help.
Please feel free to contact us today to learn more about reputable assembly services in China.
The year 2021 was synonymous with shortages in almost every industry. Across the world, some product shortages meant that shelves were empty and the demand for products outstripped what was available.
This isn’t a problem that’s going away anytime soon. Experts have indicated that global supply chains could be affected for up to two more years.
This is changing the way that companies approach outsourcing manufacturing.
In this article, we will take you through the 7 ways that the supply chain crisis has changed outsourcing manufacturing and what options are available to businesses.
Read on to find out more.
1. Implementing Company Emergency Plans
Company emergency plans are in place for a reason. Supply chain disruptions or breakdowns in production lines can be costly for any business that relies on providing a product or service to customers.
It’s having the infrastructure and policy in place for those ‘what-if’ moments. A contingency plan for different scenarios is critical for those businesses that need to react quickly when something goes wrong.
Whether that’s changing your outsourcing manufacturer, or changing your shipping routes, a plan needs to be in place for every eventuality.
2. Looking Further Afield
The supply chain crisis has had businesses investigating new ways to increase outsourcing. Many companies were unable to rely on domestic assembly lines and factories in 2021 due to the number of workers that were sick or ill from COVID 19.
Booming manufacturing markets in China mean that companies can still get excellent results and products, just overseas.
You don’t even need to feel as if you’re on a different continent. With state-of-the-art technology, you can get direct video footage of your products being prepared in the warehouses.
This means you can have peace of mind when it comes to the quality of your products.
3. Assembly of Products has Become More Challenging
If a company is relying on several components in a supply chain, this is where problems can emerge. If there’s a shortage in one component or product, this slows down the overall build of a device or item.
If the delayed item is integral to the overall build of a product, this means the product can’t be completed and sold to the customer. If there are delays on several components, this can be detrimental to the supply chain.
This is why some companies are moving away from fragmented production lines and looking to streamline all of their product components with one company or warehouse.
It ensures that products aren’t being delayed any further than necessary and that there aren’t any vital pieces missing.
4. Ordering More Products Through Outsourcing Manufacturing to Store
It’s not just consumers that realize they may need to stock up more. Businesses and companies are ordering in and storing more items on a large scale than previously before the pandemic.
With demands for items at an all-time high, it’s important that companies have enough stock to last them for a longer period of time.
Problems in ports and unloading items have also delayed steps in the supply chain. The Suez Canal crisis was estimated to have held up $9.6 billion of trade per day of the blockage. It also affected global oil prices as well as global supply chains for weeks after.
Events such as these are rare, but they can’t be ruled out happening again.
If a company knows their busiest time of year is Christmas, it’s essential that they have the surplus stock ready for November and ready to be shipped domestically.
5. Redesigning Products for Streamlined Production
Some larger companies have gone to great lengths to ensure that they are able to keep up with their outsourced manufacturing. This includes redesigning their products so they don’t have to wait on supply chains for their different components.
Especially in tech products, this is a trend that will continue to develop in the next few years.
Businesses are weighing up their options and working out which is the most efficient way to build their products, without being held up in long supply chain delays.
If there are chip shortages, businesses are shopping around to see what the wait times and price points are.
6. Supply Chain Vulnerability Audits
Companies are trying to learn from their mistakes and supply chain errors of 2021.
Mistakes do happen and it was an unprecedented situation for many businesses, even larger ones that have the necessary capital and infrastructure.
Many companies are now carrying out their own supply chain vulnerability audits. This means that they can pinpoint any weaknesses and gaps and pivot to a more efficient way.
Whether this is changing their outsourcing manufacturer or ordering products on a larger scale, it’s important that mistakes can be used as a learning experience.
7. Adjusting Targets for Production
If your production and output were drastically down for 2021, that’s something that was true for a lot of companies the world over.
Nintendo, for example, was short of its production target due to supply chain issues. The simple fact is, you can’t finish a product if you don’t have all the pieces for the job.
Supply chain problems aren’t going away any time soon. It can be helpful to make reasonable adjustments to your production targets to combat this global issue.
Outsourcing Manufacturing: What Can You Do for Your Business?
The supply chain crisis is the result of a myriad of problems, in conjunction with the pandemic. One way to combat this is to reevaluate your outsourcing manufacturing.
Take a look at the services we can offer your company, from manufacturing to assembly to warehousing.
We’re a reputable manufacturing company with 16 years of experience in the field.
Fill in our contact form and one of our expert team will get back to you shortly. We look forward to making your outsourcing manufacturing a lot more straightforward.
Despite recent uncertainty in the supply chain, China continues to serve as the second-largest exporter to the United States. For many companies, a partnership with a Chinese assembly service is essential for solidifying their full business potential.
Decision-makers around the world understand the importance of operating in a calculated and gradual way in China. With this in mind, how would you launch and scale your China assembly operations effectively?
Keep reading to learn more about outsourcing assembly and how to use a China assembly service.
Getting Off to a Good Start
Outsourcing production to China can serve as a vital part of your supply chain strategy. However, there are caveats involved when initiating business with China assembly services.
For instance, out-of-country interests typically have a modest local presence. They’re also unfamiliar with the nation’s bureaucracy and legal system.
Also, these firms must manage cultural barriers in the local business environment. Often, these companies make mistakes due to their lack of experience.
You can overcome these kinds of issues by working with a professional service provider that operates in the China market. You’ll find that this kind of consultant is aware of all local regulations. More importantly, they’ll help you operate efficiently from day one.
Managing Import Regulations
Companies often face another dilemma when starting business negotiations with OEM manufacturers in China. They face problems dealing with the local currency.
For some companies, doing business in China doesn’t justify the investment in establishing a local branch. On the other hand, some China service providers don’t want to accept payments in foreign currency. Some companies may not even have this capability.
By working with a China assembly service provider, however, you can enlist a consultant to perform these transactions on your behalf.
Finding a Stable Supplier in Uncertain Times
If ever an event represented uncertain times, the pandemic is definitive of this circumstance. During this and other market disruptions, companies must make operational adjustments. These adjustments result in a loss of time and risk-taking that are inherent to change.
Still, you can remain stable and flexible if you manage change properly. By outsourcing contract manufacturing in China, you can adjust to changes quickly.
Your business may have a sensitivity to these kinds of situations. If so, the benefits of working with a partner that always has their feet on the ground in China are obvious.
The Freedom to Focus On Growth
You need an efficient and economical solution for managing your business activities in China. With it, your sales managers can focus on finding more business.
Meanwhile, your company representatives can focus on other important business development functions. For instance, they can work on building your customer pipeline.
Tasked with managing your overseas interests, your team members could find themselves overwhelmed with China’s bureaucratic and operational requirements. As a result, they can struggle to find time to sell your products and grow your company’s presence.
Reducing Costs With the Right Partner
In most cases, it’s faster to have your products assembled in China. This is the exact kind of advantage your company needs.
China assembly companies can provide customized production facilities suited to your needs. These facilities serve as a cost-effective and fast solution for OEM manufacturing.
They enable you to operate your outsourced manufacturing processes responsibly. Meanwhile, your firm will continue to enjoy the benefits of a production operation that runs more efficiently versus one on your native soil.
Let’s have a look at a few more benefits of outsourcing product assembly in China.
Reduced Labor Costs
China has remarkably low labor costs. In China, the average salary is nearly half of that of salaries in the United States. This circumstance is a huge benefit for labor-intensive industries.
Outsourcing product assembly in China can help you to lower labor costs due to high turnover. You can also further lower labor costs by outsourcing to developing cities in China.
Reduced Product Costs
China is the home of the largest manufacturing sector in the world. In a single year, China produced nearly 30% of global manufacturing output. Furthermore, export growth in China at times matches the growth of all other export activities in the world.
What that means for your business is that there’s no need to import the many goods and raw materials needed for production. In turn, you can avoid import tariffs.
The Chinese manufacturing ecosystem is engineered to build products at lower costs. Chinese factories can easily access components, affordable labor, a strong technical workforce, and assembly suppliers.
More Efficient Use of Company Resources
China is rich in talent and resources. The country has a labor pool capable of handling your in-country interest in several areas, including:
• Customer service
• Information technology
You can save time and have more of it to concentrate on your business by outsourcing.
Meanwhile, your in-house team can focus on the core competencies of your company, such as team building, leadership, and product development. You can spare your company from using their talents wastefully on paperwork and other mundane tasks related to your manufacturing process.
Innovation You Can Count On
China ranks near the top of the global list of innovation among countries. It even outpaces countries like India, Japan, and the Philippines.
Premier China assembly services are on par with the best companies in the world. They can compete with companies in the US, Switzerland, and Sweden when it comes to innovation. In January 2022 alone, Chinese companies exported nearly $250 billion in goods.
Chinese companies have vast research potential. They can give you fast and easy access to technology. Moreover, their access to research can give you a considerable edge over your competitors in other countries.
A Legal Environment for Success
Each year, a growing number of companies import Chinese goods. The Chinese government welcomes foreign companies interested in assembly services. The country amends its outsourcing laws continually for this reason.
China works toward improving its infrastructure to ensure efficient outsourcing. At times, the country has spent ten times more on infrastructure development compared to the United States.
Yet, China’s improvements go beyond bridges and railways. The company has also developed its digital infrastructure, supporting the rapid transfer of vital business information.
Like any other industry, however, there are both good and bad elements in the Chinese market.
Challenges of Outsourcing China Assembly Service
If you choose the wrong service provider, you can find they deliver low-quality products. Often, these products won’t meet international standards.
Despite their affordable cost, they don’t offer much value. You must remain vigilant to ensure that your Chinese assembly service produces high-quality products.
You can achieve this goal by conducting regular quality control audits. Alternatively, you can hire a knowledgeable partner in China to conduct regular inspections on your behalf.
In addition, intellectual property rights vary around the world. With this in mind, you must research China’s copyright and trademark system. This task is especially important when a service provider has access to your designs, products, and other trade secrets.
The Chinese government and many national outsourcing companies have strict IP protection measures. Still, a service provider could make copies of your products and sell them at lower prices.
It’s prudent to draft non-disclosure, non-use, and non-circumvention agreements when working with product assembly services in China. These types of agreements will offer more protection compared to a standard non-disclosure agreement.
Verifying Assembly Services
When searching for a China assembly service, you’ll eventually develop a shortlist of potential providers. Before making a selection, however, it’s critical to verify their credentials. By verifying the credentials of a service provider, you can ensure they can meet your outsourcing needs.
For instance, you must check whether a supplier can produce goods according to your requirements. You must also investigate whether they can ramp up production if you choose to scale up your operation.
You must cross-check any information a potential supplier provides. For example, you may need to verify their:
• Business license
• Customs registration certificate
• International trade certificate
• VAT invoices
A reliable consultant can help you verify that any such documents presented by a potential assembly service are genuine.
Gaining an Advantage With Chinese Assembly
If you want to launch an efficient operation in China, it’s in your best interests to partner with a local sourcing agent. An experienced consultant can help you to choose the right China assembly service. They’ll help you to avoid investing your money in the wrong provider.
An experienced consultant can also help you select a suitable city for outsourcing. They’ll also help you to source the legal guidance you need to successfully kick-start your China operation.
Expertise You Can Take To the Bank
A knowledgeable local consultant can help you in many areas. These areas could include:
• Logistics management
• Human resources
• Digital marketing
By partnering with the right consultant, you can lean on them for support in all aspects of your business. Meanwhile, you can remain focused on building sales and managing your native distribution channels.
Moving Forward With a China Assembly Service
Once you’ve selected a service provider, you must create an outsourcing agreement that defines the specifics of your arrangement. For instance, you might outsource product assembly in China.
In that case, the agreement should cover important details, like price per product, production value, and other important elements. You might also highlight terms for special services like just-in-time inventory management.
Your agreement might also cover minimum productivity, working hours, and KPI tracking. It should also specify ways to resolve disputes, dissolve your agreement, and other legal matters.
Most importantly, you must ensure that the meaning of your agreement doesn’t change when translated from one language to the other.
Defining Your Specifications
You must also clearly define your product specifications. This kind of clarity will help you avoid problems.
For example, you must explain exactly what you expect from your outsourcing partner. This explanation might include your product specifications.
You must list and explain even minute details. Furthermore, you must conduct regular inspections. They’ll ensure your service provider implements your instructions correctly.
Getting Your Team On Board
It’s a big decision to outsource your assembly to China. What’s just as important is getting your internal team on board with the change.
For example, you should explain why you decided to outsource assembly to China. You should also explain to every department how they’ll benefit from the transition.
In addition, you should clarify the roles and responsibilities of each team member. In this way, they’ll know how to manage their tasks related to your outsourcing operation.
Monitoring Service Provider Performance
It can prove challenging to monitor an outsourcing partner. However, this challenge becomes intensified when your base of operation is in another country.
It’s vital that your partner works productively. You must find a way to control absenteeism and distractions.
It’s helpful to use performance monitoring software. Companies of all sizes—from small startups to global conglomerates—use productivity management tools.
With this kind of resource, you can track the time that employees work. You can also manage employee performance based on real-time productivity reports. You can also use this kind of tool to assign projects and tasks to outsourced staff members.
Your Partner in Chinese Assembly Services
Now, you have a better understanding of how to use a China assembly service. What you need now is an experienced consultant with strong ties to the best service providers in the nation. Shield Works Mfg. can help.
We believe in building productive long-term manufacturing relationships. When we set out to deliver results, it happens.
Contact us today to learn more about securing your production interests in China.
You may not believe how much capital is actually tied up in inventory. Inventory, along with accounts receivable and accounts payable, is equivalent to 7% of the US GDP.
With so many resources tied up in inventory, it’s no doubt that businesses are constantly re-evaluating their inventory management system.
One of the most popular traditional methods is the just-in-time inventory management system. But after the pandemic changed the way many businesses operate, it may be time to consider a new method.
Below we have created the following guide explaining the importance of your inventory management system. We’ll also talk about finding the production planning sweet spot.
How Does Just-In-Time Work?
“Just-in-time” is a method of inventory management that means inventory arrives exactly when it is needed. It’s also commonly referred to as a “pull” system. This is because the system replaces supplies as goods are consumed.
Just-in-time inventory works based on the idea that materials arrive when you expect production to begin. However, they should not arrive before production begins.
Essentially, production can’t begin without inventory. But businesses using JIT don’t want to incur any storage costs for inventory that arrives too soon.
Many businesses have relied on JIT to keep production value balanced with inventory levels. This keeps capital free to use in other areas of the company while meeting production demand.
JIT works the best when a company has trusted suppliers. They provide consistent quality of materials at the expected times. Simultaneously, suppliers provide products in long-term contracts that mitigate price fluctuations.
Because this model relies on a smooth supply chain, unexpected supply chain interruptions can disrupt the entire process. Sudden shortages during the Covid-19 pandemic can have detrimental effects on the end production of a product.
For this reason, many businesses suffered. Over 60% of small businesses reported disruptions in the supply chain during the early pandemic.
Just-In-Time Inventory Used Successfully
However, this doesn’t mean that a JIT system isn’t effective. Just-in-time inventory management works well in numerous industries and will continue to be effective.
Take restaurants. Food preparation uses a just-in-time inventory approach because many ingredients don’t last longer than a day or two. Chefs will have to buy meat to serve every day by estimating what diners will order.
Fast fashion is a segment of the fashion industry that relies on just-in-time systems. Chains like Zara don’t order ahead for an entire season.
Instead, they’ll design and manufacture items with short turnaround times. Fast fashion brands will be able to keep up with trends as they happen.
You may have heard of dropshipping in the eCommerce world. Dropshipping only purchase products from the manufacturer when a customer places an order. The eCommerce seller carries no inventory and essentially outsources inventory management.
Based on these business models, just-in-time inventory management can be successful. Many industries will continue relying on a just-in-time system. But you may find it to your benefit to start mixing in other strategies for your inventory management.
Just-In-Time vs. Just-In-Case: Pull vs. Push
Companies use just-in-time inventory to prevent excess supply from building up. This will keep inventory low and cut costs as much as possible.
But what happens when the supply chain gets stopped? In 2020, 82% of mid-market manufacturers had to significantly reduce production or shut it down completely at some point.
This then affects sellers using just-in-time management. They won’t receive the materials and products for customers. Instead, they can only sell what they have.
With a JIT, businesses wouldn’t have a lot to sell. They would run out of existing inventory quickly.
At the same time, demand for certain products, especially health-related items, skyrocketed. Businesses in this industry could not keep up with the high demand.
Here’s where just-in-case inventory management comes in. It helps to facilitate growth by allowing companies to keep up with most demand.
JIC inventory management focuses on maximizing inventory by purchasing larger inventory orders. This helps to manage unpredictable demand and survive disruptions in the supply chain. This approach will no doubt become more popular in the wake of the pandemic.
JIC is referred to as a “push” system because inventory purchases are not based on current demand. JIT is a “pull” system because inventory is purchased to order.
The main drawback of JIC is the additional costs of holding the excess inventory. Businesses will place larger orders if they use JIC, which will increase the cost of the order and tie up capital in inventory. Maintaining the excess inventory will raise storage and management costs.
Finding the Sweet Spot
If the pandemic has proven anything, it’s that JIT can’t be relied upon alone. Supplier stability is returning closer to normal. However, the way that many businesses operate has changed forever.
Businesses are starting to realize that balance will provide the most benefits. Both JIT and JIC systems have positive qualities. Combined, they can create the most effective inventory management system.
Companies can create a hybrid inventory management model. In practice, it would use both the buffer of just-in-case and the conservative use of capital associated with just-in-time.
A hybrid system involves having some parts of the supply chain operate in a push model and others operate in a pull model. There needs to be more demand forecast involved than with JIC. But a hybrid model wouldn’t have standing inventory rest at zero like it would with JIT systems.
The main goal of finding the sweet spot is to address the needs of both long-term and short-term production. Inventory levels should be low enough to be cost-effective but high enough to survive production delays or higher demand.
You may want to consider using JIC for quick-turnover items. It can also be used for scarce items or items with long lead times. JIT inventory can be used for less popular items, like the customization of a certain product.
Leveraging the Right Inventory Management System
The right inventory system is all about balance. And when it comes time to choose your manufacturer, you want a team that understands how to utilize the best practices of different inventory management systems.
Shield Works is a managed precious assembly, manufacturing, and warehouse facility based in the heart of Zhuhai City, China. Learn more about our manufacturing services by contacting us.
It’s no secret that China is the world’s factory. The country’s economy has grown rapidly in the past few decades. In fact, its share in global manufacturing output has been growing steadily at around 2% each year.
Its manufacturing goes from textiles to clothing, machinery, electronics, and even electronic assembly. As a result, manufacturers are adopting new technologies that allow them to stay on top of the game. It’s for this reason that China has become a world-class outsourcing destination.
If you’re thinking of joining the bandwagon, you absolutely should. There are many good reasons why you should outsource your electronic assembly in China. If you want to know what these reasons are, keep reading to find the top most beneficial reasons below.
1. Unmatched Expertise in Electronics
Many people are unsure about why product assembly in China is so popular. The answer boils down to the country having access to the resources required for manufacturing. Most manufacturers based in China have been doing this for generations.
They have a wealth of knowledge that surpasses what most other companies from around the world can produce. Does your company need a certain level of quality for its products? Outsourcing electronic assembly work to China would be a good idea.
Their highly skilled workers and advanced equipment mean top-quality production. China also specializes in developing affordable and reliable electronic products. When outsourcing, you get access to a team of seasoned experts that have years of experience in this field.
2. Availability of Different Types of Equipment and Facilities
China is a country with a large number of factories that offer electronic assembly services. There’s a high availability of different types of equipment and facilities. Hence, your company will be able to choose the right manufacturer for your production line.
You can focus on meeting customer demands by offering products manufactured as per their needs. In China, it’s easy to pull off product assembly, whether you need commercial or industrial goods.
3. Large Amount of Products Ready for Shipment Within 24 Hours
The fast-paced world we live in today has seen consumers demand products faster than ever before. As a result, many companies outsource to China because it offers quick turnarounds.
In most cases, companies can have all their products ready for shipment or delivery within 24 hours. This is one of the most significant advantages of outsourcing to China.
4. A Wealth of Materials and Services
China has a large number of suppliers, contract manufacturers, and logistics providers, all of which are necessary for running an efficient production line. Your business will not slow down even if you plan to increase the volume of goods produced for sale.
Companies that outsource their materials to China also get to save on storage space. You don’t need extra storage for materials and excess products. This makes manufacturing in China one of the best strategies.
5. Accessibility and Eco-Friendliness
China has expanded its economy to make it more accessible to people all over the world. This is possible due to low costs and simplified processes through automation and mass production.
Electronics manufacturing is one area where this is very efficient. The best part is that it makes consumer goods available at affordable prices.
For this reason, many countries outsource labor-intensive jobs to China to cut down on labor costs. You see, outsourcing eliminates the need for companies to set up manufacturing plants.
Even better, it’s increasingly eco-friendly. You eliminate the carbon footprint and wastage of materials that would be a result of manufacturing.
6. Quality Assurance and Quantity Control
Outsourced manufacturers are held accountable for providing quality goods and services. This is done by testing every product before it leaves the factories. They ensure that they meet all quality standards during transit and after delivery.
With this system, customers don’t have to worry about receiving faulty units. China is packed with highly skilled professionals that ensure quality control.
Another benefit of outsourcing your electronic assembly jobs to China is quantity control. You’ll be able to produce goods in the exact quantities you want, whether it is 1 or 1000, depending on your budget. With this flexibility, businesses save thousands by not having extra stock lying around.
7. Time Savings and Faster Time-to-Market
Outsourcing electronic assembly to China enables businesses to launch their products faster. Manufacturers in China can meet deadlines due to working at a fast pace. Companies outsourcing to China will have the advantage of launching their products on time.
This means that they can start marketing their goods early and increase sales before competitors even get a chance to enter the market. Furthermore, the turnaround time for getting samples is very short. The process makes it easy for businesses to test products before placing larger orders.
8. Free Trade Agreement (FTA) Benefits
Many high-tech companies outsource their manufacturing to China because of the FTA benefits. These include tax cuts, tariff remissions, and stimulus packages. Companies don’t have to worry about dealing with one country’s tariffs.
No tariffs will apply if they pass through another FTA member nation. At the same time, companies also enjoy zero customs duties on goods sold. This results in higher market penetration compared to non-FTA members.
9. Diverse Product Portfolio and No Minimum Order Quantity
China has one of the world’s largest populations. As a result, they have developed numerous manufacturing hubs. These hubs make it easier for businesses that outsource to access diverse markets.
If there is an increase in demand for one type of product, companies can easily scale up production. In China, facilities are already readily available and production can start ASAP.
Outsourcing electronic assembly to China is also ideal for start-ups and small businesses. They can do so without having to worry about meeting a minimum order quantity.
This allows them to experiment with a new product or design. Moreover, it also allows these companies to create personalized products at affordable prices.
10. Learn from Others’ Mistakes
Outsourcing your electronic assembly jobs saves you from making costly mistakes when entering a new market. Chinese manufacturers have years of experience. They also handle quality control and shipping operations.
They would make minimal to zero mistakes and not compromise on quality. This allows you to benefit from their expertise without worrying about major setbacks.
They have also established long-term relationships with shipping companies in America and Europe. They can negotiate for further discounts when sending goods to your country.
11. Reduced Overhead Costs
Companies that outsource to China can save up to 50% of overhead costs. This is money they would have spent if they were assembling them in their own countries. Low labor costs combined with low operating expenses make outsourcing effective.
Manufacturing in China is also possible because of the logistical efficiencies available. This includes easy access to seaports, airports, railways, and roads.
They make it possible for companies to ship goods quickly. Even when orders increase at the last minute.
At the same time, you can monitor product quality through tracking systems. Tacking in real-time allows you to receive fast feedback on all your production.
12. Lower Capital Requirement
Outsourcing electronic assembly to China leads to lower capital requirements. This is a huge benefit compared with setting up manufacturing plants locally. Because of the inexpensive labor market, it’s possible to hire hundreds of people at once.
This means that large orders are processed with minimal capital outlay. On the other hand, local manufacturing requires large amounts of capital. You have to hire or contract workers individually instead of hiring them by batch.
13. High-Tech Equipment and Affordable Labor
Advanced technologies are available for businesses that outsource their assembly to China. This is because of the availability of high-tech equipment in transferable conditions. The latter allows lower labor costs.
Electronics manufacturing jobs are being replaced by automation. It allows manufacturers to reduce costs further. In this way, companies can keep up with the competitive market without spending a lot.
14. Competitive Advantages and Business Growth
Businesses find it difficult to compete with bigger companies. However, by outsourcing their electronic assembly jobs to China, they can gain a competitive advantage. This is because of lower labor costs and proximity to the market.
Lower labor cost means that businesses have more affordable products than larger competitors. Having a warehouse in China means selling products to competing businesses at lower prices.
Outsource Electronic Assembly to China
Outsourcing electronic assembly can allow companies to focus on developing new technologies. Companies that outsource product assembly in China are able to benefit from the country’s massive market while still complying with their own innovation demands.
Are you ready to outsource your electronic assembly to China? Shield Works is the answer. We offer high-end electronic manufacturing services to businesses around the world. If you need a quote, simply contact us here.
The OEM industry ships over 1.9 trillion dollars of goods every year, huge right? There are plenty of reasons this type of manufacturing is so popular.
OEMs (original equipment manufacturers) are an essential component of modern industrial production. Whether you’re considering a phone, car, or even your beauty products, chances are they contain OEM products inside them.
The majority of the things we use daily come with OEM parts. However, these enterprises primarily operate in the B2B sector. This means most consumers are unaware of their importance.
OEM manufacturers may save money and time. Third-party components allow a company to focus on its primary business. They no longer need to focus on each secondary or internal item.
If you want to learn more about OEM, read on.
What is an OEM, and How Does It Work?
Initially, the term Original Equipment Manufacturer (OEM) referred to a firm that sold equipment to another company for resale or incorporation into their equipment for sale.
The term “OEM” currently refers to a product obtained by a firm to reuse or incorporate into another product under the reseller’s brand name.
This could mean the entire product is from an OEM manufacturer. The end business simply labeled the product with its branding. Alternatively, the OEM parts are a few components inside a product.
The OEM is the firm that creates subsystems or components that other companies utilize to make the final product. For example, not all of the features in a Lenovo laptop computer are made by Lenovo. Some components, such as the CPU or memory module, may be the work of an OEM.
OEM manufacturers are not the same as value-added resellers or VARs. A VAR is a corporation or organization that purchases an OEM component, part, or product and either enhances or adds extra details. They do so to raise its value before selling it directly to customers.
VARs and OEMs collaborate. OEMs create sub-assembly parts for VARs to sell. Some OEMs produce entire things for VAR distribution, meaning they directly influence the final result.
For example, if your product can handle medical problems, a VAR may bundle it with other goods for health providers.
Why is OEM Important?
A manufacturer or reseller can cut expenses by cooperating with an OEM. Companies are not required to construct manufacturing facilities or manage OEM manufacturing in-house.
They incorporate OEM components from China, India, or other countries with cheap manufacturing.
Typically, the cost savings pass on to the client who purchases the bundled product or system.
Managing many products, systems, and providers may be difficult for the end-user. The technical support and maintenance model expands dramatically when an organization embraces new technology. There might be dozens of OEMs and third-party companies servicing their hardware products.
Companies can decide to involve a third party to connect with and maintain relationships with OEM manufacturers. This makes the process smoother. A consolidated support and service approach helps many firms decrease OEM and vendor complexity.
How is an OEM Product Developed, Partnered With, and Resold?
Before offering a product to end-users, businesses determine the best strategy to meet the demands of their consumers.
By collaborating with an OEM manufacturer, a company may:
- Decrease manufacturing investment
- Decrease production costs
- Decrease material expenses
- Obtain knowledge in product design
- Have a shorter production life cycle.
- Still develop products employing best-of-breed components
- Focus on branding
OEMs can add everything to the product and brand it with their logo. Other OEMs merely supply components and do not sell products under their name. However, many businesses do both.
These items are often available for purchase straight from the firm as well.
The OEM Manufacturer Sector
In the hardware sector, an original equipment manufacturer (OEM) is a firm that creates a product for end customers, such as a PC, laptop, or printer. Original equipment makers include Apple, HP, Dell, Canon, and Brother.
On the other hand, OEM hardware refers to the components that comprise the items mentioned above. It includes CPUs, fans, motherboards, memory chips, hard drives, and other features. Companies that manufacture these components offer them to OEMs as OEM hardware.
The hardware sector of the computer business is even more well-known for OEMs. Hard drives, graphics cards, and CPUs for retail goods are built by a small number of firms, with market leaders such as Intel dominating.
For example, hard drive manufacturers provide bare hard drives for OEM customers. they also provide retail hard drives that come in a box with peripherals such as cables and installation instructions.
OEM hardware is often less expensive than retail versions. However, there are certain drawbacks. Most OEM hardware lacks customer support. It also has limited guarantee terms and is not easily integrated with other components of whatever system you’re building.
DVD drives, for example, may be missing cables or ribbons that connect to the motherboard.
It is because OEM hardware is primarily built for resellers. Those manufacturers must include:
- Technical assistance
- Other components when constructing complete systems
Other OEM Physical Products
There are tonnes of other industries that OEM products. These include but aren’t limited to sectors such as:
Machined goods – OEM manufacturers can often build parts to scale, these can include things like shims, nuts and bolts, rotors, and other metal or plastic components for machinery.
Auto – Car companies do not build every single part of their car in their factories. They often use OEM manufactures for computer chips, audio components, door trims, etc.
Tools – Whether we are talking household or industrial tools, OEM parts are frequently used. Motors, drill bits, and casing are all examples of how tools use off-site manufacturing.
Household products – You may be surprised to find that many of your branded household products are actually OEM or contain OEM parts. Everything from pottery, to TVs and kitchen appliances, may use this industry to drive costs down.
Beauty products – Many beauty companies do not make containers for their product, they often have them shipped in from an OEM manufacturer.
Musical instruments – Piano wires and guitar strings, tuning pegs, piano keys, and any other small part on musical gear are often OEM manufactured.
Original Equipment Manufacturers (OEMs) Provide Replacement Components and Spares
Some parts of all products are more prone to wear and tear than others. Companies frequently maintain a continual supply of vital spares on hand for their essential assets. These stockpiles get renewed regularly.
OEMs are the most outstanding providers of equipment parts and replacement components.
OEMs Provide Aftersales Assistance as Well as Maintenance and Repairs
On top of quality testing, certain OEM providers may also provide continuing maintenance services. They do so as part of an after-sales support package. When working with highly specialized equipment, the on-site maintenance personnel may lack the essential skills or instruments to perform the necessary maintenance tasks.
The maintenance contract determines the cost of these services.
Keep in mind that many OEM manufacturers do not offer all of the above services. Choosing vendors that do not provide enough documentation or a consistent supply of spares might raise your maintenance expenses and increase the risk of unplanned downtime. When selecting maintenance contractors, make sure you conduct your research.
OEM Vs. OE Parts
OE is an abbreviation for Original Equipment Manufacturing, the same as “OEM.” Both OE and OEM components are equivalent since they are manufactured following exact requirements. The only difference is that a different company manufactures the OE components.
Consider an OEM automobile component for a Mercedes made in-house by the firm. The OE variation of the same element might come from a Mercedes-licensed auto parts subcontractor, such as Hella Behr.
The genuine Mercedes logo will have the same build quality and dependability as the original product. OE spares are often less expensive than OEM spares.
OEM Vs. Aftermarket Parts
Aftermarket components are produced by firms that are not affiliated with the OEM. Various companies are active in manufacturing aftermarket replacements for OEM spares, particularly in the automobile sector.
Moreover, aftermarket components have a lot of appeal since they may be up to 60% less expensive than OEM or OE parts. However, that cost comes with significant drawbacks regarding quality and dependability.
OEM/OE spares from various vendors will provide a comparable degree of dependability. However, you do not have this warranty with aftermarket components. There are many possibilities from obscure producers with wildly varying quality.
Some high-priced aftermarket solutions provide performance and durability equivalent to OEM parts. Unfortunately, this is an exception rather than the rule. The great majority of low-cost replacements have a short guarantee and are of poor quality.
It is preferable to use OEM/OE components for essential purchases.
How are OCM and OEM Parts Similar?
OCM components are another sort of named part that appears, particularly in foodservice maintenance. Components distributed through equipment manufacturer networks and authorized service providers are generally known as OCM (Original Component Manufacturer) or direct source parts.
These are the identical parts used in the original equipment. It implies that referring to a component as an OCM part is practically synonymous with referring to it as an OEM or OE part.
OCM components are also known as original parts. In many circumstances, the term “original parts” refers to OER components (original equipment replacement parts) and may not be identical to OEM parts.
Why are OEM Products Less Costly?
OEM products are often less expensive due to economies of scale. Because the firm collaborates with others to produce huge quantities, both the price and the manufacturing time significantly decrease.
When you buy a product from an OEM, you should always double-check what you’re buying. While the goods are less expensive and provide the same features and performance, you may not receive some “extras” such as tech support, generally handled by a retail business.
What are Genuine Parts?
Genuine components are typically leftovers from previous production runs. The OEM packages and resells them as replacement components.
Genuine replacement or genuinely made components vary slightly from genuine parts. Genuine replacement parts are typically available after a product’s production run. But they are not leftover components.
They are usually the same or equivalent to the original OEM components. Usually, they’re manufactured by the same OEM parts source.
Genuine replacement parts, in many aspects, are similar to any other spare parts. They are supplied by the maker of the original finished product. Even if they are not identical, they are more likely to be of the same quality as OE components.
Benefits of Purchasing OEM Products
There are some across-the-board benefits you will have when you buy OEMs. These include:
An OEM product is the same as the original manufacturer’s product. Although there are less expensive alternatives, the price of the OEM product reflects its quality.
Such things are often not just of high quality but also long-lasting. For example, when purchasing a spare tire, an OEM tire is usually preferable to an aftermarket tire since one can be sure of the materials utilized in its manufacture.
OEM parts often last longer than aftermarket parts. They are also designed to fit with the end product from the start.
Move Forward with OEM Manufacturers
Do you need manufacturing services but don’t know where to look? Relax! Our OEM platform Shield Works is here to help you get started.
Now that you know what OEM manufacturers do, check out the rest of our blog to learn more about how we can help your business. Or, get in contact with us today to get cracking on your manufacturing needs.
Your business’s intellectual property (IP) is essential to your company. You invest a lot of money and resources in your employees and the assets of the business and their resulting creations. The biggest asset you have as a business is the mindset of your talent base, which holds significant business value for many years down the line.
Once your IP is open to the public, it’s easy for other people to copy it. This is why businesses should take intellectual property protection seriously. While you’re not obligated to consider the safety of your business’s IP, it could save you thousands of dollars and a significant amount of time in the future.
Unfortunately, most start-ups and mid-sized businesses often take IP protection for granted. Overlooking this aspect of your business will lead to significant regrets later.
Are you still unconvinced about the importance of intellectual property protection? Read below to understand more about intellectual property protection and why it is important:
What Is Intellectual Property?
IP refers to intangible assets such as ideas that are legally protected and owned by an individual or a company. The property is protected from external use and implementation without permission. An intangible asset is referred to as a non-physical asset that is owned by a person or a business.
The main concept behind intellectual property is that certain products of the human intellect should be legally protected and owned in the same way as physical properties. Most countries with developed economies have strict rules to protect these forms of property.
There are several types of intellectual property, including:
- Trade secrets
Intellectual property is owned by the creator of the work, or by an individual deemed the owner. However, this can differ in certain circumstances where different types of intellectual property ownership are determined differently.
For example, if an idea comes from an employer, they become the owners of that IP. However, if it comes from an employee under contract, it can be registered under the employer. Keep in mind that IP ownership is transferable from one individual to another.
It Protects Your Exclusive Rights
IP protection gives your business exclusive rights within the jurisdiction where it’s registered. This means you will have the right to your design, brand name, and invention. The good news is that other people can’t directly benefit from your IP or reap any financial benefits from counterfeits of your brand.
IP protection also helps you protect your business from reputational damage, often caused by malicious people producing substandard products in your name. This gives your business the competitive edge it needs to compete with even major brands on the market.
It Prevents Other People from Using Your Goodwill and Branding
Crafting, protecting, and maintaining a great online and offline brand is a costly endeavor for most companies. Therefore, it’s essential to take the right steps to protect your brand and ensure it’s not at risk. Make sure you get started immediately when establishing your brand.
Most businesses often make the mistake of waiting until they have a larger budget to put in place IP protection. This is a mistake that could cost you thousands of dollars. This is because most of these businesses often forget about the process until someone else steals their IP.
The first step towards protecting your intellectual property is registering it. Ensure you register your trademark, invention, or design to protect your company’s unique identifiers. Through this, you will be taking active steps towards protecting your business’s distinct personality and discouraging other individuals from using it.
As such, if anyone tries to use your business’s registered IP, they will likely be infringing on your rights. This means you can sue them and claim intellectual property infringement.
Therefore, you can defend your company’s rights to use the IP and take the other party to court. You can even receive damages from the infringing party or a percentage of the profits they made in the infringement process.
It Adds Value to Your Property
Are you looking to stay ahead of the curve in the assembly and manufacturing industry? Then obtaining your IP rights is the first step to doing so. Securing your IP rights will proactively increase your company’s market share.
It can also help you win your customers’ loyalty by keeping them loyal to your brand. Your company logo, name, and the products or services you offer your clients are fundamental parts of your branding. This is what sets you apart from your competitors, making your business stand out.
Therefore, it’s essential to make sure your business uses these intangible assets to get ahead of the game by protecting them. Different intellectual properties and creations can be protected in varying ways. With the right advisors and team, it will be easy to efficiently protect your IP at each step of your business’s development stage.
Intellectual Property Protection Helps You Raise Money
Intellectual property protection can create a profit-generating asset for your company. This means you can raise money by selling your IP or licensing it.
When you own the intellectual property rights to a brand or a creation, you have the freedom to use it however you want. You can even transfer the rights to other companies or individuals. This can be an extra revenue stream for your business through earning royalties by licensing your IP or selling the rights to another individual.
Knowing how to fully take advantage of your IP is essential to protecting your IP. Some financial institutions highly regard IP rights, and they can be a form of security for numerous loans in some cases.
It Protects Business Growth
As a small business, it’s essential to protect your company’s unique services or products that you own. In some cases, competitors use other businesses’ success to take away a chunk of the market share. It results in reduced revenue and slow business growth.
Losing your market share early in the company’s development stage can be quite overwhelming and devastating. It’s also stressful and time-consuming to start chasing the guilty party if you don’t have any legal protection. This could result in losses and even business closure if not appropriately handled.
Keep in mind that no one else is responsible for checking if your IP has been infringed. You should always check to ensure that no one else in the market uses your assets to make a profit or discredit your brand. Even major companies have had to deal with IP infringement at some point in their development journey.
Protecting intellectual property is directly related to your business growth. It’s the only way to ensure that your business is protected throughout the development stages.
It Protects and Secures Your Business Ideas
When you have a unique and great idea for a service or product, there are always individuals who will try to duplicate and sell the idea as their own, making a profit in the process. Depending on your circumstances, you could use trademarks, copyrights, or patents to protect your ideas. All these are instrumental in covering different areas of intellectual property.
Without proper consent, IP protection can help you prevent your competitors or any other individual from making a profit from your ideas. This protection should apply to companies of all sizes.
We have all seen billion-dollar companies having their ideas infringed upon, which leads to costly lawsuits. A great example of this is the Samsung-Apple dispute about their smartphones.
IP Protection Is an Easy Process
While the intellectual property protection process may seem daunting, stressful, and time-consuming, it’s easier than most people think. Likewise, the time, effort, and resources you use to protect your IP are well worth it.
While it’s not feasible to protect the idea by itself, you can secure the processes and means by which you put your unique idea into operation. This is what you will protect using IP.
On the other hand, copyright doesn’t require any actual registration procedures. That’s because the protection is automatic and free. While copyright doesn’t protect your idea, it will cover how the concept is presented, for example, on flyers, websites, presentations, and brochures.
If you’re looking to protect your intellectual property by registering a design, applying for a patent, or trademark, you can do this through your local intellectual property office. You can do this on your own or with a solicitor.
Contact Us for Intellectual Property Protection Today
Do you have a company in China? If your company doesn’t file its patents, trademarks, or copyrights in China, the IP will have no formal protection. Contact us today at Shield Works for all your intellectual property protection needs in China.
We work with a top Zhuhai-based IP industry expert to offer our clients IP protection services to cover all their needs.
Running a business is expensive, especially if you produce complex products on a large scale. Operating out of your office or small warehouse isn’t going to cut it.
Building a full-on factory is super expensive. You also have to consider local labor costs and other technical headaches. The simplest solution is to go with an OEM manufacturing company.
What is OEM manufacturing? It’s partnering with a company that already has purpose-built factories. With them, you can reduce the costs and energy required in making your product.
You can also streamline the process and let your staff focus on more important things. The only thing you need to know is what they are, how they operate, and where to look for good ones. For an in-depth guide on OEM manufacturing and its uses, read on.
Defining an OEM
You may have heard the term OEM but aren’t sure what it means. You know it’s related to large-scale manufacturing and factories, but you want more specifics. OEM stands for Original Equipment Manufacturer.
These companies make and sell goods or parts to other companies to finish the product. Examples are companies that make protective glass for smartphones or car exhaust pipes.
The company that buys the components goes by the designation VAR. VAR stands for value-added reseller. VARs contract or partner with OEMs to build smaller components that go into a more complex product.
The “value-added” part comes from the idea that a VAR will do something to an OEM’s parts to increase the value. The sum of the individual parts gets transformed by the VAR into a new product and then sold for a profit.
The parts sourced and manufactured by OEMs are often small. By themselves, they don’t contribute to the overall value or complexity of the product. For example, an OEM might make the knobs on a car’s thermostat, but they didn’t design the thermostat or the car.
That said, OEMs are far more than manufacturers of simple screws and knobs. By definition, an OEM is anything that contributes to a more complex end product. This means that companies who make computer chips or other complex components can also be OEMs.
They only have to make these on behalf of a second company who will incorporate those parts into a new product.
The Basics of OEM Manufacturing
So what is OEM manufacturing, and how does it work on a basic level? OEMs fill a space in the global market for a variety of goods and components other companies need. These range from specialty bolts and screws to glass screens, electronics boards, and textiles.
Many of these companies might like to make these basic parts themselves. The issue is this is often too cost-prohibitive. Building an entire factory only to make screws for IKEA furniture isn’t worth it.
It’s cheaper and easier for companies to contract the services of an OEM. This is because the OEM has already built and tooled the factory to produce a variety of equipment. All the VAR needs to do is partner up with the right OEM company to fit their needs.
All of the top electronics brands use OEM manufacturing.
Using OEM Manufacturing
There are many ways to use OEM manufacturing. They’ve become a staple of the global economy and have made countless commercial products cheaper. Many of them take advantage of cheaper labor and government investment or subsidies.
Innovations in robotics, warehousing, and assembly line manufacturing all help improve efficiency. These also all come at a lower cost. There is nothing stopping an OEM from operating in developed economies, and many do.
However, using OEMs is most effective when you can secure the highest level quality of components for the most competitive price. This leads to a division of manufacturing operations. Western factories and manufacturers can focus on finishing products.
The automobile industry is a fantastic example. These companies rely on special OEM manufacturers to produce many of their car parts. These include battery and engine parts to electronic components in the entertainment systems.
The finished parts get assembled in the VAR company’s facility. They employ skilled workers to engineer the car, draft the parts OEMs will need to make, and put it together.
This process gets the most out of OEMs to produce high-quality local products. The OEM parts are still high-quality and selected by the VAR. Before seeing use, they also pass all necessary inspections in the reseller’s country.
By using OEMs, auto manufacturers can deliver high-quality vehicles to the market. The costs usually associated with building their own factories or components are gone. The result is consumers get cheaper cars without sacrificing quality.
The Relationship of OEMs and VARs
OEMs aren’t only specific manufacturers waiting for VARs to come along. While many OEMs specialize in specific fields or types of commodities, that’s not all they do. They have to remain flexible to work with as many VARs as possible.
OEMs and VARs work together by having a direct relationship. The VAR has to know exactly what they want, how they want it, and in what form or quantities. The OEM has to listen to these requests and find ways to accommodate them to the satisfaction of the VAR.
Communication, Flexibility, and Customizability
The most important thing in this business relationship is communication. OEMs set up their manufacturing facilities to be flexible but also high-quality. If an OEM factory can make 2-inch bolts, chances are they can adjust to different sizes as well.
The ability to accommodate multiple VARs with specific requirements is key. Quality control is also an important factor. VARs will be clear about proper measurements and specifications.
They’ll also communicate what kind of standard they expect. This is why the OEM needs to work with the VAR to meet these needs. OEM manufacturers sell to businesses, whereas VARs sell to consumers.
This means that VARs take the blame in the consumer market for defective products. Let’s use an example where Levi contracts an OEM to make the zippers or buttons on their blue jeans. It’s Levi that gets raked over the coals if the buttons are cheap or the zipper malfunctions.
The same is true if Samsung uses a faulty OEM part in their phones or TVs. OEMs need to balance flexibility and affordability with guarantees of quality and reliability. Between the two of them, VARs and OEMs need to work together to make sure both sides benefit.
OEMs in the Computer Space
A rising trend in relation to OEMs turning into semi-VARs has been occurring in the PC industry. Companies that design operating software or computer parts have been OEMs. This refers to the likes of Microsoft and Apple and, of course, Intel, Nvidia, and AMD.
The typical relationship would involve Microsoft selling Windows to a company like HP. In addition, Nvidia or Intel might also sell graphics cards and processors to HP. Windows, Nivida, and Intel are OEMs in this relationship, while HP is the VAR.
Companies like HP, Dell, or Lenovo integrate these parts into a finished PC. These are then sold to the consumer. However, with the rise of online ordering and PC building, things are changing.
It’s becoming popular for consumers to buy parts from OEMs like Nvidia or Intel. They can order everything from the graphics card to the wires and even the case online. Because this doesn’t require people to go to third-party retail stores like Best Buy, these OEMs can also function as VARs.
This gives them more leverage over the market. It also gives them more control over things like quality and manufacturing.
Where To Look For OEM Partners
There are a lot of things to consider when comparing OEMs. Cost and quality are important factors, but that’s easier said than done. For companies and VARs, there are two major regions to consider: industrial India and China.
There are, of course, many other options in the developing world to consider. You can also find good quality OEMs to partner within the “Global North,” but costs tend to be higher. India and China have similar strengths, but China wins in several key areas.
The population density in these countries and industrial economic strength are important factors. They have huge skilled workforces, which means a ready labor pool. This is an important consideration since labor shortages, and lack of specialists could choke your supply lines.
Both India and China also have tons of factories to choose from. They rank in the top 5 for having the largest share of global factories. They’re joined by the US, Japan, and Germany, which all have higher labor and operating costs.
Having a large sample size of OEMs to choose from means you’re more likely to find a good and reputable match. That said, a few hidden edge factors make China preferable over any other options.
The World’s Largest Manufacturing Country
China has almost 30% of the world’s manufacturing capacity. This puts them head and shoulders over the US, which sits at second place with 16.8%. Chinese labor is cheaper, and operating costs are lower.
Contrary to popular belief, China produces more than cheap and affordable products. They’ve developed a reputation for innovation in almost every field. They also have a huge number of specialists.
Chinese OEMs are also used to working and communicating with foreign companies. You’ll still need to do your research to find one that meets your needs. However, it’s safe to say China isn’t only the cheapest option; it’s also the highest-quality one.
The Difference between The OEM- VAR Relationship with Aftermarket
Chances are you’ve heard the term “aftermarket part.” These are products manufactured and sold after the original product has gotten finished. To be more specific, an aftermarket part gets manufactured by a third-party company.
They are not associated with the OEM that made the original part. Aftermarket parts don’t fit into the OEM-VAR relationships and are competitors. OEMs and VARs develop a close business relationship.
How Aftermarket Parts Affect Things
The VAR wants to make sure the parts are standard. They also want to guarantee consistent replacement parts from the OEM. The VAR and OEM might draw up a contract to this effect to make sure certain products have end of life support.
To use cars as an example again, VARs will want to make sure that OEMs keep making specific car components for them. It makes it easier and cheaper for those companies to repair vehicles and source replacement parts.
Some OEMs can attempt to sell these parts directly to consumers, thus by-passing VARs. Many VARs are ok with this, as their focus is on customer satisfaction by keeping their products working. Those VARs who don’t want to get bypassed will usually agree with the OEM about rights.
If the original OEM made the replacement part, it’s official and not aftermarket. If a different company, not associated or contracted with the VAR, made the component, it is aftermarket. Many companies that make parts used as aftermarket replacements are also OEMs.
They often make parts for other companies, such as luxury cars, in the case of the auto industry. Consumers might buy a higher-quality stereo from them or replace the gear shifter. By putting these parts into a different car, they become aftermarket.
What Is OEM Manufacturing?
What is OEM manufacturing? It’s a process and approach that helps lower the costs of producing complex products. OEMs allow the consumer market to pump out affordable yet high-quality items.
Any company considering producing products on a large scale needs to know about OEMs. As long as you have good communication and do your research, the perfect OEM fit is out there. Shield Works is ready and waiting to bring your manufacturing dreams to life, so give us a call today.
When it comes to manufacturing, China is the dream destination. The sheer size of the country and its population make it a natural choice for manufacturers looking to produce on a large scale.
However, finding the proper manufacturer in China can be tricky. This is applicable if you’re unsure what you’re looking for or where to start your search. Many people believe Chinese manufacturing to be sub-par, but this simply isn’t the case.
This article will cover some tips that will help you locate Chinese manufacturers that are right for your company!
When you’re keen on reading more about the utility & power of Chinese manufacturers, scroll down.
What Is Chinese Manufacturing?
In short, it’s the process of outsourcing your manufacturing to China. This is done by hiring a factory in one of China’s numerous cities and working with them on creating a product that meets your specifications.
In some cases, manufacturers may be able to hire for specific tasks. While other times, they will manufacture entire products from start to finish.
What Are the Benefits of Moving Manufacturing to China?
When you outsource production overseas, several benefits come along with it. This list is not exhaustive by any means, but it does hold evident benefits of moving your factory.
Your costs can decrease substantially. This is because China has lower minimum wages than many industrialized areas like Japan or Germany. While this isn’t true across the board (China has been increasing its minimum wage in recent years), it remains an essential factor.
Labor costs can be lower than domestic costs since most employees prefer working for foreign companies and often accept a smaller salary. This is due to several factors such as improving their resume, learning English, and skills that may transfer over into other industries later on.
Chinese manufacturers can provide you with a great deal of value for the price. Compared to companies in other countries, China’s manufacturing industry is very cost-efficient. This makes it easier for your company to profit without charging customers more or cutting corners on quality control.
China’s sheer production scale means that factories have access to technology and resources unavailable elsewhere. Since there are many factories in one country, they can share ideas and implement new technologies faster than suppliers from different nations could ever hope to!
Many Chinese factories can produce products quickly and in large quantities. If you’re looking for a company that can churn out your product at high speeds and low costs, then look no further!
Why Do People Think Chinese Manufacturing Is Bad?
While Chinese manufacturers are highly sought after for their low costs and high productivity, there also exists a lot of stigma surrounding them.
Some people think that Chinese companies aren’t capable of producing products with the same level of quality as many other countries do.
However, this belief doesn’t accurately represent contract manufacturing China hubs. Chinese manufacturing is top-notch and it works at scale, unlike other locations.
China is most probably your best bet for manufacturing in the 21st century. With so much experience and resources, China can make any project come to life.
When looking for a Chinese factory to outsource your production line to, there are several factors that you’ll want to take into account:
Communication is an essential factor when it comes to any business transaction. If your supplier can’t answer e-mails or phone calls promptly, then don’t expect anything good to come from working with them!
How does the company communicate with its customers? Remember, though, quality communication doesn’t necessarily mean they’re fluent English speakers (although this certainly helps). It’s more about finding someone who will respond quickly and clearly.
Many Chinese factories focus on creating goods such as consumer electronics, toys, packaging materials, and more.
What kind of products do they specialize in producing? If you have a specific product in mind that you want to manufacture, it’s essential to find a familiar supplier with your industry.
This may be one of the most important factors to consider when choosing a Chinese factory. You don’t want your reputation or brand name to be tarnished by poor-quality goods! You must inspect samples of their work before making any decisions.
What is the quality of their products?
Do they have experience working with companies from other countries? More and more businesses are outsourcing production overseas, so your chosen supplier likely has experience collaborating with people from different parts of the world.
However, suppose you’re looking for someone who has worked specifically with other brands operating in your industry. In that case, you’ll need to find a company that has experience working with businesses similar to yours.
How Do I Find a Supplier?
Now that we know some of the benefits of using Chinese manufacturers, it’s time to learn to find one. The best way to start is by doing online research or contacting an agency specializing in finding suppliers for foreign companies. However, there are also a few things you can do on your own:
Look for Trade Shows
Trade shows are a great place to start if you meet with potential suppliers face-to-face. They will have representatives from many different factories in attendance so you can ask them questions and get a feel for what they’re capable of.
Use a Search Engine
If you’re looking for a specific type of supplier, then using a search engine is the best way to find them. Enter in what you’re looking for and your location (or the location of the factory), and Google will do the rest!
Ask Friends Or Colleagues
If you know someone already doing business with a Chinese manufacturer, ask them for advice. They’ll likely be able to recommend a few good factories that have worked well for them in the past.
In essence, China is a great place to find manufacturers for your business. They can offer lower costs and increased production speed, which will ultimately help you succeed as an entrepreneur.
How Do I Vet Great Manufacturers From Bad Ones?
There are several factors involved when looking at Chinese manufacturers. Nevertheless, here are some key points:
Price is one of the most important factors when choosing a manufacturer in China. If your product is new to the market, you will likely not have much competition. Therefore, you can afford to charge customers more for what they’re getting.
Still, there are some cases where this isn’t true (such as with commodities). This means you need to find someone offering competitive prices with high-quality products.
No matter how good your supplier does on price, if their result doesn’t meet industry standards, then it won’t do any good! Quality control matters.
Make sure whoever you work with has an extensive history of OEM manufacturing items before signing control of production. This is so that they know exactly what needs to be done once tasks are handed off between each stage of production.
Product assembly in China is quality-oriented. Thus, this part of the equation is a given.
Even if you have a good relationship with your supplier and usually produce high-quality products, some exceptions will likely be. You’ll want to choose a manufacturer in China who is willing to work with you on fixing errors.
This should happen as soon as possible so that customers don’t get upset by poor service! China assembly service is one of the best, so keep that in mind.
In the end, finding the right Chinese manufacturers should always come down to choosing someone who can meet all of your company’s needs. This may take time, but it’s well worth doing due diligence before moving forward. Outsourcing manufacturing overseas has enormous benefits for companies looking to grow!
A successful business owner must find their niche market. They must know what product/service combination will yield the most sales.
Outsourcing to a Chinese manufacturer is often the answer for businesses that want to keep costs low. But also to remain competitive in their industry.
Manufacturing Done Right
When looking for a Chinese manufacturer, research is essential to find the best partner possible.
There are many things to consider, such as price, quality control, and service, but if you take the time to find a supplier that meets all of your needs, then you’ll be able to succeed as an entrepreneur.
If you’re looking for product assembly/contract manufacturing, get in touch with us, and we will take care of you.
Chinese trade has expanded at a breakneck pace over the last several decades. In 2018, China exported a whopping $2.49 trillion in goods. The value of China’s exports always surpasses their annual import cost. This makes them a powerhouse of manufacturing and industry. Chinese factories were not always positioned like this, though, and it took a lot of growth to get there. So how did that all change?
We’re going to break down how product assembly in China got to where it is today and why it is still leagues beyond anyone else in the world. Stay till the end to see where they aim to go from here.
The History of Chinese Factories
During the period from 1992 to 2002, China implemented a series of incentives that were very attractive to foreign companies and investors. This alone had a massive impact on the growth of China’s manufacturing sector.
The term “made in China” was first coined in the early 1940s and this was because of a boycott of Japan and foreign-made products. China’s economy lacked the structure for efficient industrialization and they wanted to change that.
Chinese citizens wanted more opportunities to grow domestically. Boycotting these foreign-made products gave them an opportunity to take part in what they dubbed the National Salvation Effort.
What Was the National Salvation Effort?
This was a movement that opposed the Nationalist Government and demanded a stronger resistance to the expansion of Japan. As a whole, the National Salvation Movement was a coalition of leftist groups, albeit a loose group.
It included members of the Chinese Communist Party, including those who were both open and secret participants.
Why is this relevant? It was a crucial step in positioning China as a powerhouse, and not just in the manufacturing sector.
China Is the Factory of the World
Cheap and plentiful labor primarily aided in China’s rise as the ‘world’s factory.’ Besides this, an abundance of raw resources and low environmental regulations made it easy for them to grow. And, lest we forget, China’s extensive workforce is only matched by the quantity of land at their disposal.
If we’re talking about labor, we must acknowledge that in 1980, the average Chinese annual salary was between $416 to $508. On the other side of the world, the average American was earning 40-50 times that amount.
This salary discrepancy was one of the biggest draws for global corporations, as it meant higher profit margins. Additionally, China’s proximity to the Four Asian Tigers made it easy for global industries to transition.
China began a series of market reforms in the late 1970s that established the real groundwork for change.
Because of rural land reforms, farmers benefitted more from their produce, which allowed more people to seek work in major cities.
In order to entice foreign investors, the Communist Party began establishing special economic zones. These zones had market-friendly policies that massively benefitted businesses and traders.
With this reform came significant growth, and today, China has several of these manufacturing hubs. Each one specializes in various parts of the supply chain.
For example, Guangdong focuses on electronics. The eastern provinces near Shanghai specialize in daily goods, mechanical parts, and medical equipment. The cities of Wuhan and Chongqing are known for their production of chemical products and auto components.
Why China Is Still Considered the World’s Factory
China has two major advantages as a manufacturing power, both of which have been demonstrated in the last year. To start, China’s industrial foundation is unrivaled in terms of range and depth.
With the capacity to produce anything from low-cost footwear to high-end biotech, China’s grip on the supply chain is unmatched.
China’s combination of manufacturing hubs, improved factories, and first-class infrastructure has made them even more competitive. This is true despite recent wage growth.
The Top Contributing Factors
Despite a change in international trade policies, China still holds most of the world’s manufacturing power. This is largely due to a few, consistent factors.
China’s Business Ecosystem
Industrial production doesn’t occur in a vacuum. It’s supported by a network of suppliers and distributors, as well as component manufacturers, government agencies, and customers.
Through competition and collaboration, these groups all become involved in the manufacturing process.
China’s business ecosystem has evolved dramatically in the last 30 years and there are a few noteworthy changes that stand out.
First, some areas have remained hubs for production. Shenzhen is an example, as it produces a substantial number of goods for the electronics industry. Overall, this domination of the market makes it difficult for anyone outside of these hubs to stand out.
Second, China boasts a technical workforce that surpasses any other. They also have a chain of assembly providers that seem to exceed the bounds of human capacity, making them the powerhouse we know today.
Taxes and Tariffs
Another significant factor was the export tax rebate China introduced in 1985. They set this into motion to boost the competitiveness of its exports. It effectively abolished double taxation on exported goods.
Additionally, any customer-based products were exempt from import taxes if they were coming from China. These lower tax rates helped keep production costs low and attracted businesses eager to make low-cost items.
Currency and Wages
Despite the US’s concerns that China manipulates its currency for national gain, the weaker yuan does make Chinese exports more competitive. Or rather, they become cheaper to buy with other foreign currencies.
Predominantly, it is a win for consumers all over the world, as Chinese products become significantly cheaper because of this.
And, if we’re talking about money, we can’t disregard the impact that China’s law of supply and demand plays on its worker wages.
Because the supply of Chinese factory workers exceeds the demand for work, salaries remain low. Furthermore, until the late twentieth century, most of the Chinese population were considered rural or ‘lower to middle class.’
Internal migration reversed the countries’ skewed rural-urban distribution. As the rise of industrial cities made more work available, there was a natural pull towards urban living and development.
A Working Example
Let’s have a look at how the supply of face masks gave us a particular illustration of China’s strength. In 2020, at the start of February, it made about half the world’s supply of masks, around 10 million a day. Within a month of that, output increased to nearly 120 million.
It would become excessively costly if every country were to develop its own production capacity to match rising demand. Most countries simply do not have the infrastructure and resources.
China still does manufacture a bulk of the face masks required for the pandemic. Any country hoping to make its own masks needs companies with expertise in textiles, chemicals, metallurgy, and machining.
They also need a good, consistent supply of raw materials, adequate manufacturing space, and qualified personal. Never mind the money required to keep it all running smoothly. Because of this, it’s impossible to start from scratch, which is why China had such a good head start.
All those things we’ve just mentioned? We know they were already in place. The cogs of China’s manufacturing machine were already well oiled and geared up to take on the load.
How Does China Want to Grow From Here?
So, while we know China is equipped to handle anything thrown at them from a manufacturing standpoint, where do they want to go from here?
Based on everything we’ve seen, China aims to move into more advanced lines of production. The industries they’ve pioneered till now have simply been a springboard.
As education and salaries grow, as they should do, that initial cost advantage shrinks. The aim for China now is to focus on domestic consumption and leave the chore of mass-producing, cheap, and labor-intensive items to others.
This gives them the space to focus on their own citizens. There has always been an aim to grow socially and economically but they intend to do this while maintaining a hold on their manufacturing.
On pure scale alone, China remains unopposed. We’re likely to see a massive change in time, but China’s manufacturing power is likely to remain unchecked.
There is a considerable new focus on technology and automation in particular. With the promise of robotics and AI, there is room for people to concentrate on more skilled pursuits.
Automation will revolutionize the way we make goods, even if we’re not quite there yet.
Quality Contract Manufacturing in China
As an OEM manufacturer in Chinese factories, we have the knowledge and expertise to offer exceptional service and goods delivery. We know how the system works, and we are proud of the last 16 years of service we’ve conducted in China.
We value quality, innovation, integrity, and excellence in all things, and aim to always offer the same to you.
Contact us today to see how we can help you with your OEM manufacturing, fulfillment, and precision assembly needs.