Business owners who set up their sourcing efforts for the long run are off to a great start. Here’s how you can be one of them.
When done right, having products and components manufactured in a low-cost region like China can be very rewarding for business owners. But get it wrong, and you can lose both money and your reputation.
The process of outsourcing your manufacturing requirements does not happen overnight. Identifying the parts you want to outsource, looking for suppliers, verifying their credentials, negotiating with them, placing your order, keeping an eye on quality control are just a few steps involved when you source from abroad. All this takes time and effort.
That is not all. Once you set everything up and get your first consignment, you can sit back and enjoy the fruits of your labor – but not for very long. You must continue to be on the ball for the next consignment.
So why bother then? Doing all this work again and again might not seem that appealing, right?
Well, one of the main reasons business owners look at outsourcing is because it allows them to remain competitive by cutting costs. Once you get your sourcing project off the ground, it is therefore in your interest to ensure that it lasts for a long time. After all, don’t you want to stay competitive for years?
If you view sourcing as a marathon rather than a quick sprint from the very beginning, you will be better prepared for the whole process, and your project will be bound for long-term success.
This is why business owners who set up their sourcing efforts for the long run are off to a great start. Here’s how you can be one of them.
Business owners who first initiate discussions on moving manufacturing costs to low-cost countries like China can face internal resistance for several reasons. A reluctance to change is one of the most common ones. The fear of losing jobs is another. The way I see it, however, is that jobs will be lost if business owners do not embrace change in order to become competitive.
Any sourcing project must therefore start at the top: The business owners and top management must support it. Then they need to ensure that all the key people in the company (and preferably all employees) can see the benefits and opportunities in sourcing products from low-cost regions.
Once the decision has been made, business owners need to allocate resources to manage the project. This should preferably be a full sourcing team. In smaller businesses, where that might not be feasible, a project manager could lead the work. Just make sure you allocate enough resources to the project over time, not just to start it off. (Businesses that aren’t keen on establishing their own teams in the low-cost region can hire a trusted sourcing agent as outlined later in this piece.)
You could start by analyzing your product range and prioritising what to outsource first. I suggest starting small with a narrow scope. Chose a very well-defined product or component with great, up-to-date drawings. You want to get a small, quick win so that everyone in your team stays motivated.
While getting their outsourcing project out, some companies make mistakes that lead to failure in the long run.
Here is why that happens.
Often, when the initial sourcing team has done its work setting up manufacturing in China, and the first container has been delivered, happy that the product is great, the management decides to dissolve the sourcing team based in China, and sends everyone back home. After all, the purchasing team can take over and just place purchase orders now, right?
In my experience, companies with this mindset usually receive a second container with a disappointing product and a third container with absolute crap.
Business owners can avoid a situation like this if they remember that when sourcing from low-cost regions, supervision is all-important. You need to have your products inspected at every stage of production, well before the container leaves the factory. Better still, you need boots on the ground who can conduct in-process checks and quickly resolve problems that crop up right up till the container doors are closed at the end of each order cycle.
This is where experienced sourcing agents can also help.
Businesses that are relatively new to outsourcing and those firms that do not want their own employees in the low-cost region could team up with such agents who will guide them through the process step by step.
Sourcing Allies, for instance, has been helping companies in the US and Western Europe manufacture and source goods from China, India and Eastern Europe for over a decade, and has a proven sourcing process.
A trusted collaboration partner will look out for your interests at all times. The partner will understand what you want, will make sure that no corners are cut, and ensure that your quality product reaches you within the desired lead time.
You will need to put in work too, of course, but relying on experience within the sourcing field will help you avoid common mistakes and ensure that your outsourcing project is successful from the start.
Once your key collaboration partner is in place, you want to build lasting relations with them. Once your partner knows your expectations and needs, the process to outsource your next product or component will be pretty straightforward. Use the same process repeatedly and you will find that you keep winning.
Once you accept that sourcing is a marathon and use it to your advantage, you will be well positioned to stay competitive and grow your business.
The key focus of global sourcing agent Sourcing Allies is to ensure that the sourcing process, manufacturing, and delivery of your goods is as efficient as possible. All this with the right price, quality and lead time.
January 13, 2020
Finding a manufacturer in China can seem like quite a daunting task. Business owners who are intimidated by the enormous task at hand can take heart from (yes!) a Chinese proverb: “The journey of a thousand miles begins with a single step.”
December 30, 2019
OEM is also called contract manufacturing or outsourced manufacturing