Some Considerations to Take before Sourcing from China
With the existence of more and more serious competition in the market, many companies are looking to source in low-cost countries like China. However, many China trading companies fail to provide the clarity that firms need in order to monitor the process. The issues like cultural and language barriers are some that organizations rarely face in the homeland. The companies fall into the trap because they only think about pricing instead of realizing that sourcing can only be beneficial if it covers all the factors comprising cost, lead time, quality, and operational risks.
What should you do for deriving benefits?
In order to derive benefits from China procurement, the companies should learn to deal first with some of the crucial internal points that may affect the entire setup. To understand this broader picture, a prerequisite for success should be kept on the top priority list. As per the middle management, the advantages of lower-cost purchasing exceed operational costs and risks. Furthermore, performance and incentives are considered as inventory costs. To deal with the new risks of conducting suppliers in China, a few adjustments will be needed within the organization.
The approach should be slow and steady, enabling managers to adapt gradually the new ways of choosing vendors, negotiating with them and minimizing the pains of the transition stage. Logistics condition, quality assurance and control, and customs regulations are the features that need special attention when direct sourcing is implied. In case of quality assurance and control, a profound assessment of pre-selected suppliers is done. During this analysis, the firms often look to gain more insight into suppliers’ R&D activities, financial stability, due diligence, current client base, production process and quality procedures.
Quality management is an uninterrupted process. Once you have recruited a supplier, you need to measure its performance consistently. This actually helps firms to optimize supplier performance, hence boosting service and product quality and delivery. Packing, inspecting container loading, satisfying customs regulations, arranging shipments, and managing inventory and consolidation all fall under the logistics department. During China sourcing, many detailed decisions have to be made and many activities have to be managed. When corrective measures are necessary, a hands-on approach is mostly required to monitor the supply and take immediate action if necessary.
Risk control is yet another important factor to successfully capitalize in China. Sourcing companies help clients in identifying reliable suppliers, offering quality assurance, performing logistics activities and recruiting personnel. Henceforth, setting up sourcing firms in China enable the business to gain control and save more. China procurement can certainly build a real competitive advantage, but this does not happen in a fortnight. A business planning to have a future must lay its foundation today. With considerable time and effort, you can place your stones in a correct manner that can create value and favorable circumstances for the future.