Myth Busting (Part II)- Manufacturing in China adds Risk and Volatility to my Supply Chain

Many brands may feel apprehension when moving their manufacturing to China. It is understandable as there is risk in moving production overseas and adapting to the cultural and work differences.

March 28, 2019

Many brands may feel apprehension when moving their manufacturing to China. It is understandable as there is risk in moving production overseas and adapting to the cultural and work differences.

Alternatively, manufacturing in China offers significant benefits. Your brand can access high-quality manufacturers and a talented engineering pool, which can take your product from concept to manufacturing at a reduced cost and potentially improved quality.

It’s practical to examine the benefits and potential risks of manufacturing in China.

Product Quality— Good management systems and clear documentation reduces risk by avoiding miscommunication and pitfalls; this is true regardless of where your manufacturing is taking place. When manufacturing in China, where there are significant language and cultural differences, the need for defined management systems and documentation becomes especially important to ensure a smooth process.

Price Stability—There is a greater risk of product price fluctuations when working globally.  Fluctuation in currency, material, and labor costs all pose risks. To make sure that your company will not be surprised with unforeseen costs, it’s essential that your manufacturing agreement formally outline costs and terms. Currency risks are fortunately minimized when working with China due the Chinese government actively stabilizing the USD exchange rate.

Geopolitical Risk—The global supply chain continues to be affected by volatility. This will be the case until international trade agreements, primarily between the US and China, are finalized.  Unanticipated risk factors, including turmoil from extreme weather, employee strikes, even political fallout can occur in the US or anywhere in the world. It behooves manufacturers to have redundancy in their supply chain, both domestically and internationally, to cover unforeseen events.

Intellectual Property (IP) —The Chinese government has taken steps to secure intellectual property rights. Patents, trademarks and contracts are important, along with working with a contract manufacturer with good systems that control information flow, are defensive strategies against IP theft.

Supplier Management, Geographic, & Cultural Risk —Selecting the right suppliers is a universal critical challenge. There is increased complexity of managing a supplier half-way around the world when there are both language and cultural differences.  It is important that brands put in place good internal management processes and procedures with highly experienced personnel to manage these suppliers.  It is also important for brands to select suppliers that can bridge the cultural divide and follow agreed upon procedures and specifications.

Manufacturing in China takes more time and effort than manufacturing in the US. Phone and email communications are complicated by distance, language and cultural interpretation.

China leads the world in terms of manufacturing output, yet risks need to be noted and considered. If you move your company’s production to China, make sure that you select a manufacturing partner that has open communication, good management and established systems, to realize the benefits while mitigating risk.

Here at Genimex, we provide turn-key manufacturing solutions that support all phases in the product development process. We have a robust team of industrial designers, engineers, account management, merchandisers and quality control systems in place that ensures your product to be cost efficient and quality-made by having a trustworthy network of vetted suppliers and manufacturers in China and Asia. We have offices in NYC, Taipei and Shanghai, and we are committed to giving our partners a stress-free and trusted partnership when working with us.