China’s manufacturing industry has earned a global reputation for excellence and breadth. To the point where many well-known companies around the world use it as their primary factory.
However, manufacturing in China may seem like a complicated and daunting process to most startups. What should you do first? Where do you even begin looking for a reliable manufacturer? Do you think it’s possible to make decent products in China?
We have the answers if any of these problems are keeping you up at night. Here, we cover the ins and outs of manufacturing in China and give you helpful hints at every turn.
There are factories on every continent except Antarctica; why ship your production to China when there are plenty of other options?
The solution is elementary. There are a lot of benefits you can reap in China that you might not be able to find elsewhere. Examples of these are:
Manufacturing in China is state-of-the-art, with many top facilities using state-of-the-art machinery.
Therefore, most Chinese manufacturers have the resources necessary to realize complex product designs.
Affordable Manufacturing Costs
Chinese industrial policy is generally supportive of manufacturers due to government encouragement. Moreover, most factories use economies of scale to keep their operating costs low, allowing them to provide you with competitive manufacturing prices.
Though some Chinese factories may be small, the vast majority have impressive output rates. One benefit is that it’s easy to locate a manufacturer that can meet your volume requirements.
A Global Frontier
The shipping infrastructure in China is very strong. In addition to the New Silk Road initiative, the China-Europe rail has established a connection to Europe. In addition, it is possible to fly between many of the world’s major cities.
As a result, if you have your product made in China, exporting it to other markets is a breeze. All that is required is a sales license and the selection of a reliable cargo delivery service.
How Much Does It Cost to Manufacture a Product in China?
The price of manufacturing different goods in China varies widely. But the fact remains that China typically has a lower total cost of production than other countries.
As we’ve already established, the aforementioned factors—government subsidies, tax breaks, and economies of scale—are major contributors to the aforementioned low manufacturing costs. Aside from these, there are other factors that have an impact:
Technology-enabled, automated production is frequently less expensive than manual methods, especially when producing in large quantities.
The cost of labor in China is lower than in many other regions of the world. Manufacturing relies heavily on human labor, so having access to cheap labor is a major cost savings factor.
In China, raw materials can be obtained locally or imported cheaply from other Asian countries. Because of their massive orders, Chinese manufacturers can save money on these supplies.
Preparing on How to Manufacture a Product in China
If you want to work with Chinese manufacturers more easily, it may help to get your paperwork in order first. As such, you should try to:
Refine Your Product Concept
It’s common for a product’s concept to hold water in theory, but that doesn’t necessarily mean it can be mass produced. As a result, before pursuing manufacturers, make sure your product design has been thoroughly tested and evaluated.
The creation of a prototype in collaboration with a manufacturer or an expert in the field is one possible method of accomplishing this. Prototypes are helpful because they allow you to see how an end product will look and work before you commit to production.
Research the Product Market
Performing market research can help you fine-tune your product for maximum success. Consider some of the following areas to delve into:
In the market for your product, who are the main rivals?
What are the specifics of their product offering, and how can you improve upon it?
Find out what people want from the product and figure out how to give it to them.
When it comes to this product, what are its current market prices?
Investigate Manufacturing Trends in the Market
There are noticeable manufacturing trends across most industries. In the apparel industry, for instance, it is economically preferable to have products manufactured in Asia.
If you look into these tendencies, you might be able to determine if China is the best place for your company to produce goods. Local production may be essential in exceptional circumstances, such as in countries with protectionist policies.
How Do I Find a Manufacturer For My Product in China?
Once you’ve settled all your business details, you can move on to finding a trustworthy Chinese manufacturer to partner with. Fortunately, you can get there in a variety of ways. So, let’s take a look at a few of them.
Every year, thousands of people attend trade shows featuring products made in China and other countries. The Canton Fair is a good example of this because it attracts thousands of suppliers and manufacturers from literally every industry in China.
The great thing about these events is that they gather together hundreds of producers in each industry. Consequently, you would be able to talk to various manufacturers and examine various samples of their work.
Dates and locations of these expos can be found in online trade fair guides. Once you’ve found a trade show or convention that works for your schedule, you should check the event’s official website to see if any relevant product manufacturers will be there.
Business-focused and geared toward bridging the gap between retailers and suppliers, e-commerce platforms like Alibaba are revolutionizing the global economy. Therefore, you can conduct a search on such sites and compile a list of prospective manufacturers to contact.
Spend some time learning more about the top manufacturers once you’ve narrowed your list. In order to make a profit, some middlemen pose as manufacturers, so it’s important to verify their legitimacy before doing business.
Work With a Trading Company
A trading company is a business that acts as an intermediary between you and the factory where your product is produced and then sells you the finished goods at a profit. The simplest way to describe them is as intermediaries.
Using a trading company can be helpful because they have established relationships with suppliers and know where to locate factories. They could also come in handy if you are making a limited edition product or prefer to produce only small quantities of your product.
On the negative side, you would be charged more than if you dealt directly with the manufacturer(s) and you would have very little say over the production process.
Partner With a Sourcing Company
A sourcing firm acts as a go-between for you and Chinese factories.
Let’s say, for argument’s sake, that you want to produce air fresheners. It follows that you would:
Locate a reliable sourcing company.
Please describe the kind of manufactured good you have in mind.
Please describe any additional features or support options that would make this manufacturer ideal for you.
What the sourcing agent would do in exchange is:
Make contact with Chinese companies that make air fresheners.
Have a conversation about the rough outline of the design and the approximate number of items you need.
Inquire about getting a quote for the aforementioned services
The sourcing agent will then report their findings to you so you can make a manufacturer choice.
The sourcing agent saves you time and effort by acting as your representative in all consultations and investigations. You wouldn’t have to worry about the language barrier, and a reliable sourcing agent can probably get you better deals, too.
These sourcing services do, however, cost money, and it can be difficult to locate a trustworthy sourcing agent.
Consult the China Chamber of Commerce
One can find Chambers of Commerce in a large majority of nations. These organizations were formed to foster commerce on a national and international scale.
The China Chamber of Commerce is a good resource for learning more about relevant manufacturers in China.
What’s more, the Chamber of Commerce is a reliable source of information because they only share data they’ve independently verified with official government channels. Therefore, it can be used as a verification tool for manufacturers that have been suggested or sourced in other ways.
Factors to Consider When Negotiating with Your Manufacturer in China
Establishing a productive partnership with a product manufacturer requires settling on a framework for conducting business together. The most foolproof way to handle this situation is to negotiate a contract that both parties agree to.
It’s possible to bargain and lobby for:
Manufacturers don’t have to go through any sort of middleman, so you can rest assured that you’re getting a fair price. Utilize this to your advantage to bargain for reasonable production rates. Take advantage of the fact that you know this is the start of a long-term partnership.
The frequency of your payments to the manufacturer, if any, should be considered among the most important factors in determining whether or not the terms of payment It’s possible to pay as you go, per order, or every three months. If you’re short on funds, don’t be afraid to ask for some.
Payment options: pick a system that works well for both your company and the one making the product. If you are an entrepreneur who is not based in China, consider the currency exchange rate before making any decisions.
Be specific about the time frame in which you’d like your product orders to be fulfilled and shipped. Because the Chinese New Year interferes with normal production in China’s factories, it’s important to find a way to reach an agreement on how to handle the situation.
The raw materials your manufacturer uses should be compatible with your product’s intended use. Further, they should provide you with some form of assurance that the materials were obtained legally and morally.
What Are the Disadvantages of Manufacturing in China?
If we didn’t mention the difficulties you might encounter in China, this guide would be seriously lacking. All right, let’s cut to the chase. It is important to be aware of and avoid the following potential issues.
Intellectual Property Theft
A marketable product concept is priceless. Sharing it with certain sourcing agents, trading companies, or even manufacturers could result in them using it to their advantage.
If this occurs, they may have already beaten you to market by the time you release your product. Thus, it is important to equip yourself with intellectual property protection resources. Examples of these are:
NDAs are legal contracts that state one party will not disclose the other’s product idea to a third party in any form, including verbally, in writing, or through physical models.
Please note that a standard NDA would not be adequate in China because of the way intellectual property law is structured there. An NNN, or nonstandard nongovernmental document, is used instead. It shields your ideas from being used or shared without your permission, or circumvented in any way.
A trademark registration guarantees that no one else can claim your brand’s identity without your permission.
Having a patent will prevent your manufacturing partners and even your competitors from copying your product’s formulation or design if you’re releasing a novel product.
Chinese factories often put quantity and efficiency ahead of quality. Because of this, it can be challenging to track down a provider that consistently meets high quality standards.
The notion that anything made in China is going to be of poor quality and sold at a discount is widespread. Some consumers refuse to buy products from companies that do business in China due to ethical concerns, such as the country’s questionable treatment of its workers or the negative effects of their outsourcing on the local economy.
To convince them to buy your brand’s products may be challenging.
Supply Chain Delays
The Covid-19 pandemic shows that unrest in China can have far-reaching consequences. Holidays and shipping complications can both wreak havoc on a company’s logistics.
Think about preparing for the worst-case scenario.
Mandarin Chinese is the official language of China. Given its widespread use as a medium of communication among the populace, it is the language of choice for most commercial transactions.
You may miss out on crucial details if you cannot read or speak Mandarin. This complicates any attempts at negotiation or simple dialogue with the factories themselves.
Tips on Choosing a Suitable Manufacturer For Your Product in China
To begin, narrow your options for manufacturers down to just a few. Now that you know who to contact and who to visit, you can learn more about their services and decide which ones are a good fit.
When comparing potential Chinese manufacturers for your product, keep the following criteria in mind.
The price of a product is heavily influenced by its cost to produce; consequently, a higher cost of production will result in a higher retail price.
Take the price quotes offered by manufacturers as a starting point for determining the retail price of the product (i.e., cost plus markup). Now, let’s see how these costs stack up against what you learned about the product’s going rate in the market.
To maximize profits, you should team up with a manufacturer that quotes you a reasonable price for high-quality production while still letting you set prices that are competitive in the market.
Exactly when do you need this manufactured? Do you need packaging in addition to manufacturing? Do you need drop shipping? Have you thought about storage or JIT shipping? Create a list of these requirements, and keep track of which manufacturers can fulfill them.
Have some foresight. If you’re in the cosmetics industry and your initial focus is on skin care, for instance, you might find it profitable to branch out into other areas. So, it’s important to find a manufacturer who can adapt as your company does.
For a very long time, the phrase “made in China” has been shorthand for low-quality goods. Popular belief aside, not all Chinese-made goods are of low quality. Choosing the right manufacturer is crucial.
It’s important to give preference to producers who use rigorous quality control measures. Inquire further about the procedures they use to assess your performance. What you need to know will be made clear by the reactions or displays you get.
Samples of their goods can be requested for a more thorough quality check. It may be worth it to pay the fee that some factories charge for sample orders.
Minimum Order Quantity
You’ll recall that we discussed the benefits of economies of scale, right? The factories reach them by setting a minimum order quantity for each product. Here’s how it goes down.
Bulk production is typically less expensive than smaller-scale production when it comes to manufactured goods. The reason for this is that purchasing in bulk allows you to take advantage of cheaper raw materials.
One large batch of products can be processed in a single cycle, rather than several smaller batches.
Because of this, manufacturers typically set a minimum order quantity at the lowest possible level at which they can still make a profit.
Determine how many of the product you plan to produce initially. Think about the potential growth or decline in that number as well. You can use this data as a guide to determine if a given manufacturer has a manageable minimum order quantity (MOQ).
The manufacturer may be willing to adjust the MOQ slightly to meet your needs in certain situations.
Even though shipping isn’t a direct part of the manufacturing process, it’s still something you’ll need to coordinate with the manufacturer on.
Make sure the suppliers you work with either ship directly to your target market or are willing to help you coordinate shipping with reputable logistics companies.
A reliable producer will be registered with the appropriate authorities and can provide you with the relevant information to verify this. If you don’t check these things out, your company could be in serious legal trouble down the road.