Q My company will soon begin sourcing products to China, and we're in the process of finding a suitable factory. What are some tips for making sure we select a good one?
A Sourcing in China is an attractive option for many companies, but it also has its risks, as companies such as Mattel and Menu Foods can attest.
The three primary reasons that companies look to low-cost countries for sourcing are inexpensive labor, talent (technical skills) and access to the domestic market.
Transportation costs, protection of intellectual property and quality assurance are three risk factors that should receive careful consideration when making such decisions.
There are countless instances of an attractive initial price turning out to be much more expensive when product quality factors arise.
If your company is small and you cannot afford an on-site presence to oversee performance and quality assurance, then you should consider retaining an experienced consultant to assist in finding a suitable manufacturing partner.
There is a growing assemblage of consultants specializing in managing overseas manufacturing contracts. Many will help find a sourcing partner. Others can inspect goods at the factory and arrange shipping. Sourcing consultants typically earn their incomes as a percentage of production costs. The next question is, how does one find and identify suitable prospective consultants?
Other approaches to consider are the National Association of Manufacturers (nam.org) or "think tanks," such as the Aberdeen Group in Boston (Aberdeen.com). Two sourcing organizations mentioned in the media are Chinese Savvy in Hong Kong (www.chinasavvy.com) and One World Sourcing, in Ohio (oneworldsourcing.com). Please note that I cannot recommend or endorse any firm.
CHRISTOPHER PUTO, DEAN
UNIVERSITY OF ST. THOMAS
OPUS COLLEGE OF BUSINESS