China is one of Australia’s largest trading partners, however their competitive manufacturing prices have left many Australian business’ sourcing their production overseas rather than domestically, affecting our manufacturing industry.
As domestic prices rise, the desire for affordable overseas manufacturing grows. The ‘Made in China’ tagline visible on many Australian products is a testament to China’s manufacturing capabilities. However, choosing to manufacture and produce your ideas in China comes with its pros and cons.
In 2020, China’s manufacturing industry had 110 million employees. With low living costs in certain Chinese areas, many manufacturing employees can live off the low wages and as a result the labour costs in China are some of the lowest in the world.
Depending on factors such as; the complexity of the product, timeline for delivery and required quantity, the cost between manufacturing domestically and manufacturing in china can be significant. Domestic manufacturers have to consider much higher overhead costs.
Start up businesses or unique, custom orders will often struggle to find a domestic manufacturer willing to take on a small quantity order. A MOQ (minimum order quantity) will often be set in place to cover overheads for domestic manufacturers.
“You can’t take for granted that just because you’re willing to pay for goods, someone is willing to make them for you.”
China’s affordability and flexible options makes overseas manufacturing ideal for the common business.
One of the biggest concerns with manufacturing in China is the language barrier causing a communication deficiency when discussing details of your product. When you aren’t working face-to-face it can be difficult to communicate your vision.
The cost of shipping and the “landed cost” – the final cost of your goods once they have arrived at their clients doorstep is where domestic manufacturing has the upper hand. The cost of shipping from a remote city in China (where most factories are) versus the cost of shipping domestically will be drastically different.
Factoring in weeks into the timeline of your product to get it delivered from China vs domestically, delivery taking only a matter of days max – depending on the product this can be a dealbreaker for many business’.
Variation in quality can be a disadvantage of manufacturing your goods in China. Ironically, consumers have a lower opinion of products made in China rather than ‘Australia made.’ However, lower costs can lead to poorer quality.
After weighing up the pros and cons relevant to your business model and product, if your business would benefit from manufacturing in China ensure you have a QMS (quality management system) in place, and keep your communication clear about the vision for your product.