Outsourcing in China. Get used to it.


Outsourcing is a paradox. It is a practice that is often necessary for the long-term health of a business or organization and at the same time it is a concept that engenders considerable animosity among electorates esp. in election years. When US companies send jobs overseas, for example, American jobs are lost. But many more jobs might be lost if a company refused to outsource, was unable to meet the high cost of US labor and went out of business. Like it or not, outsourcing is simply one of the realities of Globalization. It is unavoidable.

In China these days, some companies in provinces where the cost of labor and materials is high have begun to outsource orders to other areas within China where costs are lower. These outsourcing factories, usually in coastal provinces, simply cannot compete if their costs are too high. In fact if you do an order in Eastern China or South China and part of it is not outsourced, that is highly unusual. One vendor wrote to me:

“For the labor cost, because zhejiang is developed area in china, so the labor cost is not cheap,but will cheap than guangdong I think.And some factory now buy the material and send to west china workshop to handmade it, for the cost is much cheap. Like some jewelry order we have, we buy the material and send to our jiangxin workshop to make.”

Many US companies are uncomfortable with the practice of outsourcing in China because it renders their supply china less transparent. For some industries with strict safety standards, e.g. construction, pharmaceuticals, toys etc outsourcing can be a real headache because there is sometimes no way to know if subcontractors are qualified and are using parts and materials in accordance with international safety standards. Other industries where product safety is not so much an issue nevertheless worry about outsourcing because it may lead to inconsistent quality over production lots. At some point though you have to accept that outsourcing is normal and you should not be discouraged if you find out your vendor is outsourcing part of your order. What is important is to make sure your vendor has very strict procedures as regards subcontractors and is not accepting product into his factory that does not meet your company or order standards. A simple visit to your vendor’s factory is usually enough to determine this. Once again this is why getting on a plane and going to China to see for yourself is so important when you do business there.



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