Contract manufacturing, also known as outsource manufacturing, is the practice of having products manufactured by a company other than your own. The contract manufacturer makes products according to your specifications and provides its expertise in product design, development, and production. What makes contract manufacturing in China one of the best choices for your business? Let us guide you through this blog.
The Importance of Contract Manufacturing
Outsourcing your production to a contract manufacturer can help you reduce costs and improve efficiency.
Contract manufacturers tend to specialize in certain industries such as electronics or food manufacturing, so they have experience with the specific challenges of making those products. They also have access to specialized equipment that may be too expensive for your business to purchase on its own.
The Top Advantages
-
Saves Time, Money and Resources
Contract manufacturers are equipped with all the necessary equipment, expertise and labour to produce your product. As such, you can rest assured that they will deliver excellent results within a reasonable timeframe and at a fair price.
-
Allows Focus on Core Business Issues
When you are outsourcing your manufacturing needs, you are able to focus on other aspects of your business such as marketing, sales and distribution. These aspects may be more important than actually getting down to the nitty-gritty of production.
-
Access to New Markets and Technical Resources
Contract manufacturers have access to various resources including technology that can help you drive down costs while maintaining high-quality standards. They also have access to new markets that enable them to get supplies at a discounted rate which also benefits your business in terms of reducing costs.
-
Extends their Flexibility to Your Business
Contract manufacturers have many years of experience and can help you design better products and make them using the best materials available. If you don’t know much about manufacturing, they can provide valuable guidance when it comes to creating new products.
-
Product Expertise
Contract manufacturers often specialize in specific types of products or industries, so they typically have very specialized knowledge about how to produce items with high quality and efficiency. This means that your products will likely be made better than if you produced them yourself.
It also means that working with a contract manufacturer puts you in contact with an entire network of people who could potentially become partners or mentors in the future.
-
Higher Quality Products
Contract manufacturers provide high-quality products, which helps your company gain a reputation as a reliable business with great products. They allow companies to grow faster than they could without outsourcing production.
By partnering with a contract manufacturer, businesses become more efficient and flexible, allowing them to pursue new ventures without being held back by the lack of available resources.
Why China?
The Chinese economy thrives as a manufacturing powerhouse, and the nation’s promotional products seem to be everywhere. The majority of tags, labels, and stickers on various goods proclaim they are “Made in China.”
Why is China such a manufacturing hotspot? A few reasons:
1. Manufacturing is a massive part of the Chinese economy. China’s manufacturing sector accounts for 21 per cent of overall GDP.1
2. China has low labour costs compared with other countries. This makes it attractive for manufacturers who need to meet tight profit margins or simply make products as cheaply as possible.
3. The country has a large population that can work in factories across the nation’s vast territory.
4. China has relatively open trade policies compared with its neighbours in Asia, which helps manufacturers ship their goods internationally at a lower cost than if they had to pay import duties on raw materials or final products.
Which Province for What Products?
When a country has the largest population in the world, it’s no surprise that you’ll find a wide variety of manufacturing capabilities and products available.
China has long been heralded as the “world’s factory” for manufacturing products of all kinds, and there’s an important reason for this reputation: Chinese contract manufacturers offer some of the most diverse and skilled manufacturing that can be found anywhere in the world, and at some of the most competitive prices.
Construction
More in Shandong province, the rest in Hubei, Henan, Guangdong, Jiangsu, Beijing, Zhejiang
Furniture
Mainly in Guangdong and Hebei province, the rest in Jiangsu, Zhejiang, Shanghai, Chengdu and Beijing
Household Appliance
Guangdong, Zhejiang, Shandong provinces
Machinery Manufacturing
Dongbei area, Hunan and Hubei provinces
Petrochemical Industry
Shandong (32%), Liaoning (21%), Guangdong (15%)
Pharmaceutical Industry
Tianjin city, Xian city in Shanxi province
Textile Industry
Mainly in Zhejiang (18%) and Jiangsu (20%), the rest in Fujian, Guangdong, Shandong provinces
Transportation Equipment
- Motor & Bicycle: Taizhou city in Zhejiang province (40%)
- Shipping/Vessel: Yangtze River delta, Pearl River Delta, Bohai Bay Areas
- Automobile: Mainly in Jilin, Hubei, Shanghai and Yangtze River delta, the rest in Pearl River Delta, Beijing
The Disadvantages
-
Unpreparedness to Outsource
Choosing the right contract manufacturer for your product can be a daunting task. It is a big decision and it has major implications on your product and company.
Typical contract manufacturers require pristine documentation with detailed assembly instructions. They will build exactly to the prints you provide and will not take any responsibility for issues with your design or documentation.
This can create problems and misalignment if your documentation is incomplete or inaccurate or if you need improvements to your product. For these situations, you may consider outsourcing to manufacturers who have design capabilities or delay outsourcing until your design is fully mature.
-
Communication Gap
When using a contract manufacturing service, your company may run into a communication gap that can cause a variety of problems for the production process. The communication gap between the contract manufacturer and the product owner has many reasons; language barriers, different styles of doing business and working in different time zones are some of the most common reasons.
Here are some things you can do to prevent this from happening:
- Be clear and specific about what your product is supposed to do and why it needs certain components.
- Give examples from other products if applicable (for example, “It needs to move as smoothly as this one does”).
- If possible, provide samples of materials and/or products that have been made with them.
- Provide as much information as possible about what type of performance is expected or required (for example, “It needs to be at least X% waterproof”).
-
Loss of Control
When choosing your CM, you will want to determine the amount of control you want over your manufacturing. Working with a contract manufacturer can also mean that you will have to give up control of the manufacturing process. When relinquishing this control, you risk losing critical knowledge and skills around production techniques. Without constant supervision, your company won’t be able to pinpoint any problems within production.
Make sure to check in at significant points of the project to guarantee that there are no overlaying problems within the project. This will ensure the highest quality product at all critical issues of production.
-
Intellectual Property Risks
One significant disadvantage of contract manufacturing is the risk of your intellectual property being stolen. When you outsource your manufacturing, you give other parties access to your intellectual property (IP).
Intellectual property is a collection of ideas and concepts that have commercial value, such as trademarks, copyrights, patents and trade secrets. These are the core assets of your business, and they can be protected through IP law.
As a business owner, you should take steps to protect your intellectual property.
NNN agreement is designed to protect individual property and confidentiality when working with manufacturers in China. Learn more about it here:
China’s NNN (Non-Use, Non-Disclosure, Non-Circumvention) Agreement can be compared with Western countries’ NDA (Non-Disclosure Agreement).
A Non-Disclosure Agreement or NDA is a document that establishes a confidential relationship between two parties. It outlines the conditions under which information can be shared and specifies the consequences for breaking the agreement.
It is a unilateral agreement that helps protect your intellectual property from being stolen. Any time you share proprietary information with anyone outside of your company, it should be done under an NDA. The act of signing an NDA helps set the stage for a more secure exchange of information.
Key Takeaways
Contract manufacturing is a great alternative for businesses that want to save money and time on production. This process is suitable for companies of all sizes, and it’s especially useful for small businesses that want to create a product but don’t have the resources to do so.
With China being an enormous country with a thriving, diversified economy and a large population, there is no doubt that it is a huge player in the global economy and is one of the most popular contract manufacturing destinations in Asia.
The main advantage of setting up your business operations in China is that you have access to vast resources and an enormous workforce. If you’re thinking about entering the Asian market, there’s no better place to start than in China.
But with all the language barriers importing and exporting laws, you’ll definitely need a middle man — a buying agent in China.
Why Choose ODM?
The primary purpose of hiring a buying office in China is to manage your procurement needs. You are looking for a reliable partner who can source and supply quality products, taking care of all the processes involved in the transaction.
But when choosing a buying office in China, you have to consider many different aspects, as a wrong choice could have a negative impact on your business. By working with our team, you can gain a lot of benefits such as:
Related Blogs:
3 Reasons Why ODM is Your Preferred China Buying Agent!
Although China has the reputation of producing
WAREHOUSING IN CHINA: The Perfect Solution?
Improve business efficiency today with less time and money wasted. All done with warehousing in China! A ton of elements […]
How Long Does it Take to Manufacture Products in China?
Many companies prefer to manufacture products in China for many reasons. Due to the low manufacturing and production costs, companies […]
Making Products In China: How Have Factory Conditions Improved?
The conditions for factory workers has long been a concern for people looking to produce their promotional products. Previously the […]
4 Reasons Why You Should Source Your Promotional Gift From China
Being the world’s most populous country has its own benefit. China is home to one of the most skilled and […]
Browse More of Our Latest Blogs:
Embrace the Cozy: 10 Fall Marketing Ideas From The ODM Group To Warm Up Your Business
As the leaves turn and the air grows crisp, businesses have a golden opportunity to adapt their marketing strategies to the cozy, festive spirit of fall. Seasonal marketing goes beyond aesthetics—it’s [...]
Engaging Audiences with Humor in Funny Spin the Wheel Promotional Ideas
“Spin the Wheel” is a fun-filled game where participants try their luck by spinning a wheel filled with various prizes. Each section of the wheel represents a different reward, and the prize [...]
Successful Co-Branding Partnerships: Inspiration for Business Collaboration
When two famous brands team up, it's not just a partnership, it's a powerhouse of shared values, appeal to the masses, and, of course, more visibility. These collaborations, called co-branding partnerships, can [...]
Labour Day in China and Vietnam: Celebrating Hard Work and Dedication
The ODM Zhuhai Office in China, will be closed from Wednesday, May 1st, to Friday, May 3rd 2024, to celebrate Labour Day. We will be back on Monday, May 6th. Concurrently, [...]
Top 20 Gift Shop Merchandise Ideas for a Well-Stocked Store
Narrowing down the selection of products that you offer at your gift store can get a little daunting so the way to stand out from the competition is by curating a selection [...]
Elevating Retail Impact with Innovative End Cap Display Ideas from The ODM Group
End cap displays are strategic marketing fixtures essential for retail environments, positioned at the end of store aisles to capitalize on high traffic and maximize product visibility. But it’s not just about [...]
Enhance Your Brand’s Visibility with These Unique & Quirky Campaign Merchandise Ideas From The ODM Group
In today's competitive business landscape, standing out from the crowd and capturing consumers' attention has become more challenging. As a brand, it is crucial to ensure that your target [...]
Top 10 Best Promotional Products to Captivate Your Audience in 2024
In today's competitive market, standing out with innovative promotional products is more crucial than ever. As we step into 2024, the need to captivate and convert audiences into loyal customers remains a [...]
20 Back-to-School Merch Ideas From The ODM Group
It's that time of year again - the start of a fresh academic year! The back-to-school season is not only a highly anticipated event for students, but it's also a fantastic [...]
Bar Promotion Ideas to Spice Up Your Business – Unique Drinking Glasses
The 13th of June is Gin Day and the 14th of June is Bourbon Day! Let's celebrate this day with Unique Drinking Glasses and other Bar promotional ideas! [...]
