Low-cost country sourcing (LCCS) isn’t firsthand. Tier-1 sportswear companies like Nike have been sourcing from Asia since the 1960s, but for a lot of SMEs its unmarked ground. Because of that, and a host of other factors, LCCS can be rather discouraging.
Why SMEs are sourcing from China?
China is the perfect starter-country for companies analyzing the waters of low-cost country sourcing. There are several factors that make China a good sourcing fit for the risk adverse SMEs:
- Skilled labor – The Chinese labor force is vastly skilled. China can produce exceptionally intricate products from toys to electronics to automotive and machinery. Beyond the high complexity level of China’s output, one of the reasons that keep SMEs coming back is the speed at which goods can be manufactured. For many products, China can manufacture them better and faster than any other low-cost country.
- Raw materials and sub-suppliers – Many low-cost countries in fact source their materials from China. China also produces cotton and many other raw materials required for manufacturing. Being able to source all locally decreases both cost and delivery times. And it lessens the number of countries, and therefore the level of difficulty, of low-cost country sourcing.
- Mature supply chain – China has the years of experience to be able to guarantee quality throughout the whole supply chain from sub-suppliers. That, more than anything, is why China has become the standard for low-cost country sourcing.
How SMEs should source from China
For SMEs sourcing from China, there are a few major tasks that must be undertaken to lessen risk, increase the probable benefits and guide the process.
- Identify Your Product – Before a company can source from a low-cost country it needs to first know its own product. Every low-cost country has different strengths depending on the necessities. Any organization thinking of low-cost country sourcing must know accurately what they are searching for in terms of these categories.
- Recognize The Market – China is entirely different supply market. In order to enjoy the benefits that sourcing from China provides, SMEs must take the time to recognize the market. Procurement teams need a local understanding and knowledge of how the Chinese supply chain functions. Jumping into the market blind is really challenging and mistakes can be huge.
Rising consumption and increased consumer demands are encouraging a more international approach to sourcing. SMEs are going further and further afield in the search for the lowest cost suppliers. Due to its development and constancy, a lot of companies are using China as a foundation. For small or medium-sized companies China is the perfect place to begin.