StartupNation has a great Q&A about sourcing manufacturing from overseas, with an emphasis on China.
We've been involved with mulitple small businesses that have used Chinese contract manufacturers and based on their experience the information in this article looks solid.
One point that I would quibble with is around intellectual property. From what we''ve seen and heard, the IP problems are greater than this Q&A suggests. If you are going to manufacture in China, you need to be very careful with your IP.
Another important point is it doesn't always make sense to use a Chinese, or foreign, contract manufacturing facility. We've seen a number of examples of companies bringing manufacturing back to the US.
The firms choosing US contract manufacturing facilities tend to make relatively small numbers of products with short life cycles. The reasons they moved back to the US are (1) faster turn around times, (2) the ability to more easily interact with the production team on design adjustments and changes, (3) cheaper freight (especially for those using air freight) and (4) safer IP.
But if your product volumes are high and life cycles long, offshore manufacturing makes a lot of sense. And with the help of good agent (see the Q&A), it is surprisingly easy.
Sourcing from China is a complicated issue - where lowest price is not always the best. Companies need to weigh the added inventory and the impact this will have to their cash flow and to their customer service.
Most small business technologies are not capable of weighing this decision. One solution that is particularily well suited is Phitch. Phitch works with QuickBooks to factor in actual lead times to set inventory levels at peak financial performance.
Phitch has a great tool to compare suppliers from an economic value added standpoint - in other words in compares the cost and cash impacts to guide source of supply decisions.
Phitch provides big company results on a small company budget.
Posted by: John Krech | August 14, 2009 at 07:24 PM