Execution & Operation
Maintaining quality controls, as well as communication channels, is key to successfully sourcing in China.
How do you structure the relationship with your China sourcing partner? Some companies use a full-service China sourcing agent and others set up a China representative office to manage China sourcing operations. Companies with longer planning horizons, more management heft, and a commitment to the Chinese market may choose to set up a wholly foreign-owned enterprise (WFOE), a more popular means of entry than the joint venture. Some companies acquire a China firm to jumpstart their WFOE formation.
No matter what route you take, maintaining high product quality will be challenging. For critical components with a low tolerance for error, having an employee on the ground to monitor the manufacturing process is indispensable. For other goods, regular onsite inspections, random product sampling, and periodic holistic evaluation of supplier operations generally suffice. Quality maintenance, delivery performance, inventory, and cost savings should all be reviewed regularly. If there are breaches, the China supplier must have a non-negotiable timeline for returning to the standards.
Strong communications systems are critical to supply chain management. According to our experiences, the order-to-delivery lag can be as short as twelve days but can run up to eight weeks. If demand changes unpredictably or there are no capacity for excess inventory, good communication between China sourcing suppliers and U.S. clients becomes crucial. Good online technology also encourages local operations to coordinate buying efforts and thus maximize the cost savings that Chinese procurement brings.
China offers favorable business opportunities in terms of growth potential and a low cost source of numerous products due to its labor position and extensive natural resources. China's new membership in the WTO increases its value as a sourcing partner and opens the door to the fastest growing market in the world.
