When 5%-10% more is a bargin

The background on this great idea comes from Wired Magazine.  But more than the great idea, and a Utah company to boot, the look into their issues dealing with China are insightful.  From the article:

Davis has run billion-dollar divisions of global conglomerates with integrated supply chains and the company has produced millions of Orabrushes, but they’ve still faced factory setbacks. The Chinese manufacturer they selected was having trouble molding the critical microbristles and couldn’t properly mold the logo into the handle.

I’m sure that Davis is brilliant at what he does, but even people with a ton of experience still have setbacks in China–it’s part of the reality of working here.  But their solution is even more interesting:

This hiccup spurred the team to evaluate the entire overseas production model.”Producing the product in China, shipping it to the U.S., and then getting it to the retailers is a long cash cycle,” says Davis. “There are also negative rumors in the pet industry about having things manufactured outside the U.S.” Despite manufacturing in Utah costing 5 to 10 percent more in Utah, Davis and his team decided to contract with a local factory.

When timing and  product quality are the major production issues, a higher production cost no longer becomes a barrier to production.  And suddenly China is not as competitive as it was though to be previously.

I have similar discussions with companies just about every week.  Identifying what are the most important current goals and needs sometimes rules out China as a production center even before production can start there.  I would much rather tell a potential client that they need to do their manufacturing in the US, and not use any of my services (read: not pay me anything), and get what they want than have them pay me to get them something that they’ll not be completely happy with.

Things that you need to have researched BEFORE you commit to production in China.

1. Time to market constraints

2. Cash flow timelines

3. Marketing and distribution in your home market

4. Product quality and industry/customer standards and perceptions

5. Mold and product design, production and protection

Just because you have a great idea and have decided that, for whatever reason, China is the place where you have to do your production does not mean that China is the best option once other factors are considered.  Do your homework before committing to any production location simply because you’ve heard or decided that it’s the best value.

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