China has always had the support of “manufacturing power”, Chinese products all over the world. With the shift of global manufacturing to China, China has become a pivotal link in the cross-border sourcing chain, and the sourcer of multinational companies in China has shown an unprecedented scale and trend. The cross-border source amount has shown a rapid growth momentum every year, even under the epidemic, China’s export volume has also grown in size.
Many international professional sourcer organizations and brokers have also come to China in recent years, in some international exhibitions and extensive contact with many domestic enterprises, seeking opportunities to cooperate with Chinese enterprises, China has gradually become an important sourcer and production base in the world.
Reasons Why Multinational Enterprises Choose to Source in China
1. China has abundant and cheap labor, low material cost, and low product price
2. China has the perfect infrastructure and sufficient transportation conditions, which are suitable for enterprises to carry out international transportation sales. To improve procurement efficiency, many multinational companies set up special procurement centers in specific regions, forming a procurement trend characterized by unified distribution and distribution schedule.
3. Continuous improvement of relevant policies and regulations to promote China’s export development.
What Risks and Mistakes Should Multinational Enterprises Pay attention to When Sourcing in China?
1. Avoid Sourcing Short-term Behavior and Strive for Long-term Cooperative Strategic Partnerships
For foreign Sourcers, excellent suppliers are their important resources, which have a significant impact on the growth of their enterprises.
Our relationship with international purchasers should be viewed more as competition, that is, competitive partnership, rather than simple competition. Therefore, it is necessary to establish a production and marketing alliance with them based on information exchange. The purpose is to prompt export enterprises to make production and sales plans, adapt to market demand for product development and reduce logistics loss and opportunity loss through information sharing. At the same time, the production and marketing alliance is conducive to the joint prediction of future demand, discovering marketing opportunities for new products, and making a quick response to consumer demand.
Both Chinese exporters and international buyers will benefit from this cooperation. As game theory suggests, firms can improve themselves by forming long-term deals with partners, rather than short-term ones with only one or a limited number of deals.
2. Supplier Selection
Chinese enterprises are not perfect in the management system, relatively backward management level, lack of technical innovation ability, lack of continuous new product development ability, product specialization and standardization degree is relatively low, it is difficult to form a professional supporting production system. , at the same time, the competition between enterprises to order is more fragmented, big price war, some enterpriseses to achieve low-cost, snatching orders, the purpose of cutting corners, cause the product quality is not up to standard, cause foreign consumer claims, customer complaints, and for some of the larger orders, many small businesses are unable to bear the consequences of a claim.
Therefore, In the selection of suppliers, we must examine their financial status, product professionalism, integrity, business model, management system and so on.
3. Avoid Designing Proprietary Products
Present, authorized brand and patent products more and more, especially toys, wholesale children’s toys a lot from the film and television and games, most of these toys are all patent authorization, but seldom companies in China can get the authorization of such products, to grab customers and market, many companies in the export brand without authorization, often also has caused many lawsuits and claims. In recent years, the international anti-counterfeit action against Chinese products is more and more frequent, and the intensity is greater.
4. The Low Quality of The Goods Will Damage the Reputation and Interests of The Enterprises
It is reported that ford company in 2003 in China’s procurement of 1 billion dollars of procurement products do not meet the requirements of Ford company. In some countries, China has become a synonym for low quality, which has seriously affected the reputation and interests of China’s export enterprises. In addition, some objective factors bring quality problems. For example, the United States is the only country that does not implement a metric system. This reality often leads to the inconsistency between the expected tolerance of the goods purchased in China by some Buyers in the United States, so they cannot be used.
5. Internal Resistance
Many companies know China purchasing cost is low, but the actual purchasing data shows that they seldom into China’s resourcing, a large part of the block from the company’s internal difficulties of culture and organizational structure, including the lack of a sense of urgency and the notion of “step-by-step”, lack of experience in China’s procurement and global sourcing experience in general, the organization structure is extremely complicated, Incomplete information, objections from existing suppliers and difficulties in setting workable targets. These problems must be clarified and solved before purchasing in China.
6. Prevent Disclosure of Proprietary Intellectual Property Rights
Foreign companies will only be willing to share intellectual property if there is a great deal of trust. When they share, they also take a huge risk of leakage of proprietary knowledge and technology, to competitors, to employees who may move to rival companies, and to domestic well-known enterprises, who will steal the patent of any product. Every company knows this risk, but they have to overcome it to be competitive.
7. Other Risks
There are many challenges in doing business in China. Banking and other financial crises may affect economic stability, the implementation of WTO commitments, the impact of currency fluctuations, and the complex logistics environment are all issues that need to be paid attention to when purchasing in China.
In the face of so many uncertain factors, it is very important to choose professional suppliers. A high-quality supplier can not only bring you prices, products, and services but also help you stand out from similar competitors and quickly occupy the market.
