Business Management:
Organizing Manufacture in Asia

For a number of decades now Asia has been associated with low manufacturing costs and sophisticated manufacturing capabilities.  Biting the bullet and sourcing your products and components from Asia will not be as painful as you might think provided you take some sensible precautions.

As manufacturing costs creep ever upwards, especially for processes that demand a high level of manual intervention, companies in India, Pakistan, China, Taiwan, Malaysia and the Philippines are marketing themselves as a very attractive alternative to your local suppliers.  They are increasingly adopting the quality standards demanded by Australian, European and American consumers and, provided that your product design is well developed and unlikely to require major modification, they are ready, willing, and able to provide you with the goods. 

If your product has not been fully market tested, early manufacturing outsourcing might be a high risk strategy as late design changes could get lost in translation and modification iterations will be significantly longer when you are dealing with a facility at the other side of the world.

As long as your product or component quantities exceed 10,000 pieces the additional shipping costs, subject to detailed analysis, will still bring your product to market at a cost less than you could achieve in the home market.

So, what's stopping you?  Not surprisingly, many companies are concerned about language difficulties, managing production at a distance, customs difficulties and political trade limits.  They fear that they may need to employ their own multilingual staff to travel the world monitoring productivity and quality and that they may become buried under red tape as they unravel the tax, import and export bureaucracy.

Yes, there will be additional costs involved; however these can be minimized by carefully utilizing the vast network of agents and project management companies based in major centers around the Pacific Rim and in the Indian subcontinent.  These multi-lingual organizations allow you to use their qualified and experienced staff on a flexible basis to undertake the hands-on management of the supply chain in Asia.  Their local knowledge and understanding of the region's import-export issues will pay dividends.

Establishing a working relationship with a reliable agent at an early stage will ease the selection of appropriate manufacturing providers.  In addition they can take your detailed brief, organize prototyping and sample manufacture to build your confidence.  If you already source product from Asia and are having quality or delivery problems, a good sourcing agent will pick up your project at any stage and present you with a range of solutions.  You never lose the capacity to make the final decision.

It is also becoming increasingly important for companies to be ethical in their use of overseas outsourcing.  There will always be a concern that the lower manufacturing costs are being achieved through unscrupulous employment practices.  For this reason it is important that you have an independent, trustworthy associate who can investigate the working practices of your manufacturing partners.  Fortunately the larger manufacturers like Levi Strauss, Nike, Gap, Nokia and ToysrUs have set up their own monitoring programs to compensate for the inadequate local labor inspectorates.  As a result of their efforts the treatment of workers in these countries is improving.  This trend can only benefit smaller organizations although it does not eliminate the need for formal and informal inspection to minimize the risk of negative publicity.

Outsourcing manufacturing to Asia may not be viewed as a popular option with your home labor market but success in business has always demanded being tough on the facts and open-minded on the reasons.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.