A number of the outsourcing connections are made purely online, in the digital space. One example of a well-known manufacturing outsourcing portal is www.mfg.com. This website gives an interesting glimpse of what is happening in the manufacturing outsourcing world.
No longer is China the exclusive domain of low-cost outsourcing. Customers who log into this website provide their engineering requirements and in turn suppliers from numerous countries are given the opportunity to bid on the project.
This process also indicates how this space continues to be very price-driven, and also shows how manufacturers in several other countries are strongly competitive with China.
Another company I'm aware of here in Guangzhou is ChinaSavvy. This company operates both their own manufacturing facilities, and also has good networks with other contractors and local partners.
In this regard ChinaSavvy offers a more personalised service compared with what is essentially an online and somewhat anonymous bidding service.
What are some of the things New Zealand companies can do to ensure they're outsourcing to the right partner?
Best practice is to visit the candidate partner personally - and not just once, but several times. Tour their manufacturing facility and meet as many of their staff as possible. And depending on the nature of the relationship, and how critical that partnership is to your company's long-term success, it could even be justified to retain staff in the general location of the outsourcing partner.
The locally retained staff would be charged to ensure acceptable QA standards are maintained as well as to keep the business relationship warm and cordial.
In the event that personal visits can't happen, then relying on testimonials from credible people would be a second-best option. Also, it's wise to perform a commercial background check on the company. This kind of service is readily available in China and NZTE can help with introductions to such service providers. The cost is normally well under NZ$1000.
It's also wise to have a lawyer who is experienced in Chinese law to prepare the commercial contracts. And in the event the Chinese partner provides the commercial contracts, then at the very least have a professional lawyer experienced in Chinese law review those contracts.
Once the relationship is formed, what are some things the partners need to do to ensure the relationship continues to run smoothly?
The first thing is to always be prepared for change and in fact anticipate change. Nothing is static in China, so never assume that a relationship that was happy, healthy and buoyant six months ago will be the same today.
Among other things, the local partners in China will be repeatedly flooded with other enticing business opportunities that compete with existing partnerships and revenue streams.
Neglecting the garden, so to speak - that is neglecting the health of your relationship with the Chinese partner - implicitly signals to them that you don't value your relationship and are not worried if you're displaced by another business opportunity. One, in fact, that may be directly competitive with yours.
Last of all, what would be some key advice you'd have for Kiwi firms looking to outsource certain business functions to China?
1. Understand the intellectual property landscape in China and prepare accordingly. Don't rely on personal assurances of respect for your IP rights; securing your IP rights in China's legal jurisdiction is wise.
2. Don't make bottom line price the sole criteria for choosing your partner. To a large extent the old adage is true - you get what you pay for. China is no longer the cheapest location for many kinds of manufacturing, so it's best to look for additional reasons why China makes sense.
3. Think long-term, and think several steps ahead. It takes a significant investment on both sides to establish and maintain mutually rewarding outsourcing partnerships. It is therefore best to avoid the temptation to chop and change. Having said that, avoid complacency and neglect, and make it a part of your long term business plan to keep feeding the relationship, to keep it vibrant and healthy.
Coming up in Your Business: What's happening in the franchising market and what tips do some small business franchisees have for success? If you've got a story to tell as a small business franchisee, drop me a note: nzhsmallbusiness@gmail.com
