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VOL.2 November 2010
Manufacturing in China – Part 1
With trade of over $100 billion in 2009, the importance of China and Africa bilateral exchanges are growing daily. This blooming relationship increases the need of understanding the ways of doing business. This regular column will provide a practical insight of doing business in China, including tips and advice based on experience.

China is known as the factory of the world where a wide variety of products are manufactured. Today the manufacturing in China does not only include commodities and garments but in the past few years we have seen an increase in manufacturing of hi-tech and intricate products. The more intricate and innovative a product, the more difficult is the production process. This could involve more conflicts and a longer time for the establishment of the manufacturing project.

Manufacturing in China can be very attractive for Western companies because it allows them to be more competitive in their own market, but it can turn into a nightmare if the manufacturing project is not well structured and closely controlled.

This two-part article will explain the main challenges of manufacturing in China.

 

Define manufacturing process

The starting point of this type of project is to define your manufacturing process. We can divide this process into two important phases, which are "pre development" and "post development" (this phase will be explained in the next article). Indeed, starting a product development often requires important investments (design, molds, etc.) and it is very time consuming. That is why the "pre development" phase has to be performed carefully. Defining your product specifications is an important part of manufacturing projects. It will help your team and the manufacturer work on the same reference and avoid any technical misunderstanding during the product development phase. It is also recommended to have a Chinese version of your specifications.

 

The right manufacturer

This phase of the project is the most sensitive one because it will affect all the stages of the process. The choice of the manufacturer highly depends on the type of product and the size of your business.

For instance, if the quantity of your orders is much less than the production capacity of the manufacturer, you may have commitment problem. In case your quantity is much more than their maximum production capacity you may have production delays.

Keep in mind that bigger factories do not always mean better quality. Very often smaller factories will be more committed to your project therefore they will be more willing to change and improve their production process to match your requirements.

For products with high intellectual property, the choice of the factory is even more difficult, because in China the protection of intellectual property is still not well developed. For these types of products it would be more suitable to find manufacturers with no or few business relationships with your market. This could decrease the risk of possible copy of your intellectual property by your local competitors.

Finally, to accelerate your manufacturer's research and to have an effective cooperation with the manufacturer, a network-based sourcing could be performed. That is to say that you should look first, in your business network (other suppliers, partners, suppliers of your partners, etc.), to try to find a suitable manufacturer. In China it often happens that you could perform better and faster using your guanxi (network in Chinese). This is also applicable to your sourcing, because in manufacturing projects the development part of the product could take time and requires the commitment of your manufacturer. For this matter you have to establish a mutual trust which can be enabled through your network.

 

Audits

After finding the manufacturer, an audit of the factory should be performed either by you or by a consulting company based in China. The audit has to cover the control of the factory facilities, management team, production process and working conditions. In addition, the certificates of the factory such as CE, Rohs or other standards related to your country have to be controlled to ensure that the factory has the required quality level.

However, having the certificates does not always mean good quality in mass production. Because to acquire these certificates, factories make specific samples following the specifications and the factory can even change and improve the product during the certificate application. These certificates mean that the factory is able to match the quality requirements.The manufacturing process explained in this article and the "post development" phase that will be explained in the next article, have to be adapted to your own project, however it can show you the overall process and guide you to successfully start your manufacturing in China.

Column prepared by Milad Nouri Managing Director of China Consultants International Limited

 

 

 

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