Meet the Expert
CEO, SF Global Sourcing
- 20-plus years servicing clients in need of outsourced manufacturing worldwide, including from China, Taiwan, South Korea, Poland, Israel and the U.S.
- Past Chairman of the Electronic Retailing Association and board member of the Europe Electronic Retailing Association.
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Outsourcing of Manufactured Consumer Goods and Promotional Materials
CEO, SF Global Sourcing
- The paradigm of outsourcing to cheap labor overseas is only going to continue.
- As we move more toward becoming a global marketplace, the trend toward outsourcing labor to where it's cheap is only going to continue. Governments in countries like China, India, Bangladesh, Vietnam, and Myanmar are channeling huge amounts of money toward infrastructure, like ports, airports and roads, in order to make sure that people can build factories and move goods around.
- Smaller manufacturers can increasingly get products made in China.
- It used to be the case that only large orders could be manufactured in China. But with the advent of not just email but Skype, it's increasingly becoming possible for smaller manufacturers to get their products made there. It's not at all unusual now for Chinese manufacturers to be willing to do small orders of five hundred or a thousand units. This really a huge boon to small business owners.
- Companies are increasingly outsourcing manufacturing that isn't core to their business.
- Larger companies have learned that it just doesn't make much sense to spend a lot of time and money on sourcing items that they use but aren't core to their business.
Let's look at the example of a jelly bean manufacturer. It used to be that the company would have its own purchasing and sourcing team in-house that would be responsible for the containers that the jelly beans are sold in. But these days companies know that it's actually better to have someone else do that – someone who really knows the ins and outs of China and has expertise in, say, glass containers.
- Online marketplaces like Amazon are going to have to start taking responsibility if counterfeits are sold on their site.
- The industry is just starting to really put pressure on marketplaces like Amazon and Alibaba (a massive Chinese online marketplace) to qualify products on their sites so they are not selling counterfeit goods. Thus far they've been able to get away with saying that they're not responsible for the authenticity of goods sold on their sites.
But organizations like the Electronic Retailing Association are starting to organize to fight the sale of counterfeit goods through these marketplaces. Just because your company is on the Internet, that doesn't mean you can ignore people's intellectual property and let counterfeiters hide behind your platform. Vouching for the authenticity of every product on your site is going to become the norm.
- Labor costs in China are going up, which makes other countries more competitive.
- Labor costs in China are climbing, partly because younger generations are better educated and less inclined to work in factories than their predecessors. This means that if you anticipate that you are going to make large orders on a regular basis, you might want to consider working with a manufacturer elsewhere where labor is cheaper, like Myanmar or Bangladesh.
Keep in mind, however, that China has terrific infrastructure that makes transporting your product easier, while other countries don't necessarily have roads and ports that are fully developed. If you do decide to explore going to another less developed country to take advantage of its lower labor cost structure, you might wind up working with the local government to make sure that your required infrastructure needs are met. Large and powerful companies can help get the wheels moving to build infrastructure in developing countries, so then they can benefit from lower labor costs.
Outsourcing of Manufactured Consumer Goods and Promotional Materials: Key Trends