Knowledge | How to choose the right Chinese supplier?

On the 13th May, Jane Ru, head of Business Development at Crayfish.io held the 4th session in Crayfish.io’s ‘China- Let’s talk business’ webinar series. Jane was joined by guest speaker Laura Pan where they discussed how to choose the right Chinese supplier. Laura is a supply chain expert who has over 16 years of experience managing the manufacturing of electronics and the semiconductor sales and distribution industry.

 

China is an increasingly attractive market to enter into, not merely for its sheer market size, which provides the opportunity to achieve high revenue growth, but also due to its combined excellence in product design and development, productivity and overall supply chain management skillset. With a particular focus on SMEs and how they can make full use of China’s technological advances in their own product development, this webinar focused on the supply chain and how to pick the right suppliers.

Latest trends and information on Manufacturing in China

Over the last three decades, China’s manufacturing has been developing rapidly. Manufacturing now contributes nearly 30% of the country’s GDP. China’s manufacturing accounts for the highest share of global manufacturing output. According to data from HM Revenue and Customs, China is the UK’s third-largest trading partner, and has been on a steady upward trend over the last few years. China’s strong industrial production capability means that in more than 500 major industrial product categories, China ranks first in the output of 220 of them. The numbers show that electronic machinery, equipment, and computers’ integrated circuits are at the top for this export output.

 

Whilst these trends are positive, the challenges for China’s manufacturing must not be overlooked. Manufacturing contributes the least value economically, yet occupies a lot of power, land and energy consumption. Whilst the government acknowledge this as a challenge, they also perceive it as an opportunity. By enforcing more strict environmental policies, some low-end manufacturers have moved out of China, but simultaneously other Chinese companies have upgraded their production and services to add more value to the production process.

Chinese suppliers’ in-house R&D teams have started to develop better know-how in creating a more flexible supply chain to remain competitive. At the beginning, a lot of EMS Chinese companies provided a consignment model where overseas customers could bring the raw materials and then consign the raw materials to the Chinese manufacturer. This process was low cost due to the manufacturer charging very little for the value they added to the product, which in general was just the labour cost. However, since then some of these manufacturers have developed their own purchasing department, and have been sourcing and purchasing expertise which means they are able to provide a turnkey service.

This is where the Chinese companies can provide the resources and then provide a turnkey solution so that the customer does not need to worry about getting raw components to the factory. More customers have realised that R&D capability is key to their business, and therefore Chinese companies are taking it upon themselves to have an in-house R&D team in which they can provide alternative technical solutions to the customer and flexible supply chain services. Many Chinese EMS companies have started to promote their own solutions to overseas customers, ensuring they will have their products on time. There is a real revolution in manufacturers in China which are evolving to stay competitive.

 

 

How to benefit from China’s supply Chain

There are a few ways to benefit from the services that a good Chinese supplier can provide. If the customer is from a start-up company, and they have a brilliant idea and they want to build a product to commercialise this idea, they can look to China to make this happen. The first task is to build a sample. We help you to find a good supplier in China and the production engineering team work with us to review the whole product concept to ensure that this it is feasible and worth the investment. Usually getting a supplier to agree to build your sample is hard, as you will generally only want a small quantity, but still a lot of components, and time and efforts need to be invested in terms of engineering resources.

However, in China there are different kinds of suppliers who are able to help quickly with BOM kitting and quick sample production.

When it comes to mass production, the top priority of the customer is reliable supply, competitive cost and good quality. Chinese companies are willing to participate in customer’s product upgrade. When the Chinese companies know the product well, they can contribute ideas to make the product better, which will benefit your company in the long run to continue satisfying consumer needs.

 

How to locate the right supplier

The following diagram is the order of the process that you will need to take in order to find the right supplier for you:

When it comes to supplier leads acquisition, there are lots of channels in which you can find these leads. Traditionally it is through a tradeshow or exhibition, which have become more accessible by being broadcast online during the Pandemic. It is also possible to find and locate suppliers through online directories, like ‘Made in China’. These channels are very commonly used but sometimes the quantity of information they can provide is overwhelming, and you will need to spend time and effort to see which suppliers really fit your requirements. Therefore, employing industrial associations which you can contact or get a business referral from for business partners, or finding a platform like Crayfish.io can be a more convenient and efficient way to find a supplier in China.

 

Concluding tips on finding the right supplier

  • Before you outsource your production, you will need to review your product in detail to confirm all of your requirements. You will then be able to introduce these to your supplier and understand for yourself if they have the capability to produce your product in the way you would like.
  • You also must plan ahead your applications for intellectual property (for example your brand, patent etc.). This is particularly necessary for start-up innovation companies.
  • When you screen the suppliers, you can prioritise the companies that have a geographical advantage. There may be areas with industrial clusters which would be worth considering as these will have an advantage in providing a strong supply chain and better overall service.
  • It is essential to carry out due diligence of the supplier, a service which Crayfish.io is also able to provide.
  • Carry out a factory audit before you sign any contract. Have someone from your company or from a 3rd party organisation audit the factory and production line before signing any agreements. 

 

China’s high-tech industry is developing, and with over 350,000 suppliers in China, there is a wealth of them for you to choose from. However, even the smaller suppliers are doing a great job to provide a well-integrated solution to Chinese and international customers and therefore you almost certainly will be able to find the right business partner for you, especially with the help of a service provider like Crayfish.io.

 

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