In today's recessionary environment where we're all being told we have to take action in terms of cost savings, cost reductions, cutbacks, and belt tightening, it has become more and more difficult to maintain margins and remain profitable. Downward pressure on prices means that all cost areas have to be examined closely.
In most businesses four of the most significant costs tend to be Materials, People, Logistics and Buildings. Typically a business needs it's premises to conduct it's business, so it'll be difficult to make significant savings here.
Similarly, you can only cut your human resources so far before the marginal benefit of reducing by another person is less than the cost of not being able to offer acceptable levels of customer service.
So what does that leave? Well there's logistics and materials. Logistics is a sticky one, because it's difficult to reduce costs in this area without having a direct impact on customers.
Therefore we're left with materials. If you're a manufacturer, it'll be raw materials or sub-assemblies, otherwise if you're a wholesaler or retailer it'll be finished goods that you will resell in smaller volumes. Essentially what we're talking about here is what you need to make stock available to create your sales.
The trade off however is; can you make reductions on materials, without adversely affecting quality? because although people may have less money in their pockets, they don't want inferior products.
One possible way that you can solve this tricky trade-off is to buy from a lower cost economy such as China. Currently China manufactures more than 12% of everything that is manufactured globally, and many of the worlds best known multi-national companies are based there.
There has always been the old adage that 'Made in China' means low quality, however this is not the whole truth. It is true that some of the produce exported from China is of a low quality nature, but much of the reason for this is because the demand exists for this type of product.
The full truth is that you can also buy produce of acceptable and superior quality if you approach the project in a logical and strategic fashion.
The following are the primary issues/challenges to successfully address the question 'how do we get good quality low cost produce from China, and ensure that the good quality and pricing is consistent?'
1. The first and basic challenge is the language difference. Although a number of Chinese businesses will have one person who speaks some English, some businesses have none, and also, when issues arise it has been known to happen that the English speaking contact could be on business travel or have left the company etc.
2. The time difference. For Ireland and UK residents, the time difference is almost a full working day, so as you're finishing your 10.00am tea break, the Chinese are turning off their computers and getting ready to leave.
3. Anecdotal evidence suggests that if you successfully start dealing with Chinese suppliers that the first shipment will be fine, as will the second, some minor issues may occur with the third, and then all hell breaks out by the fourth. This is not the experience of many people who deal in China, however one can be unlucky.
4. There are many websites on the internet masquerading as real businesses, and while the websites are impressive, there may be nothing behind them except an individual with a PC working from his bedroom. With this in mind, it is my opinion that a business's best option for overcoming these pitfalls and challenges is to work with a company that has a presence 'on the ground' in China.
There are several of these companies in existence, throughout the UK and Ireland, and a search of the internet will invariably reveal them to you. Some things to watch for in speaking with these companies are as follows:
(a) Do they have any UK or Irish person working on the ground in China? From a communications perspective, it's generally easier to communicate with a fellow countryman, even where in many instances the Chinese employees have very good English.
(b) Do they have a permanent presence in Ireland/UK, where customers can call at any stage during a standard business day (or later) to inquire for a status or price etc?
(c) Does the company have an open-book policy in relation to costs and margins? It is important to ensure that the company will not have hidden charges that might make the project less financially viable for you.
(d) What is the company's policy in terms of introducing you, the customer, directly to the supplier, and accommodating visits to the suppliers' premises? It is vital that you the customer should have the opportunity to make at least one visit to the suppliers' facilities. If the company tries to prevent this, it may be the case that he is hiding something from you.
It is my opinion that if you carry out your research in a logical fashion, and incorporate the steps I have outlined above, you will not go too far wrong in your attempts to source good quality, low-cost commodities from China. As I mentioned previously, there are a number of players in this market who offer these services.
Among them is Ogham Sourcing Ltd, based in Cork, Ireland, with an office in Shenzhen, China, which has been operating in this market since 2004. Sean P. Hennessy is Operations Manager with Ogham Sourcing Ltd. Ogham Souricng is an Irish Company with offices in Cork, Ireland, and Shenzhen, China. We source and import a wide range of commodities for our customers in Ireland and the UK. In addition, we provide a range of services to customers who wish to export or outsource to China. Our General Manager in China is Irish, and he has a team of Chinese People supporting the Sourcing, Quality Assurance and Export Assistance areas.