Importing From Low-Cost Countries
June 13, 2009 by Davina Cruella Sandwich
Filed under Forex Trading
Organisations have been having their products mass produced in and around Southern China (now recognisable world-wide as the manufacturing capital of the planet) for more years than I care to remember.
The main reason for this is because the currency in China (Yuan) is worth a lot less than British currency, American currency, or most other currencies for that matter.
So that’s the main reason people source their products from China. Well, what more reason do you need to do something other than the fact that it will save you lots of money? There a a couple of minor disadvantages, and a few more advantages to boot.
The advantages are few, but still obliterate the disadvantages in my opinion. Of course the main one, price is a big factor as I previously mentioned. There are 11.2 Chinese Yuan for every 1 British pound so you do get a lot more for your money.
Also, you can get in with the Chinese trading industry, and if you can become known among them, this can be infinitely advantageous. Another advantage is that you will undoubtedly wind up closer to the raw materials you need, hence you save money on that as well!
The disadvantages, I would say, are severely disproportionate to the advantages in that they seem relatively insignificant. The main disadvantage is the shipping cost. Actually getting your produced product back to the UK/USA/wherever you are based can be a bit pricey, but compared with the money you will have saved on the actual production, I think this is an insignificance.
Also there’s the time that the shipping takes, this could be seen as a greater disadvantage as, depending on level of demand, it could result in loss of turnover. Another disadvantage is that there may be some issues with production quality nearer the beginning of manufacturing as the factory staff become acclimatised to your product, but if you get a good sourcing company to do the communications for you, then you should end up with a high quality production line from start to finish. As well as that, it is difficult to predict what the local conditions are going to be like, financial or otherwise.
To conclude, I believe that the advantages that come with manufacturing your goods in Asia far outweigh the disadvantage.
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Low-cost country sourcing (LCCS) is a procurement strategy in which a company sources materials from countries with lower labour and production costs in order to cut operating expenses.[citation needed] LCCS falls under a broad category of procurement efforts called global sourcing. The process of low cost sourcing consists of two parties. The customer and the supplier countries like USA, UK, Canada, Australia, and West European nations are considered as high cost countries (HCC) like China, India, Bolivia, Brazil, Russia, Maxico, and East European nations are considered low cost countries (LCC). In low cost country sourcing the material flows from LCC to HCC while the technology flows from HCC to LCC