Smart Firms Design Their Products Domestically And Produce Them Internationally
When you look around at the world’s most successful companies that have physical products, you soon notice something interesting going on. Most of them have massive headquarters in rich developed countries, like the USA. But they also manufacture practically all their goods in China.
Take Apple, for instance. It has a massive campus in California that employs more than 5,000 people. But they don’t do any actual product there. Instead, all the brains and boffins who work for the company get together to develop the latest technologies. Once the firm produces the specifications it wants, it shares them with its partners in the Far East, and they then get on with the job of building the next generation of iPhones and Macs.
It is a similar story for a lot of other companies too. Even car manufacturers based in western countries get a lot of their parts from mainland China.
The world’s most populous country has several advantages over everyone else when it comes to producing the world’s goods. The main benefit is the low price of labour. Wages are low in the country, and so companies can set up factories and produce products at a surprisingly low cost. Other benefits include moderate regulations and a hard-working population.
It makes a lot of sense, therefore, to learn how to import from China. Companies like yours need to understand how to take advantage of the economics here. Once you do, you can supply products at a lower cost than your competitors, no matter what it is that you actually produce.
Designing your product on home soil is also important (and something that you’re forced to do anyway, really). Ideally, you want the people with the highest levels of education to come and work on your team. The specifications that you develop will determine your levels of market penetration. They also inform the degree to which consumers choose your products over those of other people.
When getting products manufactured overseas, be sure to check service availability. Local manufacturers are good at pumping out a lot of products at high volumes. But they might not have the tools to create the product according to your design specifications. Here it helps to have someone on the ground who can tell you whether you’re going to the right person for the job. Remember, not all firms claiming to offer sourcing services will actually be able to meet your needs.
Also, be sure you choose a flexible supplier. The demand for your product and inputs could change at any time. You need someone who can fulfill a small order and then ramp up production, should you see demand going up.
A lot of domestic supply chains are inflexible. But when you source overseas, you tend to find more developed systems that better meet your needs.
So, in summary, it makes a lot of sense to split up businesses that sell physical products. On the one hand, you have the brains of your operation location in your home country. And on the other, you have your production. Most companies use China.