Manufacturing goods takes a lot of money, and transporting them can be just as costly. Businesses can cut down on their costs by outsourcing operations to China, which is known for its low labor costs. Regardless of this fact, some businesses are now finding that their third party logistics operations are best outsourced to other places.
If you haven’t outsourced your logistics operations before, a move to China might be a bad idea. Moving operations to China also means that you would need to send over managerial staff to oversee operations and ensure a certain sense of quality is maintained. For a medium-sized business, sending over staff might not be plausible. For small businesses, it is out of the question.
Transportation costs have made shipping products to or from China more costly than normal. With the high level of cost efficiency slowly waning, businesses are looking for other alternatives to China-based manufacturers. Gas and oil prices seem to be climbing steadily each year that passes, so it doesn’t seem that things will get better any time soon for logistics operations in the area.
A single recall from one shipment of goods can cost a company millions. A recent case that was made into a global news story would be with Mattel- a famed toy company. Mattel ended up losing millions of dollars due to a single recall that affected millions of toys that were shipped from China. Not only does Mattel lose out on profits, but also on the lack of trust that is now instilled in consumers who were once fans of Mattel’s commitment to excellence.
The work force you hire when you outsource your operations may change- which is bad if you have a lengthy education process to create your products. Since labor is so cheap in China, workers can easily be replaced and often are. Products that are complex to make will require that each employ to learn a specific job in order to create it properly. This doesn’t affect you if your products are simplistic, but is something to weight against benefits.
Some consumers have a strong sense of patriotism- meaning they won’t buy products from other nations if their own nation is in economic turmoil. Businesses can actually miss their target market if they outsource their logistics to other countries in this case. When dealing with expensive products such as vehicles or farm equipment, even a small dip in sales can mean trouble for a business outsourcing their operations to China.
Final Thoughts
Outsourcing your logistics operations to China can still be a good thing- but be careful with the process less you create more problems than solutions. Ask a third party logistics dealer on their recommendations if you are at a loss of what to do at this time.
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