Check out the great article on the Injection Molding magazine site on the pressure many US companies are feeling to develop plans for outsourcing some part of their manufacturing to China — and the pitfalls of doing so.  Author Clare Goldsberry raised a number of good points, including the challenges posed by intellectual property theft and the lack of a stringent regulatory environment.

Before joining Kaysun, I worked in China for a US firm that managed outsourced manufacturing operations.  Based on that experience, it’s clear that OEMs should consider a few other factors as well:

• Total cost – most firms outsource to China to lower their labor costs, but too many fail to fully consider the costs of exchange rate fluctuations, transportation and quality assurance.  QA, for example, will require putting company employees on the ground in China – hiring locally, relocating US-based resources or hiring a third-party firm to fill this critical need.  Once you open the container and find errors, it will take at least 60 days to get replacements – 30 days in production and 30 days “on the water.”
• Reputation risk – this is an intangible but very real risk associated with inconsistent or poor quality.  We’ve all read or heard the news stories about tainted Chinese products hitting US markets.  It’s one thing to recall costume jewelry.  Quite another if it’s a medical device.
• Geopolitical risk – this is related to total cost, but if a worsening political climate leads to back-and-forth market sanctions, a 30% tariff on goods imported from China would wipe out any potential labor cost savings.

Bottom line – China is an attractive and viable outsourcing destination for certain promotional products and low-tech consumer goods.  But I believe the precision plastic components and assemblies required for today’s automotive and medical device markets are better sourced from leading-edge US partners like Kaysun.

- Jeff Anderson

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