The business world has become aggressively competitive. Regardless of their respective industry, every business, from small and mid-level enterprises to giant ventures, should put a lot of effort into survival. The manufacturing industry is no exception. The hiking rate of market consumption continuously drives changes in manufacturing. The pace is increasing steadily. Customer requirements are escalating faster than ever. One of the most remarkable trends found in this survival of battle is low cost country sourcing. It has become important for the world of trade and business. What is it? It is a procurement strategy through which a company supplies materials from countries having lower labor and production costs.
These days, businesses around the world are taking interest in some specific countries. Most of these countries are developing countries from where foreign manufacturers source their products. The manufacturing businesses do not depend on local manufacturers, mainly due to the high manufacturing costs. The developing countries provide cheaper labor and affordable manufacturing costs. As an outcome, these businesses can manufacture their products within budget and provide their clients with their products at competitive prices. Some favorite sourcing countries of recent times are China, India, Cambodia, Indonesia, Thailand, Brazil, and Vietnam. These countries offer some other key benefits, such as:
- Efficient production in large volumes
- Easy diversification of products
- Multiple suppliers
If you are running a manufacturing business, you should learn the tips in using the benefits received from source hub countries.
A few tips that can help a business leverage the most benefits out of low-cost sourcing
Think beyond reasonable labor and production costs
If you choose a country only for its labor and production costs, it could be a mistake. When you source your required products from a foreign country, multiple additional costs will also be there. Some of the additional costs include legal compliance, tax, and tariff costs. If you fail to understand these processes, it may lead you to huge expenses in the form of lines instructed by the government. You should do thorough research before selecting a particular country for sourcing.
Do not depend only on virtual meetings with manufacturers in the foreign lands
You should be aware of unscrupulous manufacturers. The market is full of suppliers that exercise unethical practices. Therefore, you should cautiously deal with suppliers in a foreign country. You need to visit the suppliers’ place in the foreign land to confirm their authenticity. Finalizing the deal based on a few virtual meetings will not be sufficient to determine how reliable they are.
Make sure that your chosen suppliers meet all the legal standards
Sourcing from a foreign country involves several legal standards and norms associated with the laws of your chosen sourcing country. Always check the legal documents before finalizing a deal.
Longer contracts are preferable
When you are investing money in sourcing from a foreign land, you should always opt for a long contract. Such contracts bring many complexities. Therefore, resolving all the issues for a short-term contract does not make sense.
Apart from these, a few additional tips can also help you:
- Ensure regular performance assessments in a long-term contract
- Always be ready with a plan B
- Do experiments with dropshipping
A Final Takeaway
Every business needs a product sourcing strategy while considering low cost country sourcing. Every country has a unique set of rules, advantages, and disadvantages; you should consider them all before choosing a country for sourcing your requirements.