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Many Western companies active in designing and manufacturing electromechanical systems, professional electronics, machine tools, or other industrial products, look at China Sourcing as a large opportunity, full of promises. In a business environment in which margins are getting squeezed, prices eroding faster than costs and new competitors from Asia and Eastern Europe emerging, Sourcing in China is the solution to create or sustain a competitive advantage.
But many company leaders feel lost in front of the new challenges and don't know how to start with them. Send the Purchasing director for a first exploration trip in China? Hire a Chinese-speaking buyer and integrate him or her in the existing purchasing organization in Europe? Hire someone there? Based on wrong assumptions or poor knowledge, many strategies are doomed to fail. (see our list of 5 China sourcing strategies that do not work)
Smart companies first do their homework, and define a cross-function project in which China Sourcing has a central role. At this stage, not only Purchasing must be involved, but also Operations/Manufacturing, Marketing and sometimes Sales. Once the parts to be sourced in China are clearly defined, the next step is to carefully write the first RFQs, then get some help for the crucial supplier pre-qualification and RFQ management in China.
At the end of this phase, there is a short-list of pre-qualified suppliers, and those suppliers have all properly studied and understood the project requirements. Part prices are already agreed. This is exactly at this time that the purchasing team should travel, for the first time, for face to face discussions with the suppliers, last negotiations and signature of the first Purchase Orders.
As the buying company does not have yet a local structure, the Quality Management and delivery follow-up of these first P.O.s would be too costly and time consuming if done internally, but can be outsourced.
This first batch of parts successfully sourced from China is, of course, a first success story to tell but also quite rich in learnings: Savings are precisely known, suppliers qualified, and technical difficulties identified. The buying company is much better prepared technically to deploy to a larger scale the China Sourcing initiative and start a permanent office in China: Typically, the local office will be in charge of quality control and delivery follow-up, but also process continuous improvement, product customization to better fit with Chinese manufacturingc and identification of other opportunities.
You can read, on the same topic:
"Get Started": a simple guide by procurAsia on how to start a China sourcing initiative
"Effective Sourcing in China requires western companies to change" by Nicolas Cappuccio about the implementation challenges, especially internal Change Management
"Ins and Outs of Sourcing in China" by Etienne Charlier about the benefits of China Sourcing for those with a good strategy and a flawless execution
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