Putting into Practice the Three Keys in Manufacturing Partnerships (Part 2)

January 24, 2022

Our previous post discussed three vital principles to keep in mind when selecting a manufacturing partner in China. These were inventory, automation, and seasonality.

We explained that, although it's not easy to identify and connect with a partner that meets these criteria, we at Kingstec have been supporting brands who need offshore manufacturing capacity for close to forty years.

Having outlined these three principles, now we'll share some advice drawn from our experience connecting companies in North America and Europe with the cost-efficient, highly adaptable contract manufacturers of Asia.

Inventory: sourcing raw materials

Ensuring that all the components needed to assemble your product are in place on time means verifying that your manufacturing partner is well-connected. Global markets continue to endure an erratic raw materials crunch. As a result, your company needs to be working with a knowledgeable partner with established international relationships and versatile sourcing skills.

Parts may not be available in China, but that shouldn't be a showstopper. The manufacturing partner you choose to work with should have proven global connections. They should have the resourcefulness and flexibility to source components from other countries or even different continents and deliver them on time to complete your order. Kingstec does just this for many clients – with connections and accounts already set up across the globe, we can source quickly with reliable results.

Choosing a well-connected manufacturer has always been good business, but it's become indispensable over the last couple of years. Experts tell us that global supply chain disruptions will persist until well into 2022 and possibly into 2023.

It's not unheard of for companies to place an order, wait three months or more, and then receive their deposit back due to parts shortages. Reliably delivering your product to customers depends on your manufacturing partner's agile, global procurement capacity to maintain stable production processes and deliver on time.

Automation: mitigating labour challenges

A decade ago in China, it was common to transport large groups of workers from another part of the country for factory work. For example, workers from northern China often travelled to the southern part of the country. Manufacturers recruited staff at job fairs, drove them to the factory location in buses and housed them in dormitories.

Since then, factories have set up shop or re-located in the north, further inland and in rural areas due to regional government incentives such as tax credits. They have become major local employers, locally.

Low-cost, unskilled labour is becoming a thing of the past in today's China. These days, workers receive annual pay raises as well as generous overtime rates – all of which are set by government authorities. Your company will need to anticipate these wage increases and work this into your forecast for costs, annually. For example, for your blanket orders for the next year, you should negotiate to secure this year’s pricing to ensure you can control your forecasted costs.

China's competitive edge in today's manufacturing marketplace is now strategic, leading-edge automation.

Your company needs to be working with a manufacturing partner that knows which processes lend themselves to automation and which require skilled labour to complete manually. Take note, not everything can be automated. Some work may be too difficult in terms of time, cost or complexity to automate. Examples include very fine stitching in some sewing products, fine pitched pins that need soldering or fine gauge wiring in HDMI cables. In addition, they need the expertise to balance production methods and consistently deliver a quality product.

Automation creates new job types on the factory floor, this includes labour to install the tools, build the production line and provide ongoing support. For example, workers are needed to focus on servicing the newly installed robots and advanced production equipment. These technical tasks call for more skilled labour and fewer entry-level jobs overall.

This means your manufacturing partner needs to ensure the factory has skilled workers in the right roles to maintain this high-tech production environment, and make sure automation runs smoothly, all the time.

Seasonality: planning avoids costly delays

Officially, industries in China close for seven days during the Chinese New Year period. In 2022, the break will begin on January 31st. However, the length of time for which specific facilities remain closed varies widely. The shutdown often runs for two weeks, but individual locations may close longer or for less time.

Most manufacturers shut down for roughly two weeks, so it's vital to plan well in advance, especially with orders for the first quarter of 2022. Traditionally, companies have always expected price increases during the month leading up to the Chinese New Year.

Industry watchers expect these increases to spike in 2022 due to pandemic disruptions. These pricing concerns have led many businesses to plan to complete production runs one to two months ahead of schedule to avoid Lunar New Year price hikes.

We've identified another trend over the past few years. We now notice disruptions over the period immediately after holiday shutdowns. The delays seem to stem from some workers choosing to leave their jobs during the seasonal break.

When this happens, factories and related manufacturing facilities need time to find and train new staff. As a result, production doesn't bounce back to total capacity as it did in the past. In some cases, we've been encouraging our clients to plan for some ramping-up time after the Chinese New Year festivities when placing orders.

Flexibility and Reliability in a Manufacturing Partner

These insights on inventory, automation and seasonality have been drawn from our nearly 40 years of experience connecting companies in North America and Europe with the cost-efficient, highly adaptable contract manufacturers of Asia.

We've earned our customers' trust by maintaining the strictest quality standards. We can help you select from a range of well-connected, cost-efficient manufacturing partners in Asia, which remains the world's workshop.

Why not call us today to discuss your manufacturing needs? We'll find you a partner with the experience to navigate these inventory, automation, and seasonality challenges and deliver the quality product your customers need.

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