China Works blog: China manufacturing news, analysis and insights

One of the most common questions we’re asked is how we charge for our services.

The answer is straightforward! We normally charge a hourly fee for the time we spend preparing a quote and dealing with questions between the factory and customer. We charge this fee as even the most straightforward quotes can take between 5-10 hours for the team to prepare, and every project has unique aspects that require further investigation. It also helps us prioritise the many RFQs (Request for Quotes) that arrive with China Works every day.

We also add a % commission to the factory’s price of between 5 and 8%, which varies according to the level of service required by the customer and order quantities

Finally we pass on any travel expenses if the customer requires us to quality inspect the goods on site with the factory. That is it!

If you have any further questions about how we work, or whether the China Works team can help you, then please don’t hesitate to get in touch.

Around 50% of inquiries received by China Works are from inventors looking to reduce the cost of getting their product to market. While customers are attracted by tooling costs up to 2/3 cheaper than the UK, these projects are normally difficult to get off the ground due to low initial order volumes.  So what should you do if you’re an inventor considering Chinese production?

1. Get quotes from the UK and from China – it may be beneficial to start the project in the UK, even if tooling or unit prices are more expensive to begin with. You’ll have more control over the project, less worries about IP and you can move the project to China when production ramps up

2. Evaluate whether China is right for your product – China works best for manually intensive products or tooling (e.g. plastics, fabricated parts) , where cost savings can be achieved due to the competitive labour rates. If you’re making CNC machined pieces with no tooling, it’s unlikely China will provide you major cost savings

3. Be realistic with the volumes you provide to the factory – if you intend to sell “thousands”, but your first order will be for “ten”, let the factory know this from the start. Factories lose interest pretty rapidly when they’re not given what they’ve been promised

4. Finish your designs and prototypes in the UK, and then consider China – never complete your product design process in China. Getting the factory to make endless design changes is a guaranteed way to lose their interest as bigger projects come along. Completing your designs at home will give you more control over the development process and your IP, and enable you to approach a factory when you’re ready to start mass production.

China Works have dealt with over two hundred inventors since we started in 2006, so if you’d like to find out whether your product is suitable for Chinese production please contact us today. China Works have a dedicated design team in the UK, who can help with local design and prototyping requirements, before your project is handed to our production team in China.

In the final part of our series on common sourcing mistakes we look at one of the most common (but overlooked) China sourcing problems – forgetting to tell the factory how you want your product packaged.

It is often assumed that your order will be well packaged by the factory, preventing any issues that can happen as your order is hauled from one side of the world to the other. There is a lot that can go wrong in that process though as your product is hauled on and off lorries, planes and boats for nearly a month. Additionally your factory will often default to the cheapest packaging they can find on the basis that this wasn’t specified as part of the project.

We do not condone this behaviour by factories, but why leave damage in transit to chance? Specify your packaging requirements clearly at the start of each project, and ensure the factory has a chance to price this into their quote. Specify everything from outer cartons (e.g. do you need wooden boxes, or cardboard) to inner packaging (e.g. do you want your pieces bubble wrapped to prevent scratching, do you need them bagged in lots of 50 to forward straight onto your own customers?) and more (e.g. does uncoated metal need oil applied to prevent them rusting?)

In the next of our series on common sourcing mistakes  we look at customers who are only completing part of their production in China, but fail to tell their factory how the component they’re making fits into the wider project.

Many of our manufacturing customers are looking to bring down the cost of components for end products that they make locally. These projects are a great way to bring reduce prices, but in these circumstances it’s always difficult to check quality in isolation of the wider project. On more than one occasion we’ve had a component pass the factory’s QA checks, only to be told it doesn’t fit with a wider part when it arrives in the UK.

On these types of projects we now always ask for samples of the related part that our component is supposed to fit with so we can conduct wider tests in China.

If you’re only making part of your product in China send the factory clear instructions on how the piece should be inspected, and even better send them the part(s) they are supposed to match with to let them do their own testing. Most importantly do not just take the attitude that “if they follow our drawing it will be fine”, as much of the time it won’t be if the factory can only see half the picture.

In the next of our series on common sourcing mistakes we look at Western companies who choose to complete their product development in China.

For many inventors and manufacturers it can be tempting to ask factories to support their product development process through design suggestions, prototyping and engineering drawing support. This has the benefit of a) being cheap, and b) involving the factory in your new product from the start to help them shape the end outcome.

In short this should be avoided at all costs! Over the years we have seen many projects get stuck in ‘sampling limbo’, with some projects taking up to two years to move to production, owing to constant design tweaks and changes. Factories don’t make any money from the sampling process, so over time this will erode goodwill in your project and the factory will find other priorities.

Ensure you approach your factory with finished drawings, completed prototypes and are in situation where you’re ready to start full production. This will ensure the factory treats you seriously and gives your project precedence over the many other new product development projects they are approached with every day.

(A small plug for our business – China Works have a UK based design and prototyping team, which we set-up in response to the above issue. If we can help with your project please get in touch!)

We’re often asked by customers what the different shipping terms mean, so here is a quick guide to the main terms you might come across:

Bill of Lading: Bill of lading are contracts between the owner of goods and the carrier. The customer needs an original or a copy as proof of ownership to take possession of the goods

Cost and freight: Cost & Freight to a named overseas port of import. Under this term, the seller quotes a price for the goods that include the cost of transportation to the named point of debarkation. The cost of insurance is left to the buyers account.

Cost, insurance and freight: Cost, Insurance and freight to a named overseas port of import.. Under this term the seller quotes a price ofor the goods (including insurance)

Ex-works: A term of sale in which for the quoted price, the seller mearly makes the goods available to the buyer at the sellers “named place”of business. This places the greatest responsibility on the buyer abd minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included

Free on Board (FOB): Common price term used in international trade. The seller is responsible for the cost of goods is to the point of loading it onto the ship or aircraft. The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods have been so delivered

Freight forwarder: An independent business which handles export shipments for compensation. At the request of the shipper, the forwarder makes the actual arrangements and provides the necessary services for expediting the shipment to its overseas destination.

The forwarder takes care of all documentation needed to move the shipment from origin to destination, making up and assembling the necessary documentation for submission to the bank in the exporter’s name. The forwarder arranges for cargo insurance, makes the necessary overseas communications, and advises the shipper on overseas requirements of marking and labelling

Packing list: A shipping document issued by shipper to carrier, Customs and consignee serving the purposes of identifying detail information of package count, products count, measurement of each package, weight of each package, etc

The big question for many manufacturers and inventors is whether to make your new product home or abroad. The UK offers shorter lead times, smaller stockholding requirements and greater control, while China offers obvious benefits around lower tooling costs and unit prices.

In the short term you’ll need to choose between countries to get your project going, but in the long term the answer is to establish relationships with factories in both countries.

Our most experienced customers maintain a global sourcing strategy, where they move production back to the UK when conditions allow (e.g. a weak pound, and capacity in UK manufacturing sector), and back to the Far East when conditions in this country become unfavourable (such as when factories start offering lengthy lead times, or prices jump 25% overnight)

We are currently seeing a trend back to China which is being driven by many UK manufacturers have full order books due to their export led growth. In the last fortnight we’ve had a number of new customers contact us to complain how manufacturing in the UK has suddenly become a challenge for their business.  Last year however the opposite was true with many customers looking to source locally due to the collapse of the pound.

The picture is also blurred further as over 70% of our customers are manufacturers themselves – looking to bring down the cost of components to make themselves more attractive abroad. These factories rely on Chinese prices for tooling and resource intensive parts to bring down their own production costs.

In summary we don’t condone customers moving their production to China at the expense of UK industry. We believe customers should develop a balanced approach to sourcing, with different manufacturing options to support different economic conditions. If a customer moves their production to the China we expect at some stage they will move their production back to UK, and at some stage it will also come back to China.

In the next of our series on common sourcing mistakes we look at customers who look to complete their product development process in China. This can be defined as approaching a factory with incomplete (or even no) drawings, which are not signed off and expecting the factory to advise on product design and specification and complete prototypes.

Worse still we’ve seen a number of projects get stuck in the sample development process for years – with some projects stuck in an endless cycle of mould tweaks, materials changes, packaging changes, and so on.

The above is to be avoided at all times – you risk eroding any goodwill you’ve built up with your factory, who may move onto other higher priority projects. Get all your designs complete at home, and only approach the factory when you’re in a position to place an order. It is essential to ask the factory to complete pre-production samples for approval, but avoid getting them to develop ‘prototypes’, which may be subject to continuous change.

For a comprehensive guide on how to get things right, check out our ‘Ultimate checklist on China sourcing’

In the first of a short series we’ll look at the top five sourcing mistakes that we commonly encounter, and recommend approaches you can take to avoid these traps.

The first mistake is the biggest ‘no no’ of them all – asking the factory to condense your lead times.  In theory most customers want to avoid this, but in practice your project may be running behind schedule resulting in your own customers putting pressure on you.

In our experience shortening production times is the primary cause of project failure, potentially resulting in corners cut and worse still giving the factory a comeback if the goods aren’t up to scratch – “you asked us to get these done in 2 weeks, instead of the 4 weeks we originally asked for….”

To avoid getting into this situation make sure you complete your product development at home to avoid unnecessary delays, build contingency into your timelines (particularly for first orders with a new factory), and ensure your timelines are clearly communicated to the factory. Ultimately it’s important to be patient – it’s better to deal with a 2 week delay, than a three month delay when you have to return a container load of faulty product.

For a comprehensive guide on how to get things right, check out our  ‘Ultimate China Sourcing checklist’