Nowadays, more and more companies choose to source from low-cost countries. By outsourcing production to factories in these countries and then selling in your own country, you can make higher profits at lower manufacturing costs.
Today’s post focuses on low-cost country sourcing information, including:
Low-cost country sourcing explained
Low-cost country sourcing (LCCS) refers to the process where businesses located in high-cost countries buy products from low-cost countries.
For example, a US-based POD company may choose to buy cotton blank T-shirts from China and sell them in the US. By investing the same amount of money, $1,000, the company is able to purchase more of the same T-shirts from China. This US company is using the LCCS strategy.
Advantages of outsourcing to low-cost countries
Enjoy low production cost
Countries with abundant and low-cost labor and raw materials often have lower manufacturing costs than other countries. Companies can buy high-quality products from these countries while enjoying cost advantages.
In addition, some large-scale companies choose to build factories in these countries. For example, Lego set up factories in Jiaxing, China as early as 2016. Tesla established a super factory in Shanghai, China.
Focus more on marketing and sales
Outsourcing production to these countries can allow you to invest more time in other business areas, such as brand marketing and sales. This can save you a lot of time and energy.
Expand business scope
If your budget is limited, buying products from low-cost countries can make your product more diverse. With the same budget, you may only be able to buy one or two types of products in your own country, but you can import several different types of products from these countries.
Now you know the benefits of sourcing from low-cost countries, you might be thinking about what low-cost countries are there in the world. Keep reading.
Top 4 low-cost outsourcing countries list
The most popular low-cost countries in the world include China, India, Thailand, and Vietnam. These countries have their own advantageous products. Let me introduce them one by one.
China produces many commodities for daily use, such as electronic products, clothing, shoes, toys, etc. Products made in China are exported to various countries in the world.
Many factories in China are concentrated together to form industrial clusters, which makes production more efficient and convenient. Guangdong province and Zhejiang province are the two main industry clusters in China. In Guangdong province, Shenzhen is China’s capital of electronic products. Chenghai is the world’s capital of toys. In Zhejiang province, Yiwu is the city world’s largest wholesale center for low-value and daily used products.
Vietnam’s manufacturing industry benefits from preferential policies implemented by the Vietnamese government. The main industries include textiles, furniture, handicrafts, clothing, and bags. Electronic products are also a major export product of Vietnam, but one should not expect to find a huge OEM electronic product supply chain ecosystem like that in Shenzhen.
The industrial clusters in Vietnam are mainly distributed in Ho Chi Minh City.
India’s manufacturing industry is widely distributed and includes multiple fields such as textiles, software, pharmaceuticals, chemicals, etc. Industrial clusters are mainly distributed in cities such as Mumbai, Bangalore, Delhi, Kolkata, and others.
Thailand’s manufacturing industry is mainly composed of small and medium-sized companies, but there are also some large companies, such as automobile and electronics manufacturers. The industry in Thailand mainly produces goods such as electronics, machinery, chemicals, food, and textiles.
Among these four countries, China has the most complete industrial production and the most diverse range of products. That’s why 80% of consumer products in the world are made in and exported from China.
Tips on managing low-cost country sourcing
Verify suppliers in advance
Before mass production, it is important to assess the reliability of your supplier. You can communicate with suppliers to determine their familiarity with the industry and your product. For complex customized projects, you can evaluate their ability to propose timely solutions. After receiving samples, you can carefully check the quality and other aspects to ensure they meet your requirements.
If necessary, you can sign a NNN or NDA with the factory to prevent the disclosure of product design and other confidential information.
Estimate sourcing time
You should carefully consider choosing which shipping solution as it will affect the entire sourcing time. Air freight and express delivery will be faster, while sea freight will be much slower. Additionally, if you are dealing with complex custom projects or developing a brand-new product, the lead time may be longer.
Therefore, it’s best to estimate the sourcing time to avoid receiving the goods too late to influence your business.
Calculate total costs
Product price and shipping cost are the two main parts of the total cost, and their prices are relatively transparent. For product prices, you can get a reasonable price range by comparing multiple suppliers’ quotes on platforms such as Alibaba. For shipping costs, you may get different quotes from multiple freight forwarders. It is important to combine these costs and compare the total cost.
Arrange quality control
Before your goods leave the purchasing country, it is best to check the quality of the products with the help of a sourcing agent or a third-party quality inspection agency. This is important because returning goods is a complicated process and can consume a lot of time and money.
For most low-value ordinary products, a defect rate of 5% is acceptable. But for high-value products, sometimes the defect rate should be 0%. If you have doubts about the quality, you’d better explain to the supplier your defect resolution and compensation requirements.
Know different cargo standards
Export restrictions on goods vary depending on the country and cargo types. For example, more than 20 countries in the world, including India and Malaysia, have implemented export restrictions on grains such as wheat, corn and tomatoes. However, these products can be exported from China.
Therefore, you’d better consult your supplier or freight forwarder in advance to see if such goods can be exported.
Buy from politically stable countries
It’s best to avoid sourcing from countries with unstable political situations. Because you may face risks of production stoppages due to worker strikes, war, or other factors. This means that not only will you not be able to make a profit, but you’ll also lose your investment in production.
Jingsourcing: your reliable China sourcing partner
If you choose to source from China, you can work with a trusted purchasing agent like Jingsouring. We can handle everything for you, from supplier selection, production follow-up, quality inspection, customs clearance, and arranging shipments, making your importation process smoother and more efficient.
Get suitable suppliers efficiently
There are many ways to find suppliers now, like Alibaba. However, you may spend a lot of time and effort verifying suppliers and finding that the products they make are not what you want.
But don’t worry about this problem when you work with us. Our sourcing agent will first ensure getting your ideas correctly, and then find suppliers we cooperate with to make samples. We can find suppliers matching your requirements from dozens or even hundreds of them.
We will collect their samples and send them to you together. You can compare the selected suppliers and samples and choose the most satisfactory one. This improves the efficiency of supplier selection.
Arrange strict QC
We have our own warehouse and professional inspection staff and can provide general and full inspection service according to your requirements.
If you choose our Pro Plan and use our selected suppliers, we will fully guarantee the quality of your products. This includes free replacement of defective products once they are found in our warehouse. What’s more, we will replace or compensate you for defective products found 15 days after you receive the goods and provide evidence.
Save money in your position
If you need to customize a new product, we will break down costs before mass production so that you can have a clear understanding of every investment. We will also stand in your shoes and help you save costs to the greatest extent possible.
For example, suppose you have a custom toy that contains many plastic parts, we will carefully evaluate your project and tell you which parts can directly use existing inventory, which can be made by modifying existing molds, and which require new molds. Because compared to making new molds, this way can save a lot of money.
In addition, we can also choose the appropriate technique based on your product. Because different techniques have different prices. And some techniques, although expensive, the effect is not the best.
Any product sourcing ideas?