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To China or not to China

by Timo Stehmann8. May 2013 19:23

Sorry, this could be a boring post for some people ... all words and no pictures. Here it goes:

I am not sure about other countries, but here in South Africa the latest craze is to outsource electronic manufacturing to China ... no matter what! Apparently, it can be done much cheaper there. Maybe it is just me, but sending things to be manufactured half way around the world makes me feel uneasy. What if things go wrong? There might be an error on the PCB or the wrong component(s) are soldered. What then? Well, then you turn to the locals! Here is one such story:

Some of my solder work is outsourced to a small company. Actually, it is a woman running a small soldering business from home. This set-up is useful when you have small jobs and don't manufacture thousands of items. A month ago I brought her some work and in her living room I saw a few large PCBs, each with hundreds of LEDs. Wow, am I glad I don't need to solder that! Well, that was only the tip of the iceberg. The lady showed me her workshop and there was a meter high pile of these things. What she told me then was so scary it almost caused my fight-or-flight response to kick in. Some company decided to outsource the manufacturing of their large outdoor LED displays to China. They received the PCBs and guess what? Yip, it had several errors and the manufacturer in China was not prepared to fix them. It is a little bit difficult to argue with somebody so far away and probably there is the language barrier, too. So, now new PCBs have to be made and ALL the components have to be desoldered from the old PCBs and soldered onto the new PCBs by a South African vendor!

I am sure there are more stories and most likely some of them have a much better outcome. The above story illustrates some important points.

Vendor relationships - being more than just a customer number

When it comes to manufacturing and you start outsourcing, then it helps a lot to know your vendor in person. If you use a local manufacturer, then this is much easier. Building good relationships will give you something that money cannot easily buy: dedication and care. And please, don't always try and push down the price your vendor is asking. Rather try and negotiate other things for the same price. For example, better quality, manufacturing flexibility or quicker service. If a vendor feels you pay too little it can result in passive aggression ... this is really bad, for obvious reasons. 

Using a local manufacturer also reduces the risk when things go wrong (e.g. manufacturing mistake or design mistake). No need to write more about this, the above story tells it all.

When it comes to component sourcing, then personal contact is not that important (IMHO). I had good service from several companies in China. In one case I already paid, but was quickly refunded when they realised they couldn't deliver the specific component I needed. That is great service and demonstrates that I can trust such a vendor. Always remember that you are dealing with people and even via e-mail it is important to build relationships.

Product costs, profits and risks - know your product

I was wondering which types of products are better suited to be manufactured in China? Why would you want to use a Chinese manufacturer? In general, I have found that manufacturers here in SA are not that expensive at all! For example, to manufacture a 300x100x50 mm aluminium enclosure costs R150. This is then laser cut and bent to your specifications. That is dirt cheap! However, when your product requires a lot of manual labour then costs start to increase.

I guess, at this point, people start thinking to outsource to China: reducing the costs BUT increasing the risk (this last part of the statement is often ignored). Is the cost reduction worth the risk? Well, it probably depends on the product. What I am trying to say: evaluate all your options and don't just outsource to China, because everyone seems to be doing it. Evaluate the risks and don't micro-optimise. In other words, don't try to reduce the costs by 5%, while your component costs are 70% of the total costs. If things go wrong during manufacturing and your have to re-order the components, well, then you are screwed.

Mind the gap

I have no experience with China and the language barrier. Until now, there was always somebody who could type English. One thing that I did notice is the time difference. To get the quickest respons from people, you have to contact them in the morning. The time difference between SA and China is 6 hours. So, 9 AM in China is 3AM in SA. That is pretty bad timing and in general it takes longer for things to get organised. When dealing with the USA the times are more convenient. Late afternoon here in SA is early morning in the USA. So, if you have a problem and quickly need to order somehting, then you can place the order and by the time you go to bed in the evening the people in the States are busy processing your order.

Conclusion

Keep it local as far as possible! SA has good people and capabilities at affordable prices. If China is cheaper and you have good relationships with a manufacturer there, go for it!

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Manufacturing

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