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How to get down the purchase cost from China

As what we can see, currently all the global business is getting a very big impact from the cost raising at raw material and shipping market, many global business has been hold or cancelled against the schedule . There are many reasons for that, mainly like Chinese policy at power supply limiting, USA released billion tons of dollars to the market, the exchange rate keep going down, Covid-19 still alive and attacking all the world, Changing in the Labor cost market and Industrial structure, all countries policy at the export and import.etc. What we can do, do we have any solution to cope with these trouble, can we still do global business with Chinese suppliers as before, can we keep the same price for our order as before, …?

Yes, we do and we can, but how? My answer is “we need to change”, and change what, here below our solution and points as supplier:

The biggest factors to costing mainly have two, material and labor. Obviously, we can’t do any effort to change the cost the material, because only countries level can do this and most of from overseas, but we can adjust the size to change the weight of the material, here I will not make more explanation on this part, because today my main topic is on labor costing. So let’s eyes on the labor, yes, we can get control the cost of labor. But there also many factors can change the cost of labor,

a)Quantity of order, quantity big the cost will be cheap, or will be a little higher, which just like the difference at pay of full time job and part time job. A promised annual order quantity will be helpful to get a good price from supplier.

b)Industrial design and Mechanical design, which these two element are the biggest factors in labor costing, because ID and MD will decide how many manufacturing process to get done a product, which also means we need to pay how much for the labor. So an experienced designer is very important in the development of new production line. A professional and reliable supplier also is important, a good supplier will give some helpful advice to designer to avoid any potential risk that maybe will have in manufacturing/production before ordering.A tricky supplier willn’t remind any potential risk on client’s design before getting order or payment,the cheaper you get at the beginning, but maybe will get bigger loss in the last. Back to the point, let’s take one vivid example to explain, i.e. One company would like to transfer their existing tooling to another new factory for production and send pictures of items to factory for quotes. New factory gives a very good price and get the order, but new factory finds they can’t earn any money from that new business after the 1st run production, and then asks for additional cost from company or will will close the business. Finally, company wastes time on new supplier and supplier works for nothing, that is very shame.Why? that is the point I am talking – the significance of ID and MD. As a professional supplier will require company to provide existing tooling plan info or a real sample except the pictures before costing, just in way can understand how the previous supplier designed the product and tooling, and then could well know how many process will be required for one finished item, and finally getting the accurate cost. As an experience company/customer also should help to provide these info to new supplier for a win-win cooperation business.

c)Extend the source, build and bigger the network of partnership cooperation. As all know the situation globally, all cost has been raised crazy. Just take Dongguan and Shenzhen factories for example, almost all factories couldn’t give the same price to clients as one or two years ago, even can say a month ago for some factories. But of course, there is still a small part that can keep a low price or close to the price of 1-2 years ago. Lucky, our company is the one of that part now. We built some new plants around province that next to Guangdong, which those province’s labor cost is still not so high as Dongguan or Shenzhen city. Of course, the scale of plant maybe is not so big as big city’s, but the quality and delivery time is still can be promised, especially the price will be cheaper, our factory even can keep the same price as 2 years ago for some normal products, 10-15% cost cheaper than Dongguan and Shenzhen’s price will still be workable here, this is our advantage now. However, we still need to keep and produce in Dongguan or Shenzhen factory for high-end products with high requirement or value.

d)Your words is money , keep a high reputation, try to trust in new supplier, and supplier will give support to you when you are in trouble. Keep a good cooperation relationship with supplier, don not change  the supplier frequently for just cents difference with other new supplier. Business is not only money talk, we are not working with machines, but with people with blood and  feelings. For a long term relationship client, we also used to give our support in the cost to clients to help them to extend their market or order. But sorry  supplier can’t cheaper their cost any more if client is just for one-time business.

Above are the points of mine,  please share with us if you also have your points or solutions.

Please contact me if you are looking for new supplier with competitive price, maybe we are the one for you. For more info about us, please visit our website www.pohungtoygift.com or email me at sheldon.k@pohungtoygift.com

Thanks for your time