There are many reasons for this phenomenon to include the following:

Bottom Line – For most businesses, the first and foremost consideration [...]]]> Outsourcing has remained a growing field through good economic times and bad. What makes this such an attractive option to businesses worldwide? What is it about the Asian economies that make them such outsourcing magnets?

There are many reasons for this phenomenon to include the following:

Bottom Line – For most businesses, the first and foremost consideration is the bottom line. Put simply, outsourcing makes the bottom line look good. It offers various cost savings such as a reduction in fixed costs, lower labor costs and savings in research and development. The services and goods offered by such businesses then cost less. As the benefits of the cost savings can be passed on to the public, firms that outsource then have an edge over the competition.

Availability of Labor – Often businesses find it difficult to get a talented workforce that can meet the skills required for their operations without excessive drain on their finances. The large, skilled workforce available in Asian economies makes outsourcing a very attractive choice.

Regain Focus – A lot of the routine work involved in the day to day operation of a business such as accounting often has nothing to do with the product or services offered by the business. Even services such as customer support that are crucial to a company’s product lines can be a heavy financial burden on the company. By taking on these routine tasks, outsourcing allows a company to regain its focus on its core operations

Target New Markets – Outsourcing to Asia has helped several businesses to break into new markets that they had no access to earlier. Outsourcing helps build awareness about the company in the target markets, and it can give great exposure to the products and services that the company can provide to consumers in these new markets.

Customized Services – Outsourcing in emerging markets often offers companies a way to explore the possible customization of services and products for those markets and eventually grab a foothold in them.

A combination of these factors and others have made outsourcing to Asia such a great success that many businesses are turning to this option in an effort to be competitive in the face of such stiff opposition at home.

Every nation has many advocates for keeping jobs within the [...]]]> Most people are aware of the negative buzz that outsourcing is creating – particularly in these days of high unemployment. Outsourcing to Asia – especially to countries such as China, India and Philippines has generated some controversy in recent years. Is it really bad for jobs?

Every nation has many advocates for keeping jobs within the country, and when people see the rising numbers of unemployed white collar professionals; it may seem like a good thing to oppose outsourcing. But is this really the best thing to do? The answers to this question can be arrived at by taking another look at why organizations opt for outsourcing in the first place and why, even in these days of fiscal turmoil, organizations worldwide are still resorting to outsourcing.

Contrary to popular perception as being a phenomenon of the information age, outsourcing has always been around. Industries have often chosen to outsource a part of their work for various reasons, the most common of which are lack of in-house expertise and cost-effectiveness. Outsourcing of manufacturing and blue-collar jobs has long been an accepted practice; but with the increasing globalization of services and business operations, many white-collar jobs have been outsourced to Asia too. This has come as a shock to many people who have been ardent supporters of outsourcing. The flight of high-value and high-paying jobs, coupled with the slow rate of regeneration of such jobs, has brought home the fact that this aspect of globalization is not really palatable to most people.

The cry for stopping this flight of jobs has been getting louder, but there is no gainsaying the fact that there are definite benefits to be gained from outsourcing work – it can bring lower the operating costs for one thing, and the end result can be reduced costs of goods and services with a concurrent increase in the purchasing power of consumers. The diversity and savings it brings can make companies more competitive, spawn entire new industries and boost the economy in time in various ways that are not apparent in the short term.

Furthermore, the jobs that have been outsourced are a source of prosperity and upward mobility to many skilled beneficiaries in these Asian countries. These beneficiaries in turn provide new markets. For businesses that outsource, it is a win-win situation too, as they have access to a vast pool of skilled labor that may not have parallels in their own country and more consumers to buy their products.

Of course, nobody wants to be an outsourcing statistic. Such workers have to either be retrained to get other well-paying jobs or to spend a long time on unemployment because similar jobs are not being generated at the same place or pace as they are being lost. Until the worldwide economy picks up strongly, the cry over outsourcing to Asia is unlikely to subside.

China, like the rest of the world, has adopted the metric system. The US is just one of the few countries that have not put it into full practice [...]]]> When giving specifications for a product, it is best to give everything in metrics. Doing so will make things simpler, easier and reduce the chances of error.

China, like the rest of the world, has adopted the metric system. The US is just one of the few countries that have not put it into full practice yet. While it is possible to use US measurements, there are almost no advantages to doing so but many potential pitfalls.

With the US still the largest economy in the world and the entity asking for the production the customer, Chinese or other overseas factories are often willing to accept specifications and measurements given in US units. However, keep in mind that this may be the only time that the people at the factory have encountered US measurements and thus they do not have any experience with them.

Usually, the factory will simply convert everything to metrics for internal use and then convert back to US measurements when contacting the customer. This creates another layer of complexity though and increases the chances of mistakes. There is also a greater chance of misunderstandings since people overseas looking at US measurements have no inner sense of what inches or other US measurements represent.

With this in mind and the fact that the metric system is fundamentally more rational and easy to use, it is almost certainly best to simply convert everything to metrics when giving specifications. This will save time and reduce complexity.

Also, metrics have made some inroads in the US so most Americans at least have a concept of what they are and how they work. The same cannot be said for US measurements overseas. It often makes the most sense to only use metrics for products. There is no reason to use two systems when one will do.

In short, metrics make the sourcing process easier, reduce the chances of error and should be used whenever possible.

With English the dominant language of international business, it is [...]]]> Language is often an issue when doing business overseas. While the vast majority of manufacturers in China and other Asian nations that do business overseas have one or more English speaking staffers, steps still should be taken to ensure language differences do not cause any problems.

With English the dominant language of international business, it is generally assumed that business negotiations will be carried out in English. However, English ability overseas varies greatly with each nation. For example, while many in Singapore speak English at a native-speaker level, the English level of the average person in China is much lower.

Even in a nation where the level of English is low, it is not unreasonable to expect there to be at least one person at the company who can converse in English. In fact, the lack of any English speaking staff should be taken as a warning that the manufacturer does not have any international experience. However, one should keep in mind the difficulties of learning a foreign language when communicating.

To avoid communication problems, keep specifications, instructions and any other communications as clear and to the point as possible. Use numbered lists to communicate specifications where practical. Since specifications will sometimes change as manufacturing and other design issues are taken into consideration, it is advisable to keep a master list containing all the specifications and that is always updated with any changes. Confirm the entire list before making the samples or going into a production run.

Considering even those with a good mastery of a foreign language can sometimes misunderstand things without evening knowing it, and that written translation rates are usually reasonable, it may be a good idea to hire a translation service to translate the final specifications into Chinese.

A sample can be worth a thousand words. Whenever possible, sending samples and pictures can be the best way to break down language barriers and insure there have not been misunderstandings when communicating specifications.

When negotiating, keep in mind that the person who speaks English best is probably not the decision maker. Keep orientated towards the decision maker who is likely an older person who may not speak much English.

When hiring an interpreter, make sure the interpreter understands the vocabulary of the industry of the product being sourced.

Also, do not assume that the other side does not understand English and say something they should not hear in front of them. Often, they understand more than they show and sometimes use it as a negotiating tactic.

The same tactic can by used if a member of the sourcing team speaks Chinese. Since most westerners do not speak Chinese, the manufacturer will often assume nobody does and may say things openly in Chinese they do not want the other side to know.

While language does pose some challenges, they can usually be overcome by taking relatively simple precautions.

The amount that can be invested in production is [...]]]> When sourcing an order with a Chinese or other overseas factory, a major decision is the size of the production run. Numerous factors need to be taken into consideration when deciding the size of an order. The following is a look at some of these factors.

The amount that can be invested in production is an obvious factor. With economies of scale, it is best the place the largest order one can afford to get the lowest unit cost. Up to a point, the larger the order the lower the unit cost. Also, shipping and other costs tend to be less when ordering in bulk. Shipping by full container gives the best rates. These factors need to be balanced with storage costs, projected sales and the amount the organization buying the product wants to invest.

One factor when deciding the size of a production run is trust in the manufacturer. Sampling is not always a clear indication of the quality of work a factory will ultimately produce. Until the manufacturer has demonstrated they produce quality work on a consistent basis, it is prudent to limit exposure in any single production run and source in smaller quantities.

Time will also dictate how large a production run should be. When time is limited, it is sometimes necessary to do a run that is smaller than would otherwise be optimal.

Setting up a production run requires time and money. Machines and parts often need to be purchased, workers trained and factory floor space set aside. If the manufacturer does not believe the order quantity will generate enough profit to make the production set-up worthwhile, they will simply refuse to take the order. Therefore, while there are a few products that can be ordered by the hundreds, the vast majority require production runs in the thousands, tens of thousands or more.

Suppliers are also often a factor. Buying on the open market is usually considerably more expensive, so materials need to be purchased in bulk from suppliers. Even if a manufacturer is willing to do a smaller run, they may have to purchase materials in much larger quantities than needed for the production run. Since manufacturers are rarely willing to store materials, any leftover materials will be considered waste and will add to unit costs.

The type of product is also a major factor to consider when deciding on the quantity of product to order. Some products, such as plastics, need molds and therefore require some of the largest production runs. Not only does the mold need to be produced, which usually requires a significant investment, but the materials for the plastic must be purchased in bulk. Furthermore, machines need to be set-up to produce the mold.

Molds and tooling are major factors in determining production runs. Since they usually require a significant investment, a larger order quantity may be needed to allocate the set-up costs over more units. If the purchaser is planning future orders to recoup these costs, they should stipulate they will own the tooling.

On the other hand, products such as bags are easier to source and their production runs tend to be less complicated to set-up. They can sometimes be ordered in much smaller quantities.

While every product is different, carefully considering these factors will help in deciding the quantity of a product to order with the factory.