USEFUL INFO

WHY BUY FROM THE FAR EAST?

• LABOUR

The key difference between the Far East and developed countries is that the cost of labor coupled with the cost of living is far lower. It is this factor which makes manufacturing in the Far East so much cheaper, especially for labor intensive products.

• INFRA-STRUCTURE AND TECHNOLOGY

Due to the huge growth of export out of the Far East over the past decade, billions of dollars have been invested by companies in technologies to make manufacturing more efficient. In addition to this Governments have invested heavily in transport and communication networks making access to and within these countries much easier and more efficient.

IS FAR EAST SOURCING RIGHT FOR MY COMPANY?

• LABOR CONTENT

In the majority of cases, products are cheaper to source in the Far East compared to the Western world. However, the level of price discount depends on the level of labor involved in the cost of the product. Roughly speaking, if the labor cost involved in manufacturing a product is more than 25% of the total product cost there should be a saving by sourcing from the Far East. There are some exceptions to these circumstances so the best way to find out if there are sufficient savings is to request a quotation.

• ORDER VOLUME AND VALUE

Sourcing from the Far East attracts a number of fixed costs making small volume buying non-feasible. These costs include the cost of transportation in the source country, destination country and freight between the two, quality inspections, customs clearance, sample costs, financial transaction fees etc. Even manufacturers set minimum order quantities at a high level to cover their own fixed costs of completing an order.

In order to minimize the impact of these costs, it is ideal to amortize these costs across as many units as possible. Generally speaking a full 20ft container is the minimum buying level needed to optimize Far East sourcing although minimum order levels from manufactures may be lower or higher than this.

When we provide a quotation we give a unit price that includes all of these extra costs so clients can easily compare prices and establish whether Far East sourcing is right for them.

• LEAD TIMES

The lead times for purchasing from the Far East will range from as little as six weeks for simple products up to four months for complex products. Lead times only start from the date that manufacturers receive orders and deposits.

• CASH FLOW

Unless a long term buying relationship has been established with a manufacturer, it is likely that the financial terms of doing business will be tough for a lot of businesses.

In most cases, manufacturers require at least 50% deposit from customers along with an official order before they begin preparing for production. The remaining balance is normally paid when the goods have been handed over to the designated freight forwarder.

Core Solutions do two things to minimize the financial impact and risk of conducting business in the Far East.

Firstly we do not demand higher deposits from our customers that are required by our suppliers.

We merely request the same terms. Secondly we ensure that goods are quality inspected either during or after production to ensure that the goods meet our clients’ specific requirements before any balance funds are paid.

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