WHY SOURCE OFF-SHORE?

We need to respect China

But

Not be intimidated by China!!

 

FOR EXAMPLE

 

Costing comparisons between China and / or India and Australia will be cheaper, but, how much cheaper?

 

CURRENT COST (China) REALITY COST (China)

Quoted Piece Price

Freight (slow)

Additional Inventory Carry Cost

Safety Stock for Uninterrupted Supply

Expedited supply (air freight etc.)

Warranty Claims

Engineers Visits

Project Management + Visits

Senior Executives Negotiating Visits

Stock outs / Long Lead-time Items

Supplier Soon Becoming Competitor

Currency Risk Movements

Political Instabilities

Information Flows

Engineering Changes / Running Changes / Breakpoint Control

Receiving Quality Control Issues

 

THE REALITY OF CHINA AS A SUPPLIER

The internal growth of China is such that it will certainly lose its ability to supply outside of itself and the USA.

When will Australian volumes become nuisance value whereby China will instruct our companies to resource away from China?

China is now a member of the WTO with an average output in A$ sales per employee of approx. A$30000 per annum. Incorporated in this equation is a distinct lack of Safety Provisions, Employee Amenities, and Employee Entitlements etc.

Australian companies have all of the entitlements in their costing’s and operate with an output in A$ sales per employee of around A$250000 – A$300000 per annum.

When will it be that Chinese hourly rates increase to a level that makes the “Risk Assessment” analysis somewhat daunting to the bean counters?