MITA Presentation - Recommendations II

I covered the first three recommendations for responding to cost increases from China in an earlier post. Here are the remaining four.

First, you can choose to add more value in China. We have customers that are responding by moving up the value chain from component sourcing to having sub-assemblies made in China. This allows for additional labor savings and improves leverage if current suppliers can also perform some assembly.

The next option is to make design or BOM changes to find cost savings. Customers are now motivated to test whether locally available materials in China can be substituted for their currently specified materials. We are helping by stepping up our efforts to help our factories with global sourcing initiatives. We often can find electrical components less expensively in other countries and export them to our factory partners in China.

Getting input from Chinese suppliers on what design changes can have significant cost impact is a great strategy. Something you think has little impact on cost may be a large driver due to special set-up requirements or other issues. Ask and learn.

Finally, finding ways to save on logistics costs is an opportunity for most importers. As a program grows we often find customers paying much more for freight than they hoped because their planning is not good. Being more intentional with order planning really helps avoid the very costly express shipments and rush orders.

We'll get back to trends in Chinese outsourcing next.