Did you come up with an amazing business idea, but not sure whether your sourcing skills are on top? Where to find suppliers for your products? Question, that entrepreneurs ask from themselves whenever they start their new business, but not only. Worldwide economic shift has put many companies into position where using their old suppliers is not simply profitable anymore. So where exactly should you supply your needed products and get it for a fair price and quality?
After you have come up with some ideas of your own, you may feel that you have hit the wall. Although there are hundreds of companies selling the product you are sourcing for and many different channels to get in touch with them, it seems not as easy. Here comes the question, how to be sure if the margin you will make is profitable and that also in the future?
Most probably you have already decided that it is cheaper to source your products overseas and by that we mean from Asia, excluding the long loved trading hub China. But which country is for you?
Questions you should consider:
• Product choice
• Reputable manufacturers
• Manufacturing cost
• Manufacturing quality and standards
• Intellectual property protection
• Communication & cultural differences
• Shipping time
• Importation & customs clearance
• Marketing appeal of being made in ..
• Payment security
Sourcing from Vietnam
Vietnams top manufacturing sectors include food processing, textiles, chemicals and electrical goods. The country continues to experience rapid growth after its government’s repeated Five-Year Plans that have benefit Vietnam getting closer to the global marketplace. Vietnam updated its intellectual property laws to comply with the internationally-recognized agreement on trade-related aspects of intellectual property rights in 2006. Since now, it’s upholding copyrights and prevention of counterfeit goods have made it a strong alternative to sourcing from China. However, be prepared that Vietnamese do strike differently from Chinese and that does cause delays in manufacturing.
Sourcing from Thailand
Thailand’s manufacturing sectors include cars, computer components, chemicals and food processing similarly to Vietnam. Country has experiences rapid growth between 1985-1996 and is the world’s second largest producer of hard disk drives. While productivity increased 2/3, wages have been remained about the same during the last 10-year period. Nevertheless, Thailand has relatively high minimum wage (274 USD per month) that makes it less attractive option. However, Thailand’s government is planning a major infrastructure upgrade over next 7-year period, benefitting trading opportunities logistically. New rail lines that replace trucking and plan to link up Thailand and China.
Sourcing from Malaysia
Malaysia is a major exporter of consumer electronics, electrical components and cars. Exporters in Malaysia benefit from no value added tax, as compared to a tax of 17% normally levied on exports from China. Malaysia ranks also worlds 6th in ease of doing business, scored 1st in easy credit and 5th in cross-border trade. Geography offers significant advantages for shipping goods. However, high wages (800 USD per month) do not benefit low cost production.
Sourcing from Indonesia
Indonesia is a major exporter of palm oil and coal. Exporters can benefit from low currency exchange rate. The local rupiah has fallen 13 percent against the U.S dollar. Indonesian government is upgrading its infrastructure, including 24 of the nation’s ports. However, Indonesia’s geographic location presents risk to logistics and production due to its 130 volcanoes etc.
Sourcing from the Philippines
The Philippines is major exporter of semiconductors, electronics, transport equipment and garments. One of the biggest advantage for everybody in international business is that English is one of the two official languages! That frees foreigners from any communication barriers. However, there are major setbacks when it comes to infrastructure and logistics. Only 25% of roads are paved and numerous vessels get attacked and hijacked.
Southeast Asia offers alternative options over sourcing from China. However, decision where to source depends on your unique sourcing needs. Before making sharp decisions and focusing on price, be sure your choice will be cost effective in long term. If you feel like you have hit the wall, feel free to contact us in order to find the best product for your needs.
If you have decided to make any business on your own, read our Top 5 Scams Foreign Companies Fall for in China to avoid unpleasant surprises.