American and Western European companies consider China the quintessential supplier of components or finished goods, whether shoes, general household items and most especially clothing materials. The United States has always privileged its southern neighbors in outsourcing processes, while Western European countries frequently sought out the central and eastern nations of the old continent. However, China, due to its abundant and productive workforce, low wages and excellent shipping conditions, has become everyone’s favorite destination for outsourcing. If you want wholesale plus size clothing suppliers, they have some specialized industry for that category.
Among the countries with cheap labor, Chinese production stands out as the largest of all – and also as the fastest growing. What makes China so attractive, and how should companies choose the best destination for outsourcing different parts of its value chain?
Outsourcing in low cost countries
The globalization of outsourcing and the shift of production from expensive countries to cheap countries is the new reality. High-cost countries still have a large share of textile production and clothing manufacturing, but that portion will also migrate to cheap countries. Thanks to its size and its growth rate, the migration towards China will be fabulous.
Low-cost countries can be divided into two types. Countries considered close are those in which the wage rate is three to five times higher than that of China, but the distance from the target country is smaller. In the case of products that require complex logistics or less labor, these countries remain the best option. The other type of cheap country is, in general, further away, but it offers much lower costs and is therefore considered competitive.
Most companies prefer to target low-cost countries for outsourcing for this reason and among others: Labor – this is one of the main reasons, because the objective is to save on direct costs. There is also the issue of talent and the possibility of accessing the domestic markets of the countries targeted by outsourcing. For many companies, the Chinese population, of 1.3 billion, represents a consumer base that no one can overlook.
The beauty of outsourcing in China
When it comes to outsourcing products with a high labor content, China’s extremely low wage rate is an obvious advantage. However, there is also no lack of technical competence. China trains many engineers and has numerous PhDs. graduates inside and outside the country. Therefore, there are competent professionals for the positions that require greater qualification.
The favorable industrial policies practiced by China are another important factor: The government is very flexible; the tax structure is advanced and there are tax benefits for exported products. In addition to the low wage rate, the Chinese workforce has attractive features: Companies have a highly mobile, highly productive and largely non-unionized workforce, combined with a rigid and disciplined work ethic. They have best fitness apparel manufacturers among the country.
Setbacks in outsourcing from China
The disadvantage, in this case, is of course the cost of labor. The cost of labor in China is one or two dollars an hour, and the supply is huge.
Although cheap countries have advantages in terms of labor and require less capital investment due to the use of simpler machines, there may also be numerous disadvantages. Customs taxation and administrative costs, for example, can be high.