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Today many companies are outsourcing their production to China. Probably IT companies have been leading the way while many manufacturers have opted to relocate whole factories. Pharmaceutical companies have been quick to outsource manufacture of intermediate elements to Chinese pharmaceutical enterprises and to move big portions of their manufacured product slate to China, including R & D activities. All this has had mixed results but there is no doubt that more and more companies are eyeing China as the answer to lower production costs and hence bigger profit margins.

It is important to be aware, however, that not all manufactured products are suitable for outsourcing to China and therefore a cautionary approach is essential in order to avoid a disastrous outcome. CAC advises its

clients to, initially, commission a Feasibility Study to determine the suitability of their product to be manufactured in China.Later on the process can move on to obtaining firm quotations, manufactured samples and a limited pre-production run. CAC can arrange all these activities

Ideally the best products are those having a large labour content, high volume and capable of being efficiently shipped in containers but, increasingly, as quality improves and the skills of the Chinese labour force get more sophisticated- while the availability of top class skilled staff in the West dwindles- many more products are becoming eligible to be advantageously outsourced.

Until quite recently, many in the West were of the opinion that China could not manufacture high quality products. This is no longer the case as the range and sophistication of Chinese-made products has taken the world by storm. High quality products are now routinely leaving many production facilities in China. Unfortunately, in such huge and relatively unregulated market, quality is far from uniform and therefore ensuring that the Chinese manufactured products are made to the client's exact specifications and quality requirements is the key factor to achieving a successful manufacture outsourcing to China.

The quality control and inspection budget will be, in most cases, significantly higher than in the West and clients should take this into account when considering the economics of outsourcing.

Finaly, and most important, before concluding any outsourcing agreements, which if they were to go wrong, could create serious diruption to the outsourcer, a serious finacial assessment of the Chinese manufacturers situation sould be carried out. CAC can help in this matter.