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Manufacturing cheaper in China? Not necessarily

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Too many Australian business owners mistakenly believe as a matter of course that manufacturing is cheaper in China.

And why wouldn’t they? The message from the Australian companies has been shouted loud and clear – the cost of doing business here is simply way too high.

Yet, this belief belies the success of one Australian company which has set about to reinvigorate investment in local manufacturing.

Sevaan Group CEO Tony Panrucker said he has one simple question for Australian manufacturers and clients of manufacturers: What are the benefits really of sourcing manufacture in China?

“The inherent risks are so profound it is somewhat confusing why so many companies in Australia blindly accept outsourcing to Chinese manufacturers as some sort of destiny – almost as a default culture,” Panrucker said.

Panrucker believes Australian manufacturers are suffering from a blindly habitual belief that China is the only way to go because dealing with Australian design/engineering companies is too expensive.

“But in reality, how many of us have really looked around locally to find a suitable solution? The answer to this is probably ‘very very few’; but the ones that have normally found the right supplier domestically and can attest to the various risks which actually make China an unattractive risk if the manufacturing supply chain,” Panrucker said.

“For instance, particularly when you’re dealing with orders from China that involve bulk supply, what in effect is happening is the Australia-based client is absorbing weeks and weeks of lead time even on a perfect run. When problems arise it could actually add months to your order and wreck an entire supply chain and contractual arrangement,” he said.

“Even though the unit price might be a little bit higher, speed of delivery is incomparable, standards to which we manufacture are far superior and constant, and the potential for delay in delivery is almost non-existent,” Panrucker said, adding that through proper business analysis, in almost all cases orders can be facilitated locally.

Sevaan Group itself has expanded nationally and internationally by investing in high-tech engineering equipment on its production floor, expert personnel and the recent establishment of its own grit blasting plant and upgraded powder coating facility in Sydney.

In the last two years, Sevaan Group says has brought back to Australia various orders which had been outsourced to China by many of our industries including mining and construction, railways, public works, the Defence industry and general engineering.

5 COMMENTS

  1. Having done product development and manufactured my plastic packaging products in China, I can vouch that it is not cheaper in China compared to Australia. Incidence of poor quality products and mistakes made by China manufacturers are extremely high no matter how careful you are in communicating with them. I would add at least a additional 30% to buffer for mistakes.

    I discovered this very early on and have firmly decided to move all manufacturing to Australia instead. After alot of research, I finally found a suitable supplier and the production cost was actually very much cheaper than China!
    However, the biggest problem I found was that there’s a severe lack of information on where to find suppliers. For China, you have a comprehensive website like alibaba where you can find just about anything you need from plastics to machines.
    Unfortunately in Australia, supplier information is very fragmented, some of the suppliers don’t even have a website or are slow or not responsive to enquiries.
    A simple solution to boost manufacturing is to have a website like alibaba for Australia. Not only will Australian manufacturers benefit from domestic orders but from overseas as well.
    Hope this is useful to anyone who’s considering between China & Australia.

  2. Pearl, I don’t know how you went about sourcing from China, but I can tell you that in Hornet Group’s experience there’s nothing like a 30% wastage rate! Then again, we don’t use Alibaba, we consider them a competitor. We have staff on the ground in China and we conduct quality checks and pre-shipment inspections rather than rely on samples, which tend to be prepared with extra care whatever country the factory’s in!
    Funnily enough, recent Made in Australia research (http://www.australianmade.com.au/media/299174/1309_corporate_research_summary.pdf) cites lack of availability as the second largest reason companies don’t have a policy of buying Australian, and it’s only 1% behind price. Backs up our experience, as so many companies come to us knowing what they want to source, but unable to find a supplier.

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