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Real Costs of China Sourcing: Know Before You Go

Unquestionably, China sourcing looms large for American importers. Even if we didn’t know the numbers, we can see that truth every time we shop. In fact, about one-fifth of U.S. imports are sourced in China, although it is true that several categories loom very large (electrical and other machinery, furniture, outdoor equipment, and plastic parts).

Walmart, of course, is everyone’s iconic example of a great U.S. business empire built on Chinese imports (more than three-quarters of Walmart goods) because Walmart is about volume and price—and price is the usual allure for “going to China.”

But the “price” an American firm pays for goods made in China can be far less important than the “costs”—fully and honestly calculated. Those costs are not as easy to ascertain as a price on a sticker, but Carepac attaches real importance to calculating it. And one consequence is that at Carepac, today, we emphasize in-house production in all phases of packaging design, planning, and production.

Here is a look at why we do that.

 

Packaging is not all about price

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Many buyers new to packaging approach it as a kind of afterthought—something you worry about when your product is “ready.”  Because innovative, distinctive packaging is our business, we know that the right packaging can make the difference in preserving quality, in packing and transportation costs, and, above all, the crucial point-of-sale impact of your product. Packaging is about your brand and the impression it makes not once but every time.

 

Some real costs of “going to China”

Granted the benefits of “going to China” for some companies of a given size, doing a given volume of business in certain product lines, you also must face the true costs–monetary and otherwise.

 

China Sourcing Lead times

For example, even after you locate and vet a supplier in China, there is a lead-time of 8-12 weeks (in ordinary times”) between placing an order and receiving your goods. Today, though, given the impact of COVID-19 restrictions and delays at U.S. and international ports of entry, shipping time may add 45 days, or, in the worst case, as much as 75 days. We can hope that this situation clears up, in due course, but given the long-term politics of U.S.-China relations, another crisis cannot be ruled out.

 

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The communications barrier

Many Chinese are ardent businessmen, who work to accommodate their buyers, but a significant language barrier remains. You will not only deal with the sales representative who takes your order (and gives you that “price” you love) but, as questions arise about shipping, insurance, production, costs and billing, and, yes, packaging, communication becomes, as we know, the key to efficiency, quality, and a good supplier-buyer relationship. All this depends upon coping not once but over and over again with the challenge of communication.

This article is not about Walmart, of course, but in a sense Walmart’s success actually reinforces this point. Walmart built a vast infrastructure and staffing in China on its road to success, and, of course, now has Walmart stores all over China. That is a solution to the communication problem that most of us do not enjoy.

 

Real-time contact for troubleshooting

We all know about those times when a question must be answered right now–or a change in instructions must be communicated as soon as feasible. U.S. buyers are not in the same time zone as China, of course, so work hours do not automatically overlap—not even close. Do you have someone you can reach at your China supplier any time during your workday?

 

Tariffs and shipping costs

In addition to these supposed non-monetary costs, there are costs that may be hidden from the new potential buyer who is getting a price from a Chinese supplier. For example, tariff costs of importing your goods—tariffs substantially increased during the Trump administration—can approach one-third of their value. Obviously, this must be taken into account in any projection of your actually costs.

A related cost that always is involved in sourcing from abroad is shipping. Depending upon volume and weight of what you purchase in China, these costs become significant because they are repeated perhaps many times a year.

To lend some perspective, the table on this page shows you costs of a stand-up pouch for packaging your product along with the specifications for the job. This is our business, so we give you our unit price for a bag ($0.10) when your order 50,000 bags. Since we design your bag with you, from the start, including exactly the colors you select, we also give a printing plate costs per color. The total price is $5,000 plus $150 per color plate (up to full four color).

Now, add to that price what it would cost to ship this order from China (we also can match or better the manufacturing price in China).  Shipping by boat (estimated time 45 days) to Austin, TX, and inclusion of tax and customs), adds $2,400 to your costs for a total “price” of $7,400. (Note: with typically high minimum order quantities (MOQ) in purchasing from China, you might be constrained to make a larger order.)

 

When the order arrives

When your bags are delivered from China (which is likely the first time you see the actual product), what if they are defective? Say, the printing is misaligned or blurred your bags don’t close well? Are you sure that you have adequate recourse with your Chinese supplier, even given that you are willing to wait through the new lead time and shipping lag?

 

The Carepac commitment to in-house production

These are just some considerations that over the years have caused Carepac to put a high premium on in-house production, where we have optimal control over design, materials, manufacturing machinery and processes, quality control, and overall production scheduling to meet deadlines.

Your first step in discovering what the Carepac process can mean to you is to visit our website for an instant quote. Then, talk to our team of packaging experts about how Carepac can manage your packaging needs from design to manufacturing to quality control to shipping. We will discuss the real costs to you and how we guarantee quality and satisfaction.

Be sure to check back here regularly for information, insights, and updates and a wealth of information about creating packaging the protects your product, keeps your price down, and impresses your customer at point of sale.

And join us any day on Twitter for new offers and new insights into what packaging can mean to your business.

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