« Before deciding to relocate production to China, companies need to consider the actual and global costs of outsourcing… »
In this newsletter, we will present an overview of the current state of production outsourcing costs to China.
We will also look into a new phenomenon that popped up on the web and is creating quite a buzz: crowd funding or crowd financing.
The real cost of outsourcing your manufacturing to China
Before deciding to relocate production to China, companies need to consider the actual and global costs of outsourcing, especially since Chinese labor wages are not as low as they once were; from 2003 to 2008, wages increased by 117%.
According to a study conducted by Deloitte on the manufacturing sector, it’s imperative to consider the total cost of ownership. In addition to manufacturing costs, the exchange rate, transportation costs, risk of delays and penalties, costs of intermediaries, as well as travelling costs to and from China need to be considered as well. Finally, the environmental impacts should also be considered given the increasing trend towards minimizing environmental footprints.
In an article from the daily Montreal newspaper La presse, journalist Hélène Baril writes:
…a product manufactured in Quebec for $16.95 can be made in China for $8.75. This difference of 48% can be reduced to only 6% by taking into account the total cost of ownership. (translated from its original French version)
Online crowd funding: going from a dream to a product.
A new phenomenon has popped up on the web and is creating quite a buzz: crowd funding or crowd financing for artists, designers, inventors and creators of all sorts.
Inventors will often consult industrial designers to refine and develop their ideas or inventions. Sometimes, if not quite often, lack of funds hinder further development of a product, a crucial step needed to market the invention. This applies to many designers and creators as well, both of whom develop a well-designed product simply to come short of the funds needed to market and distribute the product, a cost which actually far exceeds the actual costs of research and development of the product itself.
The budget for marketing a product is estimated at nearly four times the cost of actually developing the product.
Traditional financial institutions remain cautious at the idea of lending money to finance new product R&D and marketing projects, especially for individual or startup companies or inventors. In Canada, there are venture capital banks (for example the BDC – Business Development Bank of Canada), which are more open to investing in innovation, but the fact remains that the financial statements must demonstrate the profitability of the company or of its business model.
To overcome this phenomenon, Kickstarter, a crowd funding web portal (or a funding platform for creative projects – as their slogan states) was hatched in the United States a few years ago and its success is undeniable. Since its creation, several similar platforms have been popping up all over the web. These platforms, which are more or less based on the same idea, allow artists, designers, inventors and creators alike, to raise money for a product, service or project through donations or micro-investments by individuals.
Here are a few of the most popular crowd funding websites:
Up to the minute…
At the 2012 Alpha Gala, organized by the Ville St-Laurent Chamber of Commerce and Industry (CCSTL), Skerpa design was nominated in two categories : Business services – less than 10 people (Services aux entreprise – moins de 10 personnes) and Human Resources Management (Gestion des ressources humaines). The winners were, respectivly, Stack 8 and IMS. Congratualtions to all the winners.