For many years, consumers took the label “Made in China” for granted: few questioned the quality and were often only attracted to the inexpensive price.
Consumers are now scrutinizing what it means when a product is “Made in China” and asking questions like: Is it really inexpensive? Am I getting a quality product? And most importantly; Is “Made in China” and of the goods made across the Pacific, despite their price, are really worth it.
Historically, consumers have always wondered why everything sold in American stores seemed to be made in China, and the short answer is: it was cheaper. Companies are in business to make a profit, and the best way to cut the margins was to look for the most cost-efficient deal possible. And in most cases with most companies, that meant going to China.
When the North American Free Trade Agreement was passed in 1992, it changed the landscape for manufacturing goods in the United States. Companies now had the option to have their goods made closer to home (called “Nearshoring”) in Canada or Mexico and enjoy the same cost efficiencies without the bother of having goods sent overseas.
To compete with Manufacturing in Mexico and North America, according to manufacturing agent Michael Diliberto, Chinese manufacturers had to cut corners to turn out the cheapest product.
“First, and foremost, Chinese domestic manufacturers generally go for either the best product or the cheapest product. So, if you are not making the best, you are racing to the bottom to make the cheapest. Consumers looking at products from China are not generally looking at quality; it is assumed that if you want quality, then you buy the best one; otherwise just buy the cheap one. Manufacturers, especially in China, are not rewarded for making incrementally better products.”
Consumers Paying Extra for Any Quality
The practice of cutting corners when manufacturing to produce the cheapest goods saves money for the company in the short run, but it also has a counterbalancing effect: if quality products are important to the company (as most are), the company will have to pay extra for it to be produced, and inevitably this cost will either:
1. Eat into your product profits
2. Be passed back to the consumer, or this cost will be passed back to the consumer.
According to The Economist: “But with virtually everything made in China now, competition is no longer about quality–it’s only about price. Where’s the competition in quality when everything is made in China? There isn’t any; the quality is low regardless of the brand on the device, tool or appliance. The conclusion pretty much boils down to the simple rule: you get what you pay for. In the case of “Made in China” it also means that that it is no longer the most cost-effective option. “
Tariff and Duty Costs
And let’s not forget tariffs: No matter what kind of quality you get from China, you will pay a tariff for it: right now the tariff for goods from China can run as high as 25 percent depending the type of item being imported. Thanks to NAFTA, there are no tariffs. There is no cost passed off to the consumer.
Why Mexico is Better
Nearshore manufacturing companies like NovaLink understand that most manufacturers don’t want to cut costs, which why we offer the solution of manufacturing in Mexico vs China. The advantages of this are numerous:
Goods can be shipped from the factory floor in Mexico to North America in under a single day, as the road and rail network within the three NAFTA countries is good. To ship from China to North America, however, might include several weeks.
Stability of Wages
Wages in Mexico are among the most stable in the world; that stability is very attractive to companies considering a long-term investment in a nearshore manufacturing partnership. Similarly, factory wages in China have grown markedly over the past 6-8 years, with some regions of China have seen labor wage increases of up to 20% per year.
The NAFTA Advantage
Companies appreciate the advantage of manufacturing in Mexico as goods produced or assembled in Mexico can enter the US and Canada for free.
Conclusion: Don’t Fall for the Chinese Manufacturing Deception…
…unless good quality, cost efficient labor, proximity and a trade policy with the US doesn’t mean anything to you. Contact NovaLink for a free consultation today and discover how you can move manufacturing out of China.