Sourcing from India vs China
For a long time now, China has been the world’s factory chugging out products for global markets. But with recent global developments, including supply chain disruptions, and rising production costs in China, importers are looking at alternative sourcing markets.
With it’s vast labor pool, history of manufacturing, and the government’s push to boost industry and exports, India is emerging as a strong alternative to China.
When considering sourcing in India vs China, there are many important variables to consider ranging from each country’s political climate to their unique manufacturing capabilities. Let’s take a look at some of these different factors to help business owners decide which country makes sense for their firm.
- Artisanal products: The Indian artisan is telling a story highlighting the uniqueness of their products. These are premium handmade products that use natural materials, stand notches above the machine-made products coming out of China that are mass-produced using artificial materials.
- Low MOQ: The Minimum Order Quantity (MOQ) demanded by Chinese manufacturers for orders placed is high. This is to justify mass-produced factory products where per unit costs are competitive over large numbers. On the other hand, handcrafted products from India are customized and the MOQ can be a smaller number working to the advantage of the Amazon seller.
- English advantage: English is commonly spoken across India and is the default language for business. Hence, dealings in India are easier than in China where businesses still deal in local language and English is still not widely spoken. Culturally, Indians are more receptive to Western ideas and culture than the Chinese.
- Niche & eco-friendly products: India has options for beautiful products, indigenously designed with a lot of focus on eco-friendly and natural raw material. Suppliers in India look for new alternative materials like plant-based leather or biodegradable disposable dinnerware.
- Tariffs: When you are sourcing products from China to the US, the tariffs are as high as 25% whereas from India they are less than 5%.
- IP protection: China is known to produce ‘Me Too’ products which are similar to designs of popular Western brands. Hence, there is always a danger for a seller to infringe on intellectual property. India is a safer option with regards to manufacturers respecting buyers’ IP.
- Made-in-India initiative: Government of India has introduced ‘Made-in-India’ initiative to support manufacturing in India. Government guaranteed loans are bringing Covid hit Indian businesses back on track. The overall manufacturing climate is positive to support indigenous products and design innovation.
Perceptions about China
Statistically, China is almost 60% more productive than India. Still, businesses are looking for options outside of China, particularly because of changing perceptions of doing business with the Chinese.
Environmental issues: Air pollution is a major issue in China. Coal burning and using carbon-intensive industries has resulted in the release of greenhouse gasses, water shortage and also soil contamination. This manufacturing-led environmental pollution is not sitting well with consumers concerned about climate issues.
Human rights issues: There is a growing image in the Western world about the ‘sweatshops’ in China where worker safety and humane conditions are not fully observed. This is a huge concern with consumers and human rights organizations who call for boycott of products made in such factories. SA8000 certification is an important and necessary document that guarantees the factory’s responsibility to maintain humane working conditions.
Shifting political ties: China has been having issues with the Western countries for some time now related to international trade and policy. If you are looking for a long term association for production from China, then you are taking a big risk.
Communication: Language can be a barrier in trading with China. In Chinese factories, you would normally speak with sales staff who translate your instructions to the factory workers. The workers only hear the original instruction written in the source document, which can lead to miscommunication, misunderstanding and misinterpretations.
Culture: India as a culture is very warm and accommodating. If you walk through the factory, workers and employees are very open and will look, make eye contact and greet you with a smile. In China, workers in the factory keep to themselves.
Supply chain: In China there may be limited supplier chain transparency. Your raw material suppliers are generally not disclosed to you. Chinese manufacturers might switch raw material suppliers to get better deals.
Challenges of sourcing from India
India is an emerging destination for Amazon suppliers to source from. There are still some challenges in sourcing from India.
- Over promise: Many Indian manufacturers are still struggling to deliver orders on the date promised. There may be delivery delays and therefore it is advised to keep a buffer time when ordering from India.
- Production methods & materials: Some Indian factories are slow to adopt modern manufacturing processes. Some industries like component manufacturing are not fully developed. Unlike China, India does not have a good supply chain management and Indian manufacturers may need to import some materials and components.
- Regionalism: India is a big country and the culture is different in different regions. This affects the working style of people. Don’t risk product manufacturing that is not the regional competence of that area.
Considering its long history as a global manufacturing leader, China is sure to play a central role in companies’ sourcing efforts for years to come. Its well-established manufacturing infrastructure, and expertise aren’t going anywhere fast, and it will no doubt be top-of-mind for companies considering low cost country sourcing.
China does, however, have many challenges to overcome in the years ahead including increasing tensions with global trade partners and rising production costs.
Given recent world events and a multitude of government initiatives that India has committed to in order to strengthen its economy and infrastructure, it seems inevitable that India’s manufacturing sector has a bright future.
Many firms currently sourcing in China are already looking to diversify their manufacturing portfolio by sourcing from India as part of a China-plus-one strategy. Other firms that are just now exploring low cost country sourcing are considering India as a lucrative and in some cases superior option to China.