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An Original Equipment Market (OEM) Company is one that supplies a part used in another company’s end product. Increasingly, many companies abroad choose to outsource some of its operations to China, where often manufacturing is cheaper and more efficient.
Although careful consideration must be given when deciding upon which OEM Company to choose, as the companies may differ in standards, quality, and procedures. Increasingly US and European firms are beginning to choose OEM companies in China, not just because of cost cutting strategies but because of competitive advantages that OEM companies from China offer. Manufacturing in China has begun to slow in recent year as the country begins to shift from more of a manufacturing-based economy to a service based economy, wages have also begun to increase in China. But the country still remains a very competitive location for foreign companies to enter into contracts with OEM’s , as they offer other competitive advantages in addition to just low prices.
The OEM Company
The OEM manufacturing company in China specialises in producing one particular product or part of a product, which allows that company to produce this item at a low cost and at a competitive price. This allows companies from abroad to enter into very competitive contracts with these OEM Companies in China to supply a certain product or part at a competitive price. However, careful consideration must be given when choosing an OEM company, as it will play a vital role in the production of a product.
Choosing the correct OEM Company is vital to the success of the business, as a result the owner or a trusted advisor should visit the OEM Company in China to visit the operations in person, as in many cases the OEM Company may differ significantly from pictures and websites. A visit to the plant will also allow you to gain an insider’s perspective to this company and how it operates.
Things to consider when choosing an OEM company in China:
A number of factors should be considered when choosing an OEM company in China, and the hiring company should ensure the company is the right fit for the job to be done. It is important that the right supplier is selected at the start to ensure the relationship between a supplier in China and buyer abroad is effective and efficient.
Another important consideration to take into account is the experience and quality of service of the OEM Company. Research should be carried out to ensure the OEM Company has experience dealing with overseas suppliers and the hiring company should seek references to ensure that previous contracts were successful and that the overseas company was satisfied with the quality of service. Ensure that the OEM Company can be trusted and will fulfil the contract as arranged, if there are uncertainties there are numerous OEM suppliers in China, so seek another supplier. There are over 10,000 OEM suppliers in the Guangdong province alone, so be sure to carry out research on the OEM and ensure you are satisfied with the company you choose.The language barrier between overseas and Chinese businesses may also be an issue so before contracts have been signed it should be clear to both parties of the arrangement and any language barrier difficulties should be clarified, a common language will allow the contract to be fulfilled most efficiently.
Daxue has helped several firms in the manufacturing industry to the automotive industry to the mobile phone market, with an optimization of all the business aspects, from the strategy of the brand to the development of the product. In addition to those help in strategic moves, Daxue can bring its exclusive knowledge and expertise related to business expansion and market entry. Fundamental decisions have to be taken carefully with the evolution of technology trends and the regulatory insights of China’s local market.
Safety Standards and Corporate Social Responsibility
After securing a reliable OEM, the hiring company needs to ensure that the OEM Company’s ethics and vision are aligned with their own. There have been numerous cases of negative attention on brands by choosing to enter contracts with unethical OEM companies, this can have severe negative impacts on the brand. Working conditions in China are less regulated than the EU and the US, in many cases workers are taken advantage of and forced to work extreme hours at very low pay. This is unfair and unethical, the hiring company must take responsibility and refuse to enter into contracts with unethical OEM’s. In a recent BBC Panorama Investigation, it was revealed that 14 workers had committed suicide at the Foxconn plant in Shenzhen due to long working hours and poor living conditions. Apple used Foxconn as a supplier and as a result, Apple received large amounts of negative media attention. The hiring company should ensure that the OEM Company is providing workers with respectable living conditions and wages to allow workers to live a decent level of quality of life. Corporate social responsibility of the OEM Company should be a vital factor to consider when deciding upon the OEM Company.
The OEM Company in China provides a very competitive service to companies coming from the US and EU looking for products and parts to be produced cheaply and efficiently to a high standard. Many OEM’s in China provide a high-quality service and product, but there are also a number of OEM Companies who may be unreliable and not the right fit for the hiring company. As a result, it is important that the hiring company carefully researches suppliers to ensure they can provide a product or part to their specification in a timely and ethical manner at competitive prices.
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