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A Guide to Production Costs

ChinaSavvy, based near the industrial heart of China, is able to deliver production costs that are surpassed by none. Because we are based in China, you can benefit from low production costs as well as numerous factors that affect these costs, such as labor and machinery.

Factors that influence cost of production and how China competes

Noted below are some of the main factors that influence the cost of production:

  1. Capital Costs
  2. Factory infrastructure
  3. Overheads
  4. Direct Costs
  5. Margins

 

Taking these factors into consideration, one can see that China production costs are low for the following reasons:

Capital Costs

A number of capital costs influence the total cost of production. Some of these costs include machinery, equipment and tooling.

In China, the cost of both machinery and equipment is lower when compared to other other countries, while tooling costs in China is much lower.

With lower capital costs, China manufacturers are capable of delivering high quality products without the high cost associated with machinery, tooling and equipment.

Factory infrastructure

China offers numerous benefits in this category, ranging from a much lower cost of industrial real estate in China, to subsidies from provincial governments.

Power (or energy) costs are typically the same as you would find in the West, but construction costs are lower. Combining lower real estate costs, subsidies from provincial governments and lower construction costs, factories in China have a much lower infrastructure cost, in turn, helping to reduce the costs associated with production.

Overheads

The ongoing expenses associated with running a business does impact the cost of production, with higher overheads driving costs up. In China however, these overheads are low, and in turn helping to drive the cost of production down.

With lower labor costs as well as lower insurance and general overhead costs, manufacturers in China are able to keep production costs lower than Western manufacturers.

Direct Costs

Costs that will directly influence your production costs include both labor as well as the cost of raw materials.

Though raw material cost are generally the same as in seen in the West, China does offer low labor costs (which is about a fifth of labor costs in the US). This lower cost of labor effectively aids in reducing direct costs, positively affecting direct costs in you favor.

Margins

One of the biggest factors that influence the cost of production, China manufacturers, in general, look for much lower margins when compared to the West.

Margins, combined with lower capital costs, a lower infrastructure cost, lower overheads and lower direct costs, effectively makes China manufacturers the best option in how to reduce production costs.

Working with ChinaSavvy, a company that operates to ISO 9001:2008 standards, you can be sure that all our products and services meet Western quality standards. Having our own assembly operation, located in Dongguan, we are capable of delivering products at the most cost-effective price possible.

Combined with China’s low labor costs, China also offers an incredible manufacturing supply chain and infrastructure. Factories in China feature the newest technologies and high tech manufacturing equipment from Japan, Germany and the U.S.

Using this boom in manufacturing and engineering, ChinaSavvy not only utilizes all the manufacturing opportunities China can offer, but combines it with an unsurpassed understanding of Western quality standards and needs.

ChinaSavvy offers professional quality control and testing ranging from a pre-manufacturing evaluation to a final check before shipment.

We have access to a wide number of suppliers, giving our team the edge to source the most competitively priced materials and components, helping you reduce production costs.

ChinaSavvy also boasts a highly experienced, Western-managed engineer and quality control team, which means that not only will you benefit from the most effective product design service, but the most cost-effective one as well.

Providing quality engineering and manufacturing security, ChinaSavvy is able to help you effectively reduce your production costs and meet Western standards, all without having to sacrifice on quality.

You can also learn more about the potential benefits associated with shipping from China, as well as our range of expert industrial services.

 

Back to Main Page: Materials and Processes.

Further Suggested Reading:

 

 

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