Where To Source Products Outside Of China // Pros And Cons Of Top China Manufacturing Alternatives
China has been the epicenter of global manufacturing and product sourcing for years and is known for its cost-effectiveness, scalability, and extensive supplier network. However, businesses are increasingly exploring alternative sourcing destinations in an ever-evolving global economy marked by trade tensions, diversification strategies, and shifting market dynamics. Finding the best countries outside of China to source products has become a strategic imperative for companies looking to mitigate risks, capitalize on new opportunities, and broaden their supply chain resilience.
In this article, we explore the best countries for product sourcing beyond China. Each country offers unique advantages, from labor costs and production quality to logistical efficiencies and trade agreements. Whether it’s the textile mills of Bangladesh, the electronics factories of Vietnam, the auto parts manufacturers of Mexico, or the tech hubs of India, these countries present viable alternatives with their distinct strengths and specialties.
We will delve into the key factors that make these countries attractive for sourcing, including labor market conditions, manufacturing expertise, export infrastructure, and business-friendly environments. Additionally, the article will provide insights into the types of products best sourced from each of these countries, considering their industrial strengths and production capacities.
Join us as we navigate the global landscape of sourcing destinations, offering valuable insights for businesses looking to expand or diversify their sourcing strategy beyond China. Understanding the nuances of each alternative sourcing country can empower businesses to make informed decisions, ensuring a robust and dynamic supply chain in the face of a rapidly changing global economy.
Where is the next World Sourcing Hub?
People ask, “What is the next China?” with the world changing. The top contenders for production outside of China are countries such as India, Vietnam, Bangladesh, Indonesia, and Thailand. This guide will focus on the main alternatives to China and the pros/cons of abandoning China in favor of rising manufacturing centers.
Pros And Cons Of China Manufacturing Alternatives
Sourcing outside of China presents both opportunities and challenges. We wrote a blog post about key differences when sourcing outside of China. Buyers need to set realistic expectations in advance. We review the benefits and disadvantages of moving your manufacturing and sourcing out of China.
Pros Of Manufacturing Outside Of China
The main advantage of abandoning China for rising manufacturing centers in Asia is to lower costs and avoid tariffs imposed on Chinese goods. While many manufacturers could cope with rising wages in Chinese cities, the new import tariffs under the Trump administration made importing goods from China expensive.
The tariffs caused thousands of manufacturers to cancel their contracts in China and move factories to countries like Vietnam. Many of these countries can manufacture goods of similar quality at a lower cost of production. Here are the main pros of outsourcing outside of China:
Lower Production Cost
Chinese factories are cheaper than they used to be. Some estimates claim the average wage doubles every five years in proximity to major cities. While it’s possible to keep costs low by moving the factory to a more rural area in China, most manufacturers opt for other countries where they can operate near urban centers with logistical infrastructure. As a result, although wages in other Asian countries rise, they are still significantly lower.
Less Red Tape
You have to deal with substantial import taxes and restrictions imposed by the Chinese Communist Party. The CCP imposes many regulations regarding production within its borders and favors Chinese citizens in disputes. You may have to deal with much red tape depending on your product. The regulations are lower in neighboring countries.
Productive Workforce
Neighboring countries such as Vietnam and the Philippines can provide a significant labor force on all levels. They’re competent enough to fill jobs requiring a high level of expertise, so many of them can compete with Chinese workers. The only downside is that they don’t have a large population of China with a near-unlimited labor force.
Cons Of Manufacturing Outside Of China
Limited Supply Chains.
China has roughly 2,800,000 factories operating on its soil, which manufacture goods of a considerable variety. The huge number of factories means that manufacturers can quickly source the material they need from a nearby factory without importing it from a foreign country. With its limited capacity, Vietnam does not have a supply chain that can source materials for your manufacturer. As a result of the smaller supply chain in most countries, they’ll have to import the goods from a foreign country. In some cases, this can increase production costs because you’ll have to pay extra for shipping to bring the materials to the country.
Longer Lead Time
Alternative Asian countries have limited supply chains, which means you’ll have to wait longer for the raw materials to arrive and for the product to be produced. For example, if you have to import textiles from China to your Bangladeshi factory, this may delay production by two weeks. In China, the process is faster, and shipping often takes longer than manufacturing the product. Unless the manufacturer can source all materials locally, prepare for longer lead times.
Shipping Logistics
Chinese shipping logistics are the largest in Asia and have the most extensive network of shipping companies manufacturers can negotiate with. In countries like India, the shipping infrastructure is not nearly as developed. As a result, you may be stuck with very few shipping options. The shipments can take 2x as long to arrive from Indian ports as they would from Chinese ports. If an average shipping time from Shanghai port is 20 days to reach the West Coast, it may take up to 40 days to reach the coast if it departs from Mumbai.
Higher Theft Risk
Theft isn’t a significant problem in more advanced countries like South Korea or Vietnam. Still, it is a big issue in places like Bangladesh or Pakistan. Due to a lack of shipping infrastructure in many alternative countries, certain manufacturers report having shipping containers stolen or disappearing – never to be found again. Outsourcing outside China carries significant risks, especially if you outsource to lesser-developed countries. You may have to assign security teams for your shipping.
Difficult to search for Suppliers
Sourcing in China is relatively easy, as they have services such as Alibaba and Global Sources. While no single alternative covers the world, many countries have a few similar websites. We compiled over 50+ Alibaba Alternatives // Best Sourcing Websites to Find Suppliers Outside China.
| Country | Key Industries | Labor Cost | Ease of Doing Business | Infrastructure Quality |
|---|---|---|---|---|
| Vietnam | Textiles, Electronics, Furniture | Low | Moderate | Developing |
| India | Textiles, Pharmaceuticals, IT | Low to Moderate | Improving | Moderate |
| Bangladesh | Textiles, Garments | Low | Moderate | Developing |
| Mexico | Automotive, Electronics | Moderate | Good | Good |
| Indonesia | Textiles, Footwear, Palm Oil | Low | Improving | Developing |
Top 5 Alternatives To China Sourcing and Manufacturing
Many “upcoming” countries promise to be the next China, but they all have advantages and downsides to consider. The countries mentioned below have less red tape and lower manufacturing costs than China. They’re a worthy contender if you plan to move your Chinese factory: 50+ Alibaba Alternatives // Best Sourcing Websites to Find Suppliers Outside China.
01 // Vietnam Sourcing
Check out How to Find Vietnam Manufacturing Companies // Sourcing Products in Vietnam.
Vietnam is the #1 destination for manufacturers leaving China due to its semi-developed infrastructure, lower manufacturing costs, and proximity to China. The main advantage of geography is its easy access to Chinese raw materials. At the same time, the country is positioned favorably in the ocean for direct shipping to the US.
Vietnam is a fast-growing country investing heavily in high-tech manufacturing and experiencing stable growth. It has a stable society without significant conflicts and can produce goods of identical quality to those in China. The main disadvantage is the country's small size, which limits production potential.
02 // India Sourcing
Check out: What Products Are Made In India? // Sourcing and Manufacturing in India Guide
India is trying to replace China as the central manufacturing hub of the world, and the new government is promoting a “Made in India” program to bring new manufacturing companies to India. The advantage of India is that it’s similar to China in size, with over 1 billion residents, allowing manufacturers to draw from an infinite pool of skilled and unskilled labor.
The population of India also guarantees companies will be able to draw materials internally, and the supply chain won’t be compromised even in times of shortages. In addition, India is huge on tech and suitable for developing hardware and electronics. The main disadvantage of India is that its infrastructure is not as developed as China’s, and they have fewer options regarding shipping. When shipped from India, the goods also take longer to arrive in the US.
03 // Thailand Sourcing
Check out: What Products Are Made In Thailand? // Sourcing and Manufacturing in Thailand
Thailand has always been a manufacturing hub in SE Asia, and it’s known for its high-tech manufacturing, attracting many investments from China. In addition, Thailand is attractive for its tourist destination status, safety, and developed infrastructure.
The Thai government makes a solid effort to improve education in the country, creating a surplus of skilled labor that can participate in manufacturing. However, the main downside is that Thailand experiences yearly natural disasters caused by hurricanes, which may hinder production if the supply chain is affected.
04 // Bangladesh Sourcing
Check out: What Products Are Made In Bangladesh? // Bangladesh Manufacturing and Sourcing
Bangladesh is the world’s biggest manufacturing hub for fashion outside of China, making it ideal for manufacturing all forms of fashion, including clothing and footwear. In addition, the Bangladeshi textile industry is growing, and most of the world’s largest brands outsource manufacturing there instead of in China. Therefore, Bangladesh should be a top contender for all investments in the textile/fashion industry.
05 // Indonesia Sourcing
Check out: What Products are Made In Indonesia? // Indonesia Sourcing and Manufacturing Guide
Indonesia presents an investment opportunity due to its sheer size. With over 240 million residents, it’s currently Asia’s third most populous country, behind only China and India. In addition, the low labor costs lure investors, and many new manufacturing plants are popping up in the country. However, the main disadvantage is the geography because Indonesia has a few large islands facing infrastructural issues.
Final Thoughts on Leaving China for Manufacturing
Leaving China is not a step that buyers and procurement managers can take easily, and moving manufacturing out of China requires careful planning and consideration. Knowing what product you are looking for and what country is the most suitable. Check out our guide on what countries are best for making certain products.
When running a business, one must constantly check on improving one's supply chain. In addition, moving to a new country can be a great way to improve cost or quality. We hope you found this helpful guide. Feel free to let us know if you have any questions or comments.
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