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Asia: A complete guide

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Production & lead time in Asia: A complete guide

Posted: August 07, 2015

by Fredrik Grönkvist

Lead times, when outsourcing production to Asia, involves much more than
assembly, packing and shipment. Yet, many importers are far too optimistic about
the time it actually takes to get from deposit payment to delivered produce.

In this blog post, we guide you through the four phases of production,
quality assurance and delivery. We also explain how you by simple measures can
reduce the risks for serious delays, and why you need to consider the risk of
quality issues.

1. Tooling Production

Custom designed products, and components, often require additional tooling,
such as injection molds. Prints, for example
logos, may also require additional tooling, which by most manufacturers must be
ordered from a subcontractor. Making, and adjusting, a new mold may take
anything between 14 to 60 days, depending on its complexity. However, the
tooling is usually good for more than one order, sometimes hundreds of thousands
of units. In other words, this lead time can be deducted from all future
orders.

2. General Production Time

When a manufacturer states a certain production time, they are not only
referring to the time it takes to assemble the items. For some products, the
assembly process is very brief, and is counted in days, sometimes even hours,
for small quantities. However, production cannot begin the day after you’ve paid the initial deposit.

As Chinese manufacturers maintain a minimum amount of materials and
components, purchases must be made from the subcontractors – which in turn may
need to start production on their end. This is why manufacturers in most
industries hesitate to set a production time shorter than 30 days. Then again,
the production time varies greatly depending on the industry, and the volume
ordered. However, in most cases, the production time is set somewhere between 30
to 60 days.

3. Quality Assurance and Compliance Testing

Upon completion of mass production, a wise importer assigns a Quality
Inspector to check up on the goods, prior to delivery. While an inspection can
be scheduled with short notice, often within 72 hours, the QC report and its
photos may not be available until a day or two after the occasion. Delivery of
reference samples, if required, may take up to a week, sometimes more, to
arrive. All in all, it adds up.

Buyers in the United States, Europe and Australia may also be required to submit product samples for compliance
testing, which is even more time consuming. In my experience, it can take
days before testing companies even issue their invoice, and then another 10 to
14 days before the results are back.

4. Shipping and Logistics

This is the part is what most importers worry about. However, this is the
only lead time where you can actually be quite certain to avoid delays. First,
the cargo must be transported from the factory to the nearest Port of Loading.
This doesn’t take much longer than a few hours, but include scheduling and
waiting time, and you’re looking at one to three days.

Upon arrival in the Port of Loading, the cargo is
then placed in temporary storage in a warehouse. Depending on the arrival
timing, the cargo can usually be loaded on the next container vessel within 2 to
4 days. Obviously, the transit time varies entirely depending on location. Below
follows an overview for a a few routes:

Shenzhen – London: 29 days

Shenzhen – Hamburg: 30 days

Shenzhen – Los Angeles: 19 days

Shenzhen – New York: 33 days

Shenzhen – Vancouver: 17 days

Shenzhen – Sydney: 13 days

Shenzhen – Melbourne: 15 days

Shenzhen – Singapore: 7 days

As the cargo lands in the Port of Destination, the cargo must first be
unloaded and go through customs clearance, all of which adds on another two to
three days, before the cargo can be forwarded to the final destination.

Lead Time Summary

Phase

Duration

Tooling Production

0 – 60 days

General Production Time

30 – 60 days

QC & Compliance Testing

Quality Inspection: 3 – 5 days

Compliance Testing: 7 – 20 days

Shipping

Inland transportation (China): 1 – 3 days

Transit time (Sea): 7 – 33 days

Transit time (Air): 4 – 10 days

Inland transportation (Local): 1 – 2 days

Total

46 – 180 days

Managing Delays

As if what you just read wasn’t bad enough, it does get worse. Many Chinese
manufacturers are all but masters of time management. Delays during the
production is anything but unheard of. Yet, it is possible to at least make sure
that its not your order that’s put on hold.

Chinese suppliers rarely hesitate to take accept new orders, even if their
production plan is already filled to the brim. After all, once a buyer has wired
the deposit payment, they are stuck, and will think twice before taking their
business elsewhere. Yet, what you can do is to make sure that it’s the other
sucker that gets his or hers patio furniture delivered in late October, rather
than you. The solution is something as simple as a late delivery clause in the
sales contract, written as follows:

If the entire batch of products is not completely manufactured, packed and
made ready for inspection, within XX days (counting from the date of the
deposit payment), a deduction of US$XXX shall be made from the balance
payment, for each consecutive day, until this requirement is fulfilled.

In all honesty, it is still not an easy task to enforce a breach of the late
delivery clause. That said, this has saved our clients from delays for years,
and I cannot remember a serious reported delay for at least the last 3 years.
Considering the number of clients, and orders, we’ve managed since then, I dare
to say that it works quite well. Still, it does make sense, even from the
supplier’s perspective.

Imagine that you, as a factory owner, can’t keep your production schedule and
must choose between two buyers. The first has no late delivery clause, perhaps
not even a sales contract, while the other requires a daily deduction of US$500.
I dare to bet you’d prioritize the latter.

Quality Issues

A Late delivery clause is likely to make the supplier think a few times
before putting your order on hold. However, the more serious delays are often
caused by factors, outside of the suppliers (direct) control. A statement I
often make while writing for Chinaimportal.com, is that quality issues are
certain. The question is not if, but how severe they’ll be.

Serious quality issues, both cosmetic and functional, may sometimes not be
discovered until the later stages of production, or even after the entire batch
is packed. In a situation where a high number of defects are discovered during
the pre-shipment quality inspection, the only
wise decision is to start over from scratch and order a remake. Same goes for
compliance issues, in case your product fails such testing.

Fredrik
Grönkvist is the co-founder of ScandinAsian Enterprise in Shanghai. Since 2010,
he and his team have helped hundreds of companies worldwide, primarily in the EU
and US, to develop and manufacture products in China. He is also the main
contributor on http://www.chinaimportal.com/,
a leading knowledge base for small- to medium-sized enterprises importing from
Asia. For further questions, you can contact him on www.chinaimportal.com/contact-us/.

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