For some companies it has become “received wisdom” that it costs less to manufacture goods in China. But is it really true? In many cases moving manufacturing to China has meant lower production costs, although moving production has not necessarily lived up to expectations. Cheaper manufacturing costs aren’t the only important considerations, other important issues include:
• What value the manufacturer can add to the product i.e. through innovation and design input;
• Quality control issues;
• Logistics and overheads;
• High IP protection costs
• Brand risk
• Communication – language and cultural differences; and
• Physical proximity.
Taking into account some of the above considerations, arguably, the more sophisticated lower volume products may still be better being produced in the UK or in Europe. In relation to the high volume less complex products, China may still be the best option for manufacture.
However a major drawback to manufacturing in China is that your Intellectual property (IP) is not always secure. If you take a product to China to be manufactured, unless you have rigorous protection policies in place, you can almost guarantee within no time at all, it will be copied and sold to the world-wide market. Over the last few years we have had numerous clients come to us with the same issue: they have their unique product manufactured in China, and within days or weeks, the same product (maybe with different branding) has appeared for sale on the Internet. The website www.alibaba.com is one such website where rip off copies have been found – but there are others of course.
Alibaba is China’s largest e-commerce group. www.alibaba.com is the world’s largest online business to business trading platform for small businesses. The good news with regard to Alibaba.com is that it does have an Intellectual Property Rights Protection Policy which provides that listing of counterfeit, replicas or other unauthorized items are strictly prohibited on the site. Alibaba also has a complaint system called “Aliprotect®” where IP rights holders can file infringement claims and request that an infringing listing be taken down. Our experience of the Aliprotect® system is that if you make a good case regarding your IP rights Alibaba will take the offending listing down.
We can’t emphasise enough how important it is to get your trademarks, designs and patents registered in key countries where you trade. Even if your patents, trademarks and designs only have European protection, then trading standards may help you stop foreign imports from coming into the UK. We can help you find solutions to trading internationally. It is certainly one area where it pays to take advice early. If you think you need help with protecting your business globally, don’t hesitate to ask us about it.
Kirsten Toft
