PRODUCT FLOW ALONG SUPPLY CHAIN:
SOURCING IN CHINA vs. HONG KONG
They are many aspects involved making a decision on which styles to source from China and which styles to source from Hong Kong. The differences between the producing the products in China and Hong Kong are: * ORDER SIZES:
The minimum production quantity for a style in China is 1200 units while in Hong Kong it is 600 units. Thus Hong Kong factory can produce smaller order quantities effectively, thus enabling the company’s to increase the range of products it offered and manage the inventory risk. Reason: This difference in production abilities is mainly due to the high skilled labor coupled with shorter production lines in Hong Kong compared to the low skilled and long production lines in China * LABOUR
The workers in Hong Kong worked about 50% faster compared to the workers in China. As a result the parka line in Hong Kong requires only 10 workers to complete all the operations whereas the parka line in China require up to 40 workers. This resulted in the longer production lines. In spite of the high quality of workers in Hong Kong, the unemployment rate in the country is very low and most of the younger workers prefer office jobs. Hence it is difficult to acquire labor in Hong Kong. Reason: The differences in the efficiency might be due to the variances in the trainings given to the workers in China and Hong Kong. The workers in Hong Kong were more cross functional and were trained to work in broader range of jobs compared to the Chinese workers. * TOTAL COST
The overall cost of production is lower in China as compared to Hong Kong. Though there is a definite cost advantage, there are strict quota restrictions by the U.S government on shipping goods from China when compared to Hong Kong. Reason: The lower production costs in China can be mostly attributed to the low wage rates compared to the wage rates paid in Hong Kong. The workers are paid $0.16 per hour in China compared...
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