Know the Limitations of Full Service Outsourcing in China

In the global business arena, the outsourcing industry of China is playing a pivotal part. China-based service providers are currently able to offer a totally integrated service. China is quickly building a strong outsourcing industry, and emerging outsourcing players already have strong credentials. Full service outsourcing is a great way for the foreign companies to become leaner and more focused, efficient and effective.

The decision to outsource anything – be it manufacturing or business services – is never an easy one because it entails a sea change in the way a business works. It has implications related to organizational structures, employee strength as well as not-so-obvious ones on inventory and logistics operations. But full service outsourcing is not an entirely risk-free business practice. As the tariff war between the United States and China refuses to die down, full service outsourcing is getting a bit complicated.

Unvailing the risk of full service outsourcing in China

  • Saving cost is the main reason US and European companies opt for the full service outsourcing in China. For them, it is fast, cheap and easy way to start manufacturing. But often they fail to realize that after getting involved in a full service agreement, it becomes costly and complex to switch to a Joint Venture, WFOE or Representative Office.
  • One of the clauses of full service outsourcing is foreign companies need to hand over their IP, the details of their employees, their office and everything they are up to in China. Obviously, it is not going to be an easy process that your China hosting company will smoothly hand over everything to you when you want to sever the relationship with them.
  • In case, after signing out the full service outsourcing agreement you end up not liking their services at all. There are two options you can opt for, either you can terminate the contract or can sue on your agreement. In both scenarios, you end up paying a considerable amount of money along with wasting a huge amount of time.

China is now being perceived globally as an outsourcing destination, but as a business owner, you need to gain maximum knowledge on business conditions. Things could get sour very soon in China.

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