Talking about the manufacturing hubs, the first country which comes in most people’s mind is China. Low labor costs, abundant resources and manufacturers, and the ease of doing business become several main reasons why China is called as the “world’s factory”. Gradually, China has improved its infrastructure and quality capabilities, and at the same time has minimized the hassles that importers have to deal with when importing.
However, China’s competitiveness has waned in recent years following higher labor costs. And recent tariffs on the country’s exports have eroded buyers’ profits on goods bound for the U.S. market. Pandemic Covid-19 also forced the importers to apply the strategy “China plus one” to prevent the same situation to happen in the future.
Therefore, many importers are now on the hunt for the “next China” to source their products. But this job is not as easy as it looks like. Sourcing from the wrong location or wrong supplier can lead to longer production times, higher costs and more quality issues.
Sourcing in Indonesia is the answer!
There are several reasons why sourcing in Indonesia can be the solution for you, as follows:
Cheaper cost
Cost is one of the main considerations when importing goods. Material cost, worker wages, import duties, taxes, shipping costs, and sometimes several hidden costs, can affect the price of your product. The shipping cost from Indonesia to the USA or Europe is currently cheaper rather than the shipping cost from China.
The low labor cost in Indonesia also gives the chance for the manufacturers to reduce overall production costs. While wages vary by region, they are markedly lower than those in China.
The human capital
One of Indonesia’s greatest assets is its human capital. Indonesia is on the fourth rank of the largest population in the world. According to Indonesia statistics, the Indonesian population in 2020 is almost 271 million people and 70,72% of it is in a productive age (15-64 years old).
This situation will bring several benefits for the manufacturer, such as a faster production time.
The unlimited raw material sources
Indonesia is well known for its natural resources. Furniture material such as bamboo, rattan, wood is almost unlimited in Indonesia. That becomes an added value for the importers because they have nothing to worry about the raw material. Furthermore, most of the furniture manufacturers in Indonesia hold the SVLK certificate which indicates that they are using only legal wood in producing their products.
The possibility to diversify the supplier base
As an importer, it is a great idea if you diversify your suppliers’ base. This is needed to avoid medium to high risk sources which can be the worst possible things to happen in the future. The Covid-19 pandemic has given some importers the idea called “China plus one” strategy to deploy production between China and other Southeast Asian countries. Indonesia is a great opportunity. Java and Bali islands, only to mention them, are famous manufacturing areas all over the world. You can diversify your procurement in Indonesia to avoid region-wide problems.
How to find a qualified supplier in Indonesia?
Move your procurement to Indonesia is a great decision because Indonesia has many benefits as mentioned above. However, to find the supplier who meet your standards can be quite challenging, especially for the first time you are importing from Indonesia.
You have to make sure about every details of your potential supplier, including the company profile, facilities (office, equipment, production lines etc.), legal documents (licenses, certificates etc.), labour, social and environmental commitments, and also its clients and experience including its trade history and quality control process. This is necessary to do to avoid a scam or wasting time with a fraud company.
Conducting a Simple Factory audit in Indonesia will help you to know more about your potential supplier so that you do not end up working with a manufacturer that cannot meet your needs.