According to US Census Data in 2014, the average annual salary (exclusive of bonus and benefits) for a Purchasing Manager is USD 90,558. Their Chinese counterparts earn less than 1/3 of that amount.
A US-based manager with even basic Asian-language skills and sourcing experience in Asia will command a higher salary. Additionally, a team of managers and supporting staff will need to be hired, trained and supervised if there is a desire to maintain in-house resources for managing an international supply chain.
Investing time in factory visits in Asia is a pre-requisite for business success, but the cost of multiple business trips is often prohibitive. The figures above are for basic salary only. The total cost for an American company to hire a staff in the US is significantly higher after bonus, overheads, mandatory benefits and other indirect costs are calculated.
According to the report on HR costs in China for 2014 by Fiducia, the average salary across all industries in Guangdong providence is 4,200 RMB per month. Even adding bonus, mandatory benefits, dorm/housing and meal allowances, the direct labor cost is still less than USD 15,000 per year.
The title may sound very attractive, but we should know that the “average person” did not attend university, does not speak English and has very little international-trade experience. A review of job forums in China indicate that a Chinese manager with a university degree plus five years’ experience in general sourcing or trading can earn around RMB 12,000 per month in a major Chinese city. Candidates with specialized skills can earn even more.
Even at around USD 30,000 a year for an experienced senior Chinese manager, the cost is still a fraction of the amount needed to engage professional staff in developed economies, such as North America, the EU, and Australia/NZ.
The advantages of outsourcing Supply Chain Management to a lower-cost country are two-fold: Significantly reduced HR costs and physical proximity to supply base.
So why isn’t everybody opening an international purchasing office in Asia?
Almost all small-medium sized firms and even the majority of large buyers don’t actually set up their own office in China because hiring and managing a team in China is not an easy task, from cultural, administrative, legal, linguistic and economic points of view.
For these reasons, China-based agents are used instead and there has been an explosion in the number of sourcing agencies set up in China over the past 10 years. Unfortunately, there is a lack of professionalism, transparency and experience among some of these China-based agents, far too much over-selling and under-delivery.
A Chinese or foreign-owned sourcing agency will charge between 3% and 15% of the PO value to perform various services at various levels of (un)professionalism. Some agents often receive hidden kickbacks from the factory. As a result, the so-called “buyer’s representative” is often actually working for the factory!
By Mike Bellamy
Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center . He is also the author of, “The Essential Reference Guide to ChinaSourcing” and founder of PassageMaker Sourcing Solutions.