advantages of manufacturing overseas

The difficulties of manufacturing overseas, and The fact that Apple’s sophisticated products are manufactured by Chinese workers who often make less than seventeen dollars a day does not reduce quality at all. With higher standards for products and manufacturing procedures there are fewer opportunities for mistakes or expensive and embarrassing recalls on your products. Loyalty comes from trust. Is it true that because the Chinese have no stake in the company they work for, they don’t particularly care about product quality? They expect that the company will become more profitable and their market share will grow as a result of the lower prices. Many people are aware that unsavory working conditions exists overseas and may associate your product with unethical or careless labor practices. For example, they do not have the same incentive as U.S. manufacturers to make a mold with multiple cavities; it increases capital costs. As you probably already know, producing products in the U.S. costs drastically more than doing so in other countries. Sign up today to receive the latest TradeReady articles, international business job postings, a special 15% discount on your next FITTskills online courses or workshops, and more! The negative brand implications for putting domestic workers out of the job, and the possibility of forcing foreign workers to work in what are sometimes harsh conditions, however, may lead other companies to continue their domestic manufacturing practices. Below are a few more perks to having your product manufactured domestically: The flip side to domestic sourcing is mostly associated with cost. Be prepared! By using The Balance Small Business, you accept our. Beyond rental costs, other costs such as insurance, utilities, and maintenance can be cheaper in other countries. For example, outsourcing traditionally had been a matter of one company ordering printed circuit boards from another company in a neighboring city because it lacked the board processing facility. Without customs and shipping time, orders can be turned around faster and shipped much sooner that if manufactured overseas. Aren’t there hidden costs in such areas as cultural and political differences, warranties, and privacy issues, for example that have to be considered? All material is protected by U.S. and international copyright laws. The Balance Small Business uses cookies to provide you with a great user experience. What happens here is that neither entity, the U.S. distributor/retailer or the Chinese manufacturer, has expertise or experience with the product design. Choosing where to manufacture your product takes careful planning. As labor cost increases and they become more familiar with the market, we will see drastic improvements in this area. Other things to consider when choosing foreign manufacturing: Ultimately, the decision lies in your manufacturing needs and what ethical considerations will keep you awake at night. ( Log Out /  Clip, share and download with the leading design engineering magazine today. Change ), You are commenting using your Google account. When starting out, get your first few orders, then start putting your house in order. Here’s how and why you should consider entering African markets. I have seen companies do this well. Choose the one that will deliver the most value to your brand and your product. This allows you to develop a trust  and establish a standard of quality for your products. Today, most of the plastic injection molds and casting dies are made in China. The United States has manufacturing and labor standards, ensuring a higher quality work environment for employees and other guarantees to help consumers feel good about purchasing the product itself. WS. View all posts by Bennett O'Brien. You will also have to carry that paper up to 120 day net, for the stores that placed the order. Subscribe me to the FITT Community Weekly newsletter! I think outsourcing or offshoring based on price alone invites the possibility of suffering great loss. Those advantages are one reason the US has gained some manufacturing jobs in the past few years, after three decades of steady offshoring. 3. First, the good way: When a well-run company that has its own Marketing and Sales, Engineering, and Manufacturing Departments, considers offshoring, it is because the managers determined that they can save money by using China’s cheap labor. At the same time, it’s important to make sure you are socially responsible and not taking advantage of workers who are forced to work in horrible conditions and for terribly long hours. They went from being a manufacturing company to a distributor with no intellectual property or expertise to solve product quality problems. That’s no lie. Labor will become more powerful as the nation develops. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted. If our product category tends to be high sku and low volume, I would encourage us to study its true total cost before making a decision to manufacture in China. The second method is not so good. Minimum wage standards are enacted in China, safety standards are also being implemented, and social insurance is enforced. But the higher-end jobs, which are focused on innovation, design, and new products should increase as the company reinvests its larger profits. In the U.S. those that work in manufacturing are paid very well, due largely to union protections. The solution is matching the right Chinese company with our needs. We cannot take it for granted. Foreign Manufacturing . © 2012-2019 Copyright Forum for International Trade Training. Do you want to contract the work to a state side manufacturer or do you want to ship the work overseas? We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you’ve provided to them or that they’ve collected from your use of their services. The difficulties of manufacturing overseas seem to outweigh the benefits, especially if you are trying to beat your competitors to market with your product. That may be another reason that the Chinese often refrain from doing short-run manufacturing. By offshoring, these companies are leveraging the comparative advantage of other nations. Additional services may include financing strategies, idea generation, packaging design, product upgrades, referral networks, intellectual resources, stocking programs, legal affiliations, and logistics support. I was told that the Chinese are not skilled at designing and making molds. Their employees do not receive the same kind of treatment that we receive from our employers. This situation is rooted in the Chinese educational system and 50 years under Communist rule when books were burnt and everyone went back to the farm. Life at these types of companies can be very difficult for the workers, and it is definitely something to consider when it comes to making business decisions for major corporations. Greater variability. This can include site selection, build out, and licensing. They not only gain market share in a competitive industry, but they also help grow the total market by innovation and introducing new products. There are a number of reasons why the labour is cheaper. If you're developing an item for mass production, choosing where and how it's manufactured is essential to your trajectory and brand as a business. Their engineering capabilities and efficiencies have risen tremendously. Site Map | Privacy Policy | RSS. One of the most obvious concerns of manufacturing in another country is that it is harder to supervise production.

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