One of the most common questions manufacturing partners will hear is "where should I make my product?" While it seems like a simple question, the answer is just a bit more multi-layered. Every product has such unique requirements and each company has its special challenges and priorities, making it nearly impossible to generalize a solution. Figuring out if production makes the most sense onshore, nearshore or offshore requires many detailed conversations with manufacturing and sourcing experts.
The benefits of moving offshore, especially to the Asian markets, have been discussed at length for years. The initial cost-savings and low wages are undeniable, sometimes making the move literally pay out in the end. But it's not the answer for everyone. There are situations where remaining in the United States is a company's best choice and the higher wages are canceled out by some of its other major advantages.
CONTROL & CONVENIENCE
In the beginning stages of NPI, you’ll likely want to have a lot of oversight as the product is coming off the line throughout each stage of development. This validation process is critical to get the product ready for a successful launch, and there is no substitution for having your engineers on-sight to make changes should any design flaws be uncovered during functional testing and analysis. NPI isn't a quick process and requires a lot of control by your product development team. What’s easier for them (and your bottom line) – hopping in a car for a few 45-minute drives to your local manufacturing partner or multiple exhausting 21-hour flights to Asia? Having the flexibility to make quick drop-ins to check both quality and functionality will not only keep your business at the forefront of your suppliers’ minds, but your team will have more time to troubleshoot any technical issues and less time in the air. We have had customers who initially partnered with Asian suppliers, but after many rounds of quality issues, chose to move everything back to the United States so they could work more diligently at solving this issue.
How cheap can I get it and how quickly can it be here? Those are two of the top concerns on any buyer’s mind. There are so many benefits related to time that come with utilizing local suppliers.
It may seem obvious, but sourcing domestically allows businesses to receive their products much quicker than those relying on maritime freight which typically involves a lead time of two or more weeks. Not only do trucking carriers move faster, but there are also fewer hurdles to overcome such as unexpected delays due to port or customs issues. Faster distribution also means businesses can reduce the amount of safety stock needed, thus requiring less warehousing space and, say it with us, less money. It’s a cliché for a reason - time really is money.
We already know labor rates are significantly lower overseas. After all, it has been one of the driving factors pulling companies out of the country for decades. There are, however, certainly cost benefits to utilizing a domestic supply chain. Logistics providers charge a pretty penny to coordinate global shipments, and while ocean travel is a comparatively economical method, the cost of freight and duties can negate much of the savings you accrued by going abroad in the first place. In 2018, businesses in the U.S. spent 11.4% more on logistics and transportation services than the year prior, totaling around $1.64 trillion. Let’s not forget staying local will remove the hurdles of tariffs, exchange rates or tax implications. Now, if your volumes are high enough, the savings may still be sufficient to warrant utilizing offshore suppliers. However, if you’re in that low to mid-volume range, you’ll really want to crunch the numbers to see if localizing your supply chain makes more sense in the overall cost equation.
Even though you may initially be drawn to the immediate cost-savings related to offshore manufacturing, don't completely write off domestic options before doing your due diligence. We recommend you consult with a specialist in global manufacturing who truly understands what makes a product the right fit for each location. Don't be afraid to start this dialogue to help you decide which option is best for you, because while Vietnam or China may make the most sense for Product A, Boston or Charlotte may be most beneficial for Product B.