There's a lot of talk about bringing manufacturing back to America, but from the perspective of an offshore manufacturing executive, demand continues to remain high for quality, low-cost, strategically sourced goods out of Asia. In this article, East West Vice President Jeff Sweeney reviews, in his own words, the major benefits of taking your manufacturing operations offshore.
I am fortunate in that I have the opportunity to travel to Asia three to four times per year. The two things I am often asked about these trips, "Are the benefits of offshore manufacturing really worth it?" and my favorite, "What else can you tell me?"
There are a number of benefits that can come from shifting a production line to manufacture components or an entire product offshore. The main reason for offshore manufacturing is cost. By outsourcing assemblies and other expensive processes during manufacturing you can dramatically cut the costs of your products and pass those savings on to your customers. Start with the end in mind. The goal is to help your customers remain extremely competitive.
A successful contract manufacturer should be well skilled in your type of manufacturing or discipline. If you can partner with a company that has experience with rubber, motors and full assemblies or even materials such as plastic, metal or electronics that can be used in your product (or to make your part), you can get the same, if not better, quality products than you would from a local supplier at a greatly reduced rate.
Outsourcing to China, Vietnam, India and other countries is nothing new. Many top manufacturing companies have drawn from offshore manufacturing expertise in order to create their products at reasonable prices for over 30 years. They have continued to be successful because they have implemented a global supply chain. A mature and successful global supply chain leverages the strength of its team, wherever around the world they may be.
Capital expenditures, real estate, and hiring/training the right staff are expensive. Purchasing machinery and obtaining factory space to complete assemblies is not cheap. Hiring the right people to operate and maintain that equipment is another consideration. The right offshore manufacturing experts are equipped with the machines, the technical know-how, and the engineering staff that is required to not only build a quality product, but also handle the logistics and deliver it to you.
Where do savings come from? Labor and procuring raw materials closer to the source provide tremendous savings. It is no secret that labor rates are lower offshore. In the case of raw materials, like rubber, it makes sense to buy and manufacture rubber components where rubber is most prolific (SE Asia). This is the reason there is a global supply chain. It is important to have transparency in your supply chain so be sure to research the companies that you are outsourcing with.
Offshore manufacturing will save you money but it should never replace quality engineering and proper inspection of products before they ship overseas. It is important to develop a process to inspect each assembly and manufactured product to ensure the quality remains consistent. While there is an inherent trust between an offshore manufacturing facility and the company that engineered the product, it is important that parts are inspected regularly. Too often we hear from customers who went offshore in the past with initial success only to have quality issues with 24 months. Having a presence in these factories will help greatly. East West is able to offer our customers a peace of mind by using our own strategic business units in Asia to make sure we have our “feet on the street” at all times.
If you are interested in saving money on your manufactured products and offer your customers a much more competitive rate for your products, do not hesitate to look into offshore manufacturing to take advantage of the cost saving benefits. With proper planning, the benefits of a global supply chain far outweigh the risks.
By Jeff Sweeney | EVP / CMO, East West Manufacturing
Note: This article was first published in August 2014.
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