Why It’s a Good Idea to Take Manufacturing Overseas
Manufacturing a new product can be an exciting endeavor, but figuring out the most cost-effective way to get it done is a challenge in and of itself. Many people turn to manufacturing overseas as the obvious choice. Whether or not there’s truth to that depends on a variety of factors, some of which include the type of product you’re manufacturing, the quantity, MOQs, the teams you align yourself with at home and aboard, and more.
Manufacturing overseas can be beneficial in a number of ways; that said, there are always going to be things you need to look out for, regardless of where you choose to do your manufacturing. To help you determine whether or not overseas manufacturing is right for your business, we’ve put together some insight. Learn from our experience and use it to make a qualified, educated decision for yourself.
Advantages of Manufacturing Overseas
- Availability of Inexpensive Labor Force
Foreign countries, particularly those in Asia, are desirable locations to outsource overseas manufacturing because of their large workforce. China’s labor costs are 25%–30% lower than those in the US.[1] Vietnam’s workforce can be acquired for an estimated one-tenth of the cost of what it would be in the US.[2] Inexpensive labor costs can make a huge impact on production costs and may drastically improve profit margins.
- Access to A Wide Network of Manufacturers
Product developers have many overseas manufacturer options. Before the pandemic, China did 28.7% of world manufacturing. Having access to a wide network of manufacturers is beneficial for variety as well as quality when manufacturing overseas.
- High Capacity of Output
Manufacturing your products overseas increases production capacity. The large workforce means capacity can be at an all time high. This allows overseas producers to rapidly scale up and manufacture large volumes, which can result in cheaper raw materials provided customers meet the minimum order size requirements.
- Proximity to Raw Material and Component Suppliers
US factories simply don’t have the same kind of access to raw materials and components as factories overseas because of their proximity. That doesn’t mean they can’t get these supplies, but being closer to the source always expedites things, especially when it comes to time-to-market. Overseas contract manufacturers have mature supply chains and are more readily accessible to all raw materials.
- Increased Number of Skilled Workers
In addition to having an inexpensive labor force, manufacturing overseas in Asia also provides an increased number of skilled workers. This can make all the difference if time and manpower are of concern. Countries such as China and Vietnam are amongst the leaders in expanding the volume of skilled workers in their countries.
The Challenges of Manufacturing Your Product Overseas
While there are numerous reasons to take manufacturing overseas, there are some potential drawbacks that could occur as well. Before sourcing internationally, product development teams should consider the following factors:
- Increased Shipping Rates and Lead Times
Manufacturing overseas will always come with the cost of paying shippers, customs, and handling other expenses. These expenditures are par for the course and are to be expected, but they need to be factored into the overall budget.
- Cultural Barriers
Partnering with an international manufacturer may present language and cultural challenges. Negotiating contracts, prices, procedures, ethics, and cultural differences can be tricky if you’re not familiar with the customs and the traditions. The great thing about partnering with an international sourcing and manufacturing company like East West Basics is that we are perfectly primed to handle that for you. Our team members are multilingual and experienced in the everyday trading practices for which China and the greater parts of Asia are known.
- The Possibility of Service Issues
Manufacturing of any kind, whether at home or overseas, comes with the risk of quality issues and standards not being met. This challenge is not unique to manufacturing overseas; that said, not having boots on the ground in the country in which your goods are being made can exacerbate these issues. Another reason to consider partnering with an international team like EWB is because we have personnel onsite. With a board of directors based out of the US and an independent quality control team on the ground in Asia, you can be sure that nothing will slip through the cracks.
Make an informed decision about overseas manufacturing by equipping yourself with the right team. Start sourcing the right way when you partner with East West Basics today.