When starting up, any entrepreneur worth his or her salt will be keeping a watchful eye on their overheads. Just imagine me as Alec Baldwin with my expensive watch barking that notorious A B C at you:
Always. Be. Costcutting!
Okay, so I may have taken some creative liberties there. The simple fact is that for any startup it’s a difficult tightrope to walk between limiting overheads costs and ensuring that they don’t cut corners that will lead them to make difficult and expensive decisions later on.
If your business is in manufacturing, it may seem like common sense to outsource manufacturing operations to low-cost overseas manufacturers, but increases in reshoring have demonstrated that production remaining within the US can prove beneficial in terms of long term costs. Check out this calculator to, for example, estimate the true cost of injection molding in China.
It’s all about you
The decision of whether or not to source your manufacture overseas will depend very much on the nature of your business, your product and your expected volume. Traditionally, manufacturers of the following products have benefitted from overseas production:
- Apparel
- Electrical components
- Domestic Appliances
- Medical supplies / pharmaceuticals
- Toys and games
- Leather
- Consumer electronics
However, if your product is specialized in nature and demands a reliable timetable of production and distribution then you should only really consider domestic manufacture.
You should have a think about the following factors to determine whether or not overseas manufacture is for you, or a false economy.
Lead time
Overseas manufacture brings with it logistical considerations. Are you okay with waiting for several weeks while your products are shipped to you and pass through customs ready for you to transport them to your buyers?
Trust
It’s difficult to build a trusting relationship with a manufacturer on the other side of the planet. Cultural and language barriers and the dizzying selection of overseas manufacturers can be daunting prospects to a startup. Have you done your due diligence on your prospective manufacturer? Have you looked at their track record with similar products? Would they be willing to develop a high quality prototype with you before going into production?
If the answer to any of these questions is no then you may want to look closer to home. Whether at home or abroad, your manufacturer should understand the specific needs of your business and be as passionate about them as you are.
Quality Control
How important is quality control to your business? It’s not a flippant question. Quality and reliability of product will mean more or less to you depending on the nature of the product. The more complex and elaborate your product the more prone it may be to production or transportation mishaps. Many countries with a heavy manufacturing presence are less stringent in their manufacturing (and even safety) standards than their US counterparts.
Marketing / Prestige
There is an undeniable prestige to being able to stamp “Made in the USA” on your product. Cheaply made products in Asian, South and Central American countries can sometimes come with unfortunate connotations of poor quality or unskilled workmanship. Even if your manufacturer is of impeccable reputation, your consumers probably won’t know that.
