In our Global Economy making the right decision to manufacture domestically or internationally can be a challenge. While domestic production is the right choice for many companies there are many reasons to consider overseas manufacturing. Three of these reasons are: Lower net cost of goods, to free up internal resources, and the ability to increase production with minimal capital investment.
Lower Net Cost of Goods
The promise of reducing production costs due primarily to lower labor costs is the number one reason companies consider off shore manufacturing (or “offshoring”). The greater the labor component required in the manufacturing of a particular product, the more savings is likely to be realized. Packaging for “ready for retail” items is often an overlooked but important consideration. Labor involved in the packaging process adds to the reduced total cost of manufacturing off shore.
Free Up Internal Resources
Manufacturing off shore frees up internal resources as it allows professionals with extensive off shore experience to manage the day to day issues that invariably present themselves. While some questions may require “home office” involvement, the vast majority of time consuming issues can be handled quickly and efficiently leaving internal resources free for the important jobs of managing the core business, dealing with ever-increasing competition, and sales and marketing strategies.
Increase Production with Minimal Capital Investment
Using off shore manufacturing facilities allows companies to increase production of a current product or produce a separate product line at a cost savings compared to manufacturing domestically. The situation may be that profit margins for a particular product may have eroded over time. Taking that product off shore may help to restore that profit margin. Equipment, training, molds, jigs, printing, testing, inspection, and packaging can all be provided by experienced professionals. Producing off shore can be likened to renting a production facility complete with trained personnel who can produce your unique product, tested and inspected to your specifications, packaged just the way you want it and delivered complete and ready to sell all at a lower cost than producing it domestically.
