The Benefits of Outsourcing Your Manufacturing Overseas

Offshore manufacturing is the process of producing products, components, assemblies, or sub-assemblies in a country other than where they will be sold. In our global economy, there are very few examples of an industrial or consumer product that is produced domestically from raw materials to a finished and packaged product. At a minimum, most domestic manufacturers outsource part of their manufacturing supply chain. There are a variety of reasons that companies take advantage of offshore manufacturing for at least some of their supply chain. Check out some of the main benefits below.

1. Increase Profits With Lower Labor Costs

Cost savings is the main advantage of offshore manufacturing. Companies can enjoy inexpensive labor, a highly skilled workforce, and less expensive raw materials. Labor costs are often lower in less-developed regions, which can lead to significant savings on production and assembly costs. By some measurements, offshore manufacturing can cost 50% to 80% less than producing the same goods or components domestically. Further, global manufacturers have a unique ability to scale manufacturing capacity quickly to respond to customer demand. Adding workshops and hiring skilled labor can be done much faster than in North America.

2. Access to New Markets

Many companies take on an offshore manufacturing strategy with growth in mind. Some of the most successful companies use offshore manufacturing to leverage access to new markets. Businesses can tap into high-growth emerging markets by producing goods close to where the growth is happening. They can implement a strategy of diversifying part of the supply chain in a strategic area of growth or duplicate a successful domestic factory overseas. This gives the added benefit of using one factory with excess capacity to supplement volume at a more-constrained facility.

3. Reduced Risk

Diversifying your manufacturing supply chain helps with disaster preparedness initiatives. Having multiple, vetted suppliers allows you to move your manufacturing if a natural disaster occurs. Additionally, businesses can reduce their exposure to any one country’s economic or political instability by strategically diversifying the manufacturing supply chain.

4. Access Specialized Equipment and Expertise

Outsourcing manufacturing can offer you the opportunity to access specialized expertise, equipment, and technology that may not be feasible or cost-effective in-house. This can include advanced or specialized manufacturing machinery, added production throughput, advanced technical skills, and knowledge of the latest industry practices and trends. Offshore countries may have access to specialized skills or resources that are not readily available domestically. An outsourced manufacturing strategy can help a business ramp up production or diversify its product lines with little to no capital investment, and taking advantage of updated technology and equipment often has a positive effect on quality.

5. Focus on What Your Company Does Best

Overall, managing your entire manufacturing process is complicated and time-consuming. For inexperienced companies, outsourcing all or parts of your supply chain can help streamline operations, reduce costs, and improve efficiency. Instead of focusing on the ins and outs of your supply chain, you can shift your focus back to the core parts of your business that you’re an expert in. But at the same time, you’ll benefit from more flexibility, access to specialized technology, and the ability to scale production based on the changing demands of your growing business.