Many companies utilize offshore manufacturing to save on labor costs and raw materials. When it comes to fabricating plastic injection molds, those savings may seem significant; however, offshore manufacturing often comes with many drawbacks such as shipping delays and low product quality. These issues quickly eliminate any cost benefits associated with Chinese injection molds as they often result in the need for reworked parts.
As the COVID-19 pandemic continues to devastate global supply chains, many businesses have begun reshoring their operations. This trend is particularly prevalent in manufacturing, although reshoring rates have started to rise throughout the industrial sector in recent weeks. In fact, the Thomas Industrial Survey for April found that 64% of manufacturers are now considering reshoring, compared to only 54% who were thinking about reshoring in March.
When looking for a manufacturer that will provide you with quality, savings, and a quick turnaround, it’s essential to consider the location of your facility. While many companies are moving overseas in search of cheaper production and labor costs, it often pays to keep your company based right here in the United States. In fact, there are numerous benefits to choosing a manufacturer based in the United States over those found abroad––, especially in the long run. Below, we discuss seven of the main advantages.
There are many risks involved in selecting an OEM suppliers. Understanding them is essential to running a successful business. In our white paper "Hidden Risks in Your Offshore Supply Chain", we’ll examine three strategic areas to include in your supplier selection process: Cost, Scheduling, and Compliance.
Cost
Cost is not just the final price you pay for a part. Cost also includes shipping, time to market delays, quality control checks as well as labor. Cheap foreign labor is becoming more expensive. Offshore suppliers face a more demanding workforce. And, today’s consumers are demanding that suppliers provide improved working conditions and pay. All of this is driving up the unit cost of goods sold.
Regulatory compliance has become a focus in recent years. Products from other countries, particularly China, face additional scrutiny. From car seats to dog treats, there have been numerous safety problems.
American vs. Overseas Manufacturing
There are many risks when it comes to selecting OEM suppliers. Understanding them is essential to running a successful business. In this article, we’ll examine the factors that impact scheduling and time-to-market when using an offshore supplier.
There are many factors that impact the total cost of goods purchased. On the surface, some offshore suppliers may seem cheaper. However, the true delivered cost is impacted by many variables. Using this overview, you should be able to better compare all of your supplier choices.
Shipping - This cost must be calculated accurately to determine the true “Cost of Ownership”.
Many companies fail to understand the full cost of shipping from China and other low wage countries. Depending on the contract, importers may be responsible for picking the goods up at the factory door. Many foreign manufacturers will include FOB (Free on board) shipping.
Factors to consider include:
FOB – This is the price paid by the manufacturer to get the goods to port. Depending on the contract this may be an inland port. Once on the carrier, the purchasing company pays for the remainder of the shipping costs to the final destination (s) as well as import duties and taxes. All of these charges need to be considered to assess total shipping costs. Having a FOB contract and terms will guarantee all parties know the extent of their financial responsibilities.
Time to market – There is also a cost to any delays that occur in receiving goods for sale. When commitments and time lines are not met, profit is lost. Once a delay occurs, to get merchandise to market in time, some manufacturers have used air freight to expedite the shipping. Air freight can be 10x more expensive than shipping by container which can erode margins quickly.
In the past, many businesses operated on the assumption that their vendors were in compliance with the latest rules and regulations regarding their industry.Technology and materials were limited, so buyers worked with manufacturers who could produce the best product often without clearly defined quality guidelines or parameters.
American Manufacturing and Products
This article written by Al Veres, the VP of Operations at SFEG, originally appeared on the SFEG.com website on January 9, 2015
Back in the late 70’s and early 80’s, the big push was to move manufacturing to Mexico. Then in the late 80’s and early 90’s, Asia became the new home for manufacturing. In each of these phases mega companies like GE, Siemens, GM, Ford were the early pioneers making the moves to manufacture outside the US. Smaller companies lagged behind and never felt the full benefits of being able to capitalize on low labor costs and having the advantage of beating their competitors.
All this has changed with the rising labor costs in China and high shipping costs that drive extreme lead times, coupled with large inventory carrying costs. I recall my boss, President of a large corporation, telling us that one day the pendulum will swing back in our direction. Here we are in 2015 and the pendulum is here. The flood gates have not opened entirely but the trickle effect is starting to happen.