Overseas Manufacturing

Overseas Manufacturing: Pros and Cons You Should Know

Manufacturers in other countries are an obvious choice when deciding where to have your product made. But can overseas manufacturing deliver? We’ll discuss the advantages and disadvantages of offshore manufacturing to help you decide whether it’s the right outsourcing option for your company.

To keep your business ahead of the competition, investigate the opportunities for excellent productivity and a large network by conducting business outside of your home country.

To learn more, keep reading.

What is Overseas Manufacturing?

Overseas manufacturing is when product manufacture or assembly is moved to another country. Due to the significantly lower labor costs in other nations, most businesses are able to accomplish this.

When essential resources are more affordable in another nation, production may also take place overseas. China has long been regarded as the global hub for manufacturing.

Related Post: How to Source Products from Overseas?

Advantages of Overseas Manufacturing

Many business owners or product development teams choose to work with an overseas manufacturer right away.

It’s not difficult to understand when you look at these top five reasons why entrepreneurs, small businesses, e-commerce sellers, and product-focused companies choose an overseas partner:

1. Lower Production Cost

Overseas Manufacturing

The first step to operating a successful business is to keep production costs low without compromising quality, as any sane business owner will tell you. However, the prices of raw materials are typically comparable between countries.

So the main competitive advantage of overseas manufacturing is the cost of skilled labor. Many options for manufacturing in other countries offer your product the ability to go from raw material to finished product at a significant cost savings thanks to their skilled labor force and equipment.

Read More: Why Is Everything Made In China?

2. A Large Number of Manufacturers

Large clusters of manufacturers can be found in many foreign nations, giving product developers a variety of options. The source of 28.7% of the world’s manufacturing output in 2019—prior to the pandemic—was China, making this particularly true.

You get a sense of the variety and depth of businesses, from suppliers to factories to wholesalers, when you look into options in China. You have more options thanks to the expansion of manufacturing facilities in Mexico and other Asian and Latin American nations.

3. High-Volume Capacity

Production capacity is one of the most important benefits of manufacturing abroad. Manufacturers in other countries have the capacity to scale up quickly and produce large quantities of goods in a short amount of time.

Depending on the size of your order, you can save money by receiving volume discounts and paying less for raw materials. Just make sure you are aware of and able to fulfill their minimum order sizes.

4. Proximity to Suppliers of Raw Materials and Components

The distance between U.S. factories and the suppliers of the components or raw materials that go into their products typically causes a significant increase in costs and time to market. A mature supply chain and relatively established access to every kind of raw material are typically present among overseas contract manufacturers.

If you go with a “Made in the USA” product, you will likely face delays if your product requires raw materials or imported components. The pandemic demonstrated how supply chain breakdowns could seriously hinder the production of a good, particularly when raw materials or components need to be imported into the United States from their country of origin.

5. Plenty of Skilled Talent

In comparison to the United States, foreign countries frequently have more skilled manufacturing workers available. beginning in 2022, the U.S. manufacturing sector had 859,000 unfilled positions.

Although COVID-19 caused labor shortages abroad, they were not as severe as they were at home. Countries like Vietnam, Indonesia, and Thailand are actively preparing people from rural areas to become skilled manufacturing workers, taking a cue from their neighbors in Taiwan, China, and Korea.

Disadvantages of Overseas Manufacturing

Even with all of the benefits, overseas manufacturing comes with challenges. Here are five issues every product development team should be aware of before sourcing products overseas:

1. High Freight Costs and Longer Lead Times

Disadvantages of Overseas Manufacturing

One of the biggest drawbacks is that transportation costs are frequently higher in countries like China, which raises the price of some products in other parts of the world. It is significantly more expensive to import your product because foreign manufacturers frequently demand an additional fee for delivery outside of their country (i.e., import fees). Most of the time, these expenses outweigh the financial advantages of producing elsewhere.

Transporting goods back into the United States from other nations to meet domestic demand is time-consuming.

Shipping times and public holidays must be taken into account. For instance, businesses close down for a month or more during the Chinese New Year.

2. Problems With Customer Service

Consider what will happen if something goes wrong or isn’t up to par. What if your retailers or clients have to wait and are let down?

You’re left with the bill if a customer complains about inefficiencies or poor quality. When working with overseas manufacturers, you manage customer service by yourself. Whether the problem stemmed from manufacturing is irrelevant to consumers.

Your brand must be improved because people can see it.

3. Lack of Oversight

With overseas manufacturing, you will not be able to engage in many in-person meetings to negotiate terms, resolve problems, and oversee quality control. Building connections is more difficult when you’re not there, especially in cultures that place a high value on in-person interactions.

The savings of working abroad are frequently eroded by routine travel, which is frequently cost prohibitive.

Partnering with a product development partner or experts who can give your account a local representative is one way to get around this problem.

They will manage the local supply chain, act as your eyes and ears at the factory you choose, and perform quality control tasks just as you would if you were physically present. The best option is having a voice on location, but Zoom and Skype can be helpful.

4. Language and Cultural Barriers

You will likely find language and cultural barriers when you partner with an overseas manufacturer. To negotiate contracts and prices, comprehend workflows and ethics, and respect cultural differences can all be difficult when doing so.

Again, having a local representative on your team will ensure that nothing gets lost in translation. Employ or collaborate with a group that can offer a local who is well-versed in the culture and who can speak for you and look out for your interests.

5. Safety Risks

The protection of the environment and workers’ safety is frequently a top priority. Not every nation prioritizes environmental preservation and workplace safety to the same extent as the United States does.

Your due diligence procedures should include finding manufacturing partners with a reputation for ethical business practices, safety precautions, and environmental responsibility.

Make sure to collaborate with a product development company that has relationships with vetted manufacturers. They’ll be able to direct you so you don’t waste time and resources negotiating with manufacturers who accept more responsibility than is necessary.

Final Thoughts on Overseas Manufacturing

The global supply chain has seen significant improvements in technology, communication, and logistics over the last few decades.

Manufacturing overseas often makes financial sense, but you will need to be able to overcome the disadvantages that come with production in a foreign country.

If you decide it’s the best option for your business, there are many advantages.

Before deciding whether or not this is the right course of action, you must weigh all of these considerations.


What is Meant by Overseas Production?

Overseas manufacturing is when product manufacture or assembly is moved to another country.

What Are the Disadvantages of Manufacturing?

One of the most significant disadvantages of manufacturing businesses is the cost of machine and equipment maintenance.

What Are the Disadvantages of Domestic Manufacturing?

Domestic manufacturing may have higher product costs but it may have much lower shipping costs.

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