Basic Foreign Manufacturing and Sourcing Decisions
Foreign manufacturers are much cheaper than domestic sources; your costs of labor could be reduced by as much as 80 percent. This can allow you to funnel more money towards marketing and development for your products.
Some countries have also implemented incentives to attract companies, such as minimal taxes and fewer regulations or red tape. This allows you to start your operation quickly and scale the business as needed.
There is also a vast amount of workers available who are willing to do the labor for much lower wages; this keeps delays to a minimum since there are always employees ready.
However, foreign manufacturers have some issues too. Many still view foreign sources as inferior in terms of quality and other countries have fewer intellectual property protections, putting your business at risk. Shipping time can be weeks or even months instead of days, due to a lengthy customs and import process.
Ultimately, the decision lies in your manufacturing needs. There is no one right answer for all companies or all products. What makes the most business sense is dependent on your unique needs and your company goals. Do you sell a product which isn’t time-sensitive, or do you sell a highly-specialized product which has to be produced on a reliable timetable? There are a number of factors to consider in making the best choice for your business. Don’t go with the cheapest option; choose the one which will deliver the most value in the long-term.
Total Landed Cost
Most people focus mainly on the lowest unit cost. However, unit cost is just one piece of the total cost equation. One must consider other factors like the transportation, customs and duties, brokerage services, financing and insurance, etc. Other additional, unexpected costs are also to be considered. If customs decides to examine the freight, you should add in charges for the examination and local coordination charges. Also delays in the supply chain could result in expedited freight charges in order to meet the target delivery date.
Quality is an important part of any souring business. The quality of the product will definitely cause consequence over and above the unit cost. Hence, quality needs to be defined as issues in the quality of the product causes difficulty in addressing with a vendor through cultures, time zones and geographies. Poor quality affects everything downstream and can cause customer dissatisfaction. Defective product may need to be sold at a discount or written off as a loss thus effecting profit. Some souring agents like Classik International is a Global Sourcing Agent that stand out as offering a consistently superior product thus nurturing long term relations.
All the great products and quality will mean nothing if you are unable to get the goods to market. Therefore there must be a reliable transportation infrastructure in the country from the sourcing/manufacturing origin point to the port. Seasonal fluctuations and weather should be taken into consideration. It is important to have the flexibility with Global Sourcing Agent or sourcing consultant to implement alternate plans quickly in case the primary plan or transportation lane becomes unavailable.
Location proximity of a country may make it a more attractive to source goods. Proximity leads to benefits such as doing business in the same, or close, time zones. In addition, common cultural differences and similarities, including language, are known.
Governmental regulations can enhance or detract from the ease of doing business with a given origin. So, prior to making any sourcing decisions, it is necessary that all trade incentives or restrictions are evaluated carefully. Many government-sponsored publications, brokers or consulting organizations like Classik International are available to help educate an importer in the legal requirements of international trade.
Responsiveness of Supplier/ Global Sourcing Agent
Another important factor in sourcing decisions is the time to market goods. If your competitor has product available more quickly than yours, there are high chances for your lost market share and lost revenue. Therefore choose a receptive supplier who is able to accommodate changes.
In order to know what has been shipped choose a real time supplier who is also internet-savvy and information-sharing. Open dialogue and communication is imperative between the supplier and buyer. Late, missing or inaccurate documents can cause delays of customs clearance and, ultimately, delivery to destination.
These are some of the key factors to consider when making global sourcing decisions. Whether you are new to importing, or just considering sourcing from new origin region, choosing a proper Global Sourcing Agent with resources will help you make a well-thought-out choice. Once an informed decision is made, there is a huge opportunity to enjoy conducting profitable business in the global market.