Outsourcing manufacturing in the U.S. continues to show many signs of steady growth. For example, according to the National Association of Manufacturers (NAM), American manufacturing contributed $2.33 TRILLION to the U.S. economy during 1st quarter of 2018.
To put that figure in perspective, American manufacturing output alone would be the 9th largest economy in the world. Consequently, only eight other countries, including the U.S. would rank higher in GDP. (Source: Bureau of Economic Analysis, International Monetary Fund)
Additionally, according to the Department of Labor, since 2010, employment numbers in the U.S. Manufacturing sector continues to show healthy growth since the Great Recession (Chart retrieved from the Department of labor Employment, Hours, and Earnings from the Current Employment Statistics survey).
Top Benefits of Outsourcing Manufacturing in the U.S.
So what does this information mean for your company?
A burning question for all companies outsourcing manufacturing includes: do we outsource manufacturing in the U.S. or find a cheap labor country?
Well, outsourcing manufacturing invites many challenges, domestically or abroad.
A great deal of vulnerability comes with outsourcing manufacturing. It takes incredible trust to contract with another company.
If the product is manufactured incorrectly, who pays for that mistake?
Though outsourcing manufacturing in the U.S. is off its peak, plenty of strengths and benefits exist with American manufacturing.
Additionally, many industries and products still make cents to manufacturer in the USA in spite of the fierce competition from cheap labor countries.
Yet, plenty of risks exist beyond your control when importing products from overseas.
Below includes a number of issues to address with outsourcing manufacturing overseas:
- Fraud & stolen intellectual property
- Language barriers
- No ocean to cross
- Low minimums
- Cultural differences
- Labor practices
- Shorter lead times
- Unpredictability & Uncertainty
Let’s dig a little deeper.
#1) Fraud & Stolen Intellectual Property
When purchasing products from other countries, are you truly in control?
Outsourcing manufacturing to a trusted partner is crucial.
What if your CAD drawings, proprietary processes or intellectual property end up in the wrong hands?
Do you know a good lawyer in that country?
Fighting copyright or patent infringement abroad invites steep challenges. Actually, it can become a nightmare.
Especially if you possess patented products.
Additionally, protecting your intellectual property also plays a critical role with outsourcing manufacturing.
However, protection for U.S. patented products only extends with the United States. According to the U.S. Patent and Trademark Office, you must apply for patent protection in that country you plan on outsourcing manufacturing operations. Most countries have their own patent law. So, even though you spend a small fortune protecting your product here at home, your patent fails to protect you beyond U.S. borders.
- Patent Protection
- Violated NDA
- Copyright and Intellectual Property Infringement
- Money Exchange Fraud
Do a Google search for “Chinese Knockoffs” and you will find an interesting list of articles.
For example, click here to check out “The 46 Craziest Chinese Counterfeit Products” from Ranker.com.
#2) Language Barriers = Lost in Translation
Ever have a miscommunication or a “lost in translation” with a friend or relative over a text or email?
Sometimes we still have a misunderstanding with close friends via digital communication like email or text?
Can you think of situations where you misunderstood a text or email from a spouse, friend, parent, a child or someone you know intimately?
Email or a text causes challenges. Was the sender being funny? Serious? Were they joking or angry?
You cannot sense the tone with digital communication.
Now combine that with translation challenges.
Especially with slang, lingo or even industry terms that can cause mistakes.
Now combine those communication challenges with someone in another country. Who does not know you and is unfamiliar with your language. Your lingo. Your sense of humor.
What if critical details translate incorrectly?
- Raw material
#3) No Ocean to Cross
Ever cross an ocean via ship? Plenty of variables and perils exist that include:
- Weathering storms = Bad storms = Tsunamis
- Cargo Insurance
- Time Delays
- Dock Time
- Long lead times
- What if product is manufactured wrong?
- Can you get a prototype first?
- Import fees
- Broker fees
- What if your products get seasick or fall overboard?
- Lastly, how about Sharks – Big Sharks – that bite – really hard
Wouldn’t life be much easier if we could all predict buyer behavior or customer purchasing patterns?
Unfortunately business life doesn’t work that way. Events occur where a customer suddenly needs products….NOW!
Sometimes it seems customers need their products…….yesterday.
When you are on the buying side and need product right away, vendor flexibility becomes critical.
Furthermore, it helps your business tremendously when flexible vendors rush orders for you.
Partnering with strong allies who change gears immediately for you offers tremendous benefits.
#5) Low Minimums
For all of the fees, hassles and challenges with importing, odds are you need to purchase large quantities to make sense.
Yet, what if you just need a prototype?
How about a temporary product with a short production run?
What if you do not need a container load of product?
Is the low price worth purchasing product that you will never sell?
Is dead inventory sitting on the shelf an asset or liability?
Turnover your product fast. Keep it moving. Relentless pursue positive cash flow. Take advantage of domestic manufacturers to help your cause with turning over inventory quickly. Utilize their warehouse space to help minimize your overhead costs.
Many years ago I purchased a container load of product that had a long lead time. It took over 9 months to receive the product. By that time, my customers went else where. I was stuck with tens of thousands of dollars in unsaleable product. 100% my fault. A painful lesson learned.
“Made in America” symbolizes high quality. Outsourcing manufacturing in the U.S. means products are produced by your neighbors, relatives and members of your community.
Though Patriotism is a great reason to buy “Made in USA” products, there needs to be more.
Consequently consumers and businesses speak loudly with their wallets and credit cards.
Put out a bad product however “Made in USA” only goes so far.
Yet, partnering with a U.S. manufacturer allows you to work closely ensuring the high quality that your customers expect.
#7) Cultural Differences
Do you have certain businesses or products that you prefer not to support for various personal reasons? Possibly you don’t agree with product content. The company branding message. Maybe you just don’t care for what the company represents in your eyes.
When you purchase from a foreign manufacturer, are you certain that you share the same values? Do they have the same value on safety as you? Quality?
Workers rights also fall into this category. Do we hold companies and manufacturers in other countries at the same standards as here in the U.S.? Hot topics in the U.S. currently include the $15 minimum wage, paternal leave, LGBT rights, sexual harassment and pay gap for women.
Consequently, as American consumers, are we aware of where China stands on a number of these important issues?
In addition on a personal note, ever heard of the Yulan China Dog Meat Festival? (Did I really just type “Dog Meat Festival”??) According to this article from Marc Ching at Forbes, this community event sounds…….deeply disturbing (I need to go hug my dog now).
#8) Labor Practices
This ties in with the last point. Along with cultural differences, do you truly know the labor practices of the company where you have decided to outsources your manufacturing process?
Do foreign outsource partners share the same safety concerns for their employees that you do?
Wages? Benefits? Working conditions? Integrity? Injuries? Child labor?
American manufacturers follow state and federal laws on all of these topics.
For example, states in force minimum wages. Additionally OSHA patrols safety concerns at American manufacturers.
#9) Shorter Lead Times
Did we mention no ocean to cross? For example, need something shipped overnight from your domestic manufacturer? No problem.
In addition, they might even be able to ship a package with regular ground service and have the package arrive to you in a timely fashion. At a low cost as well.
Isn’t the name of the game to put product in your customers hands as fast as possible?
Reducing lead times helps increase inventory turnover, lowers inventory levels and drastically improves cash flow.
#10) Unpredictability & Uncertainty
Lastly, have you been following the stock market lately? Markets seem to despise unpredictability and uncertainty.
Even though entrepreneurs and business owners are risk takers by nature, unpredictability and uncertainty certainly add tremendous stress.
However, minimizing risks makes live much easier. Especially when unpredictability and uncertainty can be reduced.
Outsourcing manufacturing in the U.S. offers opportunities to drastically increase stability.
Domestic vendors eliminates the challenges of dealing fluctuating currencies.
Partnering with U.S. manufacturers also avoids of dealing with political unrest in those countries. Did you just roll your eyes with that comment?
Though political times are heated here in the U.S., we still live in the greatest country on the planet! That’s just our humble opinion.
Wrapping It Up
Thank you for reading our post.
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