Business :Deciding Between Domestic or Foreign Manufacturers

By Karina Popa

If a company wants their new product to be mass produced and sold to the public, they have to decide where and how to have it manufactured, since this is critical to the success of their business. They should consider several factors in deciding between US-based and overseas manufacturers.

Depending on the company's product and needs, they can make a decision based on the things offered by local or foreign manufacturers.

Domestic Sourcing

If the company has a specialized, in-demand product that has to be delivered right on schedule, it would be best to choose domestic sources. Products manufactured in the US have high standards in labor and manufacturing, making sure of a good work environment, safe employees and most importantly, a better quality product. This is critical as compared to the disasters that happen at overseas factories. This makes it a more ethically sound choice, and lets the company stay away from public relations disasters - like for example, a poor working conditions expose.

In addition, local manufacturers maintain strict intellectual property right protections, meaning, no one can copy or mass produce it. All Americans speak English, so there is no language barrier that will cause confusion in terms of communications.

Since there are no customs and shipping time, it will be faster to ship orders. In case there are any problems, it will be easy to meet with the manufacturer in person.

Lastly, choosing a domestic manufacturer lets a company use a valuable marketing tool such as the "Made in the US" stamp.

The disadvantage of choosing domestic sourcing has something to do with the costs involved. US labor laws require higher wages, plus better facilities, as compared to other countries, increasing the expenses on payroll and infrastructure.

Foreign Sourcing

Overseas manufacturers are a lot cheaper than domestic manufacturers. Labor costs could be reduced up to 80%. The money that can be saved can be channeled towards product marketing and development.

A number of countries have given incentives like lower taxes and less regulations/red tape to attract more companies. This will enable them to quickly begin operations and scale the business whenever necessary.

Also, there is a large number of workers who are willing to work for much lower wages. This minimizes production delays since employees are always readily available.

However, there are also a number of issues with foreign manufacturers. A lot of discerning consumers consider them inferior when in comes to quality, and some countries have few intellectual property protections, which pose a risk for businesses. Moreover, shipping can take weeks or months instead of days because of the long process of customs and importation.

Finally, the decision depends on a company's manufacturing requirements. Since there are several companies and different products, there is no right answer. Companies have their own unique needs and goals. Is the company selling a highly-specialized or a time-sensitive product which needs to be produced on a reliable timeframe?

There are many factors to take into consideration when making the best choice for a business, so companies should not choose the cheapest alternative, but rather the manufacturer that will give the most value in the long run.

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