While there has been a push in some industries to produce goods at home, more and more businesses are looking to improve their bottom line by moving production to Asia. We know that production can be less expensive, but the reason why companies manufacture offshore goes beyond affordable labor. Let’s explore the many reasons offshore production is an attractive option business for many sectors.
Cost
Cost is the reason that many companies become interested in offshore manufacturing so we will start there. In China, factory workers are demanding far less pay than workers in the United States. Paying for skilled workers in the United States and other countries is one of the biggest expenses a company must consider.
In addition to the cost of labor, the cost of goods competitive. China has a very well-developed infrastructure. Over the decades they have fast-tracked the sourcing supply chain of raw goods from local providers. Manufacturers buy in bulk. They have perfected ordering and receiving the materials needed in the most cost-efficient manner.
Skilled Labor
A Delotte article cites a study that highlights a manufacturing skills gap estimated to be as many as 2.4 million positions unfilled between 2018 and 2028. \
This means American manufacturers would be facing a shortage of skilled workers soon. With baby boomers retiring and millennials who have gotten away from labor-related jobs, the thinking is there will be a shortage of workers who can do the manufacturing work here at home. Taking these numbers into consideration, considering offshore manufacturing makes sense.
Access to Suppliers
Because of the way China and other areas of Asia has set itself as a major manufacturing hub, many suppliers have made their home in China. This allows the manufacturers in China to have quick access to some of the most specialized supplies. Some of the supplies that they have access to may not exist or be easily sourced domestically.
Proximity to Sources of Raw Goods
If you are manufacturing products that require raw goods such as rubber, manufacturing offshore simply makes sense. Southeast Asia is the most abundant source of rubber. Choosing to manufacture where goods can be sourced locally will allow for faster production as well as more affordably produced products.
Risk Mitigation
When the decision is made to manufacture goods offshore there is also risk transference, provided you are dealing with a reliable factory or manufacturing liaison. When your work is being done in China you avoid the risks and reduce the costs associated with labor, equipment purchase, and sourcing raw materials. Again, this is a good way to transfer risk if you are dealing with a factory that is known for following through on the timely delivery of high-quality goods made to your specifications. Choosing the right factory will help you transfer risk with confidence.
Broadened Horizons
Manufacturing offshore is an opportunity to grow, learn, and have an “international” mind set. International manufacturing carries the possibility to open up opportunities that you previously had not thought of. Selling into different countries in Europe or Australia, for example.
Making the Move Offshore
When you look at these motivators for taking manufacturing offshore you can see why so many companies make the move. For many companies the move offshore makes good sense. How do you know if your company is one that could benefit from offshore manufacturing?
This is a hard question. How do you know this is the right move for your business? This is where ITI Manufacturing comes in. Since 1974 ITI Manufacturing as been successfully working with businesses to help them determine if offshore manufacturing is the right option.
ITI can we you consider all of your options, choose the right factory, and assist you in the transition so that you don’t struggle with some of the common, but major speed bumps along the way.
ITI Manufacturing teams with US companies to help determine first if their business and product is right for outsourced manufacturing. Next, ITI helps you find the RIGHT factory. ITI has helped hundreds of clients from a verity of industries. ITI Manufacturing can help you as well.
Call us at 281-242-7030 to discuss your outsourcing options.
