Success for United States business owners in the domestic and international markets is becoming increasingly difficult. To succeed using a capitalist model of business, complete efficiency must be achieved — efficiency that can be determined by a full-scale analysis of the company, including a strong look at the supply chain. Often this reveals that costs could be drastically cut while maintaining quality by shifting from domestic to overseas manufacturing. This can be a daunting task, but by employing thorough due diligence any company can choose the right factory fit for them.
A company should begin by researching factories available to them. Using China as an example, a quick Internet search turns up a plethora of sources where information on factories can be found. China is one of the most popular and cost efficient overseas manufacturing options chosen by U.S. business owners. However, the decision cannot be made via the Internet alone, so the next step is to make a short list of possible options and begin contacting owners to ensure they meet the goals of the company, as well as to arrange a visit. It is imperative to visit the factory to confirm all prior contact and negotiations, and solidify the contract. Before factory visits, many criteria must be met — price, location, speed of production, and delivery are all factors to be considered. One factor easily overlooked by companies is the size of the factory, and its true production potential.
Why is factory size important in overseas manufacturing? Factory size is highly important because the utilization of space must be flexible for a company to achieve efficiency. This is to say that when the company needs to place relatively large orders, or experiences growth, the factory must be able to absorb these manufacturing requests without delay in production. Conversely, if the company is experiencing shrinkage, or relies on seasonal sales, it is ideal that minimal space is wasted. When space is wasted like this, the factory is not achieving its manufacturing potential. This incurs negative results for both the company (who is not reaching expected levels of sales) and also for the factory owner (who is dependent upon high volume orders). To avoid such a situation, it is very important that a business have a solid expectation of what manufacturing orders will be from quarter to quarter. This brings back full circle the point to be aware of needs within the company and market.
Switching to overseas manufacturing in China, and choosing an appropriately sized factory can mean big returns for United States companies looking to achieve efficiency. It can also spell disaster and massive headaches if due diligence is not conducted prior to contract signing. For these reasons many companies look to a third party to help guide them in their search for the right manufacturing plant. A third party can offer personal support and act as a go between. Further a third party will have the client interests in mind, and will help U.S. companies choose trustworthy and well-vetted factory owners. ITI can be that liaison. We’ll help you choose the right sized factory for your product. Contact us today!