Overseas manufacturer vs. domestic: which is better for your business

Sme manufacturing

Developing products was something major businesses used to do in the past. But that is no longer the case.

Online and physical businesses of all sizes and types are developing products that they get manufactured from third-party factories. This can be incredibly beneficial for the people who want to get into the game but can’t afford to have a factory of their own. Also, it reduces many burdens.

However, there is a crucial decision you need to make for the mass production of your products. That is, will your manufacturer be domestic or in another country?

There are several advantages and disadvantages of both the sides. But, six aspects need to be considered the most. Therefore, let’s see how domestic and international manufacturers rate among those six aspects.

Cost Savings

Cost savings are undoubtedly important for running a business. You need to find a manufacture who can minimize your costs and help you maximize profits while still giving you quality products.

Overseas manufacturers based in countries like China can offer you potential cost savings; there is no debate about that. When you source your manufacturing to a factory in China, you can save on the materials, labor costs, and any additional expenses, which can really improve your bottom line. Not to mention, the overheads costs are also much lower in these facilities.

The reason why there is a significant difference between the per-unit costs is related to materials but mostly the labor wages. Since the cost of living in China is lower than in the US, you might see a massive difference. For instance, a factory worker in America gets $22 per hour and health benefits, whereas a Chinese worker gets paid $2 per hour.

The savings result in massive changes in your overall cost, and they can increase your profits.

Production Capacities

When you take a look at the biggest economies in the world, China is definitely up there. Among the major reasons for this is their constantly increasing production capabilities.

Chinese manufacturers have incredibly efficient processes. These manufacturers are well-equipped for handling the massive production needs of businesses around the world. That’s why you can see that many major brands have moved their production processes to China over recent years.

In a business, you always need to make sure that you will be able to handle everything if your company grows or sees an unexpected level of growth. Therefore, whether you’re thinking about placing big orders now or simply planning for your company’s future needs, overseas manufacturers can cater to your needs.

On the other hand, domestic manufacturers might be able to cater to small orders but not larger ones. They usually don’t have as big operations to handle massive orders.

Even if domestic manufacturers offer discounts on bulk purchases, you can get deals from overseas suppliers as well.

Services Available To You

When you’re looking into domestic manufacturers, you might see that they may not be able to meet all of your needs. Many of the local manufacturers are only limited to the products they are used to producing. Therefore, you might be able to get some of your products manufactured but not all of them.

Furthermore, you need to work with a manufacturer who is willing to work with you and custom make the products for your brand. It could be colors, stickers, labels, or anything else. This is known as white label manufacturing. With local suppliers, it’s not easy to get white label services.

With overseas manufacturers in countries like China, you can easily find manufacturers who can provide the products in your brand’s catalog. They have a wide range of expertise and the technology to match. Other than that, they can also make the products tailored to fit your brand.

Samples of Products

Before you give a massive order to a manufacturer and begin the process, you should get a sample of one product to see how well they can make it. The prices and other benefits are only good if you can provide quality products and build your brand’s reputation.

When you’re ordering a prototype or a sample of a product, the choice matters as well. Since it’s just one product, the local manufacturers might charge more than what it would normally cost you to get the product manufactured.

On the other hand, working with overseas suppliers can allow you to cut costs and save time even while getting samples of your products.

To ensure quality, you should also consider hiring inspection services to ensure you make the right decision. Here as well,product inspection services in China are cheaper than domestic.

Rate of Production

You may be aware of the phrase that goes something along the lines of, you should do it yourself if you want something done right. While that applies to many things in life, it’s not always applicable.

If you have a misconception that your products will get delayed when you outsource them to overseas manufacturers like many other entrepreneurs, you may need to think again. While it’s healthy to worry about it because delays can affect your brand’s reputation and costs, overseas manufacturers are capable of providing products on time.

Since they are overseas, they do have to account for things such as shipping time. But they make up for the time in their faster rates of production.

Since overseas manufacturers have much larger spaces than domestic factories, they also have a higher number of workers, more machinery, and more moving parts. This can make sure that they can complete your orders faster.

You can further decrease the lead time if you set up automated orders or share your inventory forecasts. This will be easier for your manufacturer as well.

Flexibly and Adaptability

The business world is not predictable at all. The situation that the coronavirus put everyone in might give you an idea of that. Therefore, your business needs might increase or decrease as the market demand for your products fluctuates.

If you’re currently looking to place big orders with your manufacturer, then find out if the same supplier will still be able to cater to your needs if your order size decreases.

Just as factories have a maximum limit imposed on the orders, they also have minimums. That is why you need to find a manufacturer who can meet your highest forecasted needs as well as the lowest possible requirements.

Due to factors like unionization and strict regulations, among others, the flexibility might not be great for domestic manufacturers. With overseas suppliers, you might have much better luck in adjusting your capacities to meet your requirements.