When choosing whether to have a product manufactured at home or overseas, businesses need to take into account the pros and cons of each.
By taking a thorough inventory of the advantages and disadvantages that can come with domestic and international manufacturing and weighing them relative to your product and business model, you’re much more likely to see a positive ROI.
Domestic manufacturing advantages
Choosing a domestic manufacturer brings many benefits that, for certain businesses, may far outweigh any drawbacks. These benefits include:
- Easier communication. When you and your manufacturer speak the same language, you’re less likely to experience challenging, and potentially costly, communication breakdowns.
- Positive press. Choosing to manufacture at home can set your company positively apart, and the Made In America stamp can be a valuable marketing tool.
- Higher labor standards. Generally speaking, U.S. manufacturers have higher and better-enforced labor standards to protect the well-being of workers.
- Positive perception. Because the American public tends to perceive American-made products as being of better quality than products manufactured overseas, they are more willing to pay more for them.
- Faster fulfillment times. By going with a domestic manufacturer, there’s a good chance you’ll experience a quicker turnaround time than you would by outsourcing your product overseas.
- Reduced shipping costs. Provided your product is intended for the domestic market, you won’t incur the hefty transport costs and customs fees that come with having your product shipped to the U.S. from overseas.
- Flexible payments options. While international manufacturers often accept only a few payment methods, and in some cases, require full upfront payment from American companies, domestic manufacturers almost always offer flexible financing terms.
- Better ability to “mind the shop.” Businesses who choose a domestic or even local manufacturer are much better able to see firsthand how a facility operates and see how their product is produced.
- Greater IP security. The U.S. has some of the strictest intellectual property rights protections in the world, so manufacturing a product domestically may decrease the chances of intellectual property theft.
Domestic manufacturing disadvantages
- Rarely cost-competitive. With few exceptions, costs for domestic manufacturing are significantly higher than costs for international manufacturing. This is because U.S. labor laws mandate minimum wage for workers and cleaner, safer facilities.
- Limited production. U.S. manufacturers tend to have more limited production capabilities than their international counterparts and often are not set up to produce high volume orders.
International manufacturing advantages
Coupled with global macroeconomic trends, the downsides to U.S.-based manufacturing have contributed to the mass movement toward international manufacturing that began more than 30 years ago.
- Reduced overall costs. Manufacturing a product overseas is almost always significantly less expensive than manufacturing it domestically.
- Greater variability. There are fewer options in the U.S. for manufacturing a wide range of products at wide margins of quality. In China, for example, companies can manufacture premium tech products as well as cheap, low-quality toys.
- Easy to find. International manufacturers can be found with very little effort using well-known platforms.
- High-volume capability. International manufacturers are equipped to efficiently produce high volume orders in a single production round.
- Cultural divides. Differences in cultural norms may be difficult to navigate and language barriers may complicate effective communication.
- Limited oversight. Without hiring a third party or making a trip to the facilities, there’s no way to keep an eye on how the facilities are run or to witness the production of your product.
- Negative press. Depending on the size of your business, choosing to manufacture your product overseas may generate negative press and adversely affect your company’s reputation and sales.
- Increased shipping costs. When products intended for domestic sale are manufactured overseas, shipping costs rapidly mount to transport them to market.
- Though experienced overseas manufacturers are expert in helping their domestic customer mitigate these costs, customs are an important part of the equation in choosing whether to have a product manufactured at home or overseas.
- Less secure intellectual property rights. Without the stringent protections of U.S. intellectual property laws, it’s more likely (though still uncommon) that your idea might be stolen.
At Pivot, we’ve helped hundreds of businesses choose an affordable manufacturing solution that’s right for them. We have more than forty years of experience partnering with businesses to help them successfully design, manufacture and launch new products. We own factories in Manilla and the US and can help you avoid any disadvantages with outsourcing manufacturing. Let us help your company scale for success. Contact us today to find out more.