When deciding on manufacturing abroad versus domestically, there's no simple answer: You need to assess your business's context, goals and needs. Cost alone isn't enough of a basis for your decision. You also need to consider variables like logistics, reliability and manufacturer reputation. All of these factors affect your bottom line, and the best option will look different between scenarios. To determine the right path forward for your small business, ask the following questions:
1. What Will My Future Costs Be?
Assess your business's current costs and examine the road ahead. How do you expect your manufacturing costs to change over time? Many small companies are reshoring their efforts due to rising expenses overseas. Harold Sirkin, senior partner at Boston Consulting Group, has seen at least 200 companies return to the United States in the past several years, reports NPR. Small business owners should monitor these trends and continue to study the overall market to determine where they want to manufacture products.
2. What Are the Customs Laws?
Trade regulations between the U.S. and other nations may be complex, so it's important to research customs laws upfront to be sure your business is able to comply with them. According to the Small Business Administration, U.S. safety and quality control laws are stricter than those in some other countries. Be mindful of these differences before committing to a manufacturing partner overseas.
3. What Are My Product Development Plans?
Want to conduct a trial manufacturing run before committing to a larger batch? Entrepreneur recommends working with a U.S. company early on in your process. Instead of committing to a large inventory with this company, you can make iterative improvements to your shipments as you source customer feedback. Your line item expenses may be higher, but you can take the time to refine your strategy, catch problems early on and avoid wasted effort. Once you've established your market, you can consider moving overseas.
4. What Hidden Costs Are Likely?
At first glance, manufacturing overseas may seem cheaper. But there could be hidden costs, such as shipping, The Rodon Group notes. Other concerns include safety, reliability and customer service. You'll also want to understand the support process: who will answer your questions, and from where, when something goes wrong. Hidden costs are often business-specific and challenging to detect. Thoroughly research as much as you can, and consider working with an industry consultant to help you uncover the unknown.
Know what's important to your business, now and in the future. Make sure you understand costs, customs laws and other business-specific considerations. From there, you can make a manufacturing decision that can carry your business to long-term success.
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