Transitioning to manufacturing overseas can be a game-changer for your company, and can give you benefits such as lower costs, access to specialized labor, and proximity to new markets. The timing of when you make that transition can be key when deciding to take this next step. Moving too early could lead to logistical challenges, while waiting too long could result in missed opportunities.
Below are key indicators that can help businesses determine the right time to consider international manufacturing.
When Domestic Costs are Too High
Probably the largest reason companies explore international manufacturing are the prohibitive domestic costs of manufacturing.
But why are domestic prices higher than the Chinese or other international prices?
These can range from a variety of causes. Higher labor costs is a large contributing factor. Material availability is another large one. China has a surplus of materials, some of which can’t even be found in other countries like some rare earth materials. Some industries have unions that can artificially raise domestic prices to the point they are unbearable.
There are several potential contributing factors that can raise domestic prices, and they can be difficult to circumvent unless you manufacture overseas.
When Scaling Production Becomes a Necessity
If your business is rapidly growing and demand is outpacing domestic production capacity, moving manufacturing internationally can offer a solution. Countries with large industrial infrastructures can handle high-volume production, allowing you to meet customer demands without delays.
China has some of the largest manufacturing centers in the world, allowing them to be a prime location for scaling your business.
Access to Specialized Skills and Technology
Sometimes some countries specialize in specific fields of manufacturing. Countries like China and South Korea lead the world in electronics production due to their skilled labor force and infrastructure. India, Vietnam, Cambodia, and Malaysia are well-known for their textile expertise, often making them the best choice for companies in the fashion industry.
When Expanding Into New Markets
If your business is looking to expand its presence in foreign markets, localizing production can offer a strategic advantage. Producing goods closer to the target market can reduce tariffs, lower shipping costs, and speed up delivery times. Having your product made in China if you are looking to expand to Europe can be more cost effective than manufacturing and shipping from America.
Improving Existing Product Lines
If you have a product you already are selling there may be room for improvement. Exploring what overseas options there may be for your product. You may find more cost effective or quicker lead times by manufacturing overseas, or in some cases, better quality for your items.
Deciding when to move manufacturing internationally is a strategic decision that can be daunting. At Global Trade Specialists, we pride ourselves on helping clients at all stages of their business help to successfully and efficiently import from China. Whether driven by rising domestic costs, the need to scale production, or an opportunity to access new markets, timing your move carefully can lead to increased profitability and long-term business success.