In today’s world we need to reconsider onshoring to avoid the ever-growing risks of doing business with foreign sources. The more obvious reason right now is minimizing medical risks from long airline flights and crowded travel. China’s labor costs are rising. Intellectual property loss and product copying has been an issue and continues to grow. Your inventory being held on a slow boat from Asia, hurts cash flow while shipping by air is expensive. Bottom line, companies are successfully manufacturing closer to their design center and nearer to customers. It may be time for you to consider moving in that direction.
In years past many non-military OEMs assumed the lowest cost of manufacturing was to outsource to Asia for the cheap labor. They simply absorbed the additional travel costs and IP risks as the cost of doing business. Not anymore. The margins are small enough and the security risks are getting greater. Agility with security is the way to go for product development and the manufacturing cycles.
Partnering with local firms for engineering support and responsive manufacturing is the way of the future. The various staffing levels at your company can best utilize their time with short trips to the partner companies, rather than expensive travel and time away from the office. It is not just the executives that need to visit the external partner companies. Closer communication is needed at all levels.
Certainly, virtual meetings are rapidly growing in importance because they are very convenient for immediate dialog and group communications. That is the one positive result of our new way of doing business. We are fortunate that we have the remote communication technologies, and it is getting better every day.
Automation is driving fabrication and assembly labor costs down. That makes regional and local supply possible. Finding good global companies with resources near you, is the best of both worlds. Vario Systems is a great example of this. They are in China, Sri Lanka, Europe, and Texas.
Also let us look at the true cost of doing business internationally that is often overlooked when companies make decisions based strictly on purchase order dollars. The “Other Costs of Goods Sold” are sometimes not considered when a purchasing agent is rewarded based on purchase order cost savings only. Consider additional costs in your equation when doing business overseas, such as, travel costs, tariffs, language, IP protection, RMAs, warranty, customs, Chinese New Year, significant time zone differences, and cultural norms. Your best value is realized when you look at the big picture and the mutual strategic relationships.
Watch this video and multiple Lunch & Learn videos on my web site and YouTube channel for the Electronics Alliance.
Call or email me and I will be happy to help you find the right strategic source for your specific design and manufacturing needs.