Offshore
or Made in USA:
Which is Really Less Costly?
For many years manufacturing
in the U.S. was perceived as too costly, leading to an increase in companies
moving their production offshore. Today, rising labor costs, unexpected supply
chain disruptions, intellectual property and product liability risks and poor
quality have prompted a growing number of U.S. companies to take a closer look
at the hidden risks and costs of offshoring.
“Hidden” Risks and Costs of
Offshoring
The Hidden costs and risks to
companies include:
Product Liability Risks
Intellectual Property Theft Risks
Market Share Risks
Quality costs
Packaging costs
Freight costs
Inventory Security and Safety Risks
Infrastructure Operational Delays
Total Travel Costs
Wage inflation and currency appreciation
Bringing Supply Operations
Back to the U.S.
The Benefits to companies
include:
Quicker time to market for new products
Faster response time to deliver products
Better product quality
Quick Direct Communications with supplier
Reduced intellectual property, copyright, trademark infringement risks including counterfeit products
Reduced risk of currency fluctuations
Better collaboration between Research & Development and manufacturing operations
Reduced inventory costs
Lowered operating costs
No international travel costs
Watch this breaking news story about Made in America: Click Here
KenWalt Die Casting Company
An American Die Casting Company
High quality low cost Aluminum and Zinc Die Castings
100% Made in USA!
Consider Both Known and
Hidden Risks in Sourcing
It's important for companies
to consider in their company's sourcing strategy and decisions what they are
risking by shifting production overseas, including both known and hidden risks:
Will the offshore supplier be a 'true business partner'?
Can you communicate quickly and directly to handle your needs?
Will your intellectual property and new products be safe?
Are you risking market share by offshoring with an unknown
supplier?
Do they share your company’s commitment to ethical business
standards, legal compliance, intellectual property rights protections and
anti-corruption?
Do they have the financial strength and stability to meet your
current and future requirements?
Do they have sufficient managerial talent, skilled labor and
systems to meet the needs of your company and your customers?
Will they be able to grow with your company to meet the needs of your
company and your customers?
Can they ensure and document material content and parts meet
contractual standards (e.g., aluminum
alloy specifications, precision tolerances, quality specifications, etc.)?
Will they be able to grow with your company and meet green
manufacturing and sustainability requirements?
Your company's total risk analysis should also include:
Natural Disasters Risk: An evaluation of the foreign
country and location of the supplier for potential
natural disasters such as earthquakes, tsunami's, volcanoes,
hurricanes/cyclones and seasonal flooding.
Manmade and Technological Risks: These
include riots, boycotts, quality of electrical power, telephone and other
utility systems, water, sanitation, and transportation, infrastructure, proximity
to hazardous waste sites and nuclear power generation stations, etc.
Compliance Risks: Such as the consequences of
not meeting legal, tax, accounting, environmental and other regulatory
requirements, as well as compliance with associated ethical standards of
business practices.
Insurance Risks: Insurance of offshore suppliers
who may potentially suffer a loss causing a supply chain disruption and income
loss to your company.
Political Stability of Country: Consider
the country's stability such as trade policies, embargos and regulatory laws.
Economic Stability of Supplier: Risks such
as raw material dependencies and availabilities, labor disputes and worker's
right's.
Lost Opportunities: Supply chain disruptions as
well as quality problems can cause potential lost customers and orders.
Product Liability Risks: You may have no recourse to
collect damages for product liability claims, product recalls, breach of
contract or other legal suits.
Quality Risks: These risks include the costs
of resourcing or reworking parts that don't conform to
specifications, including returned parts due to product recalls.
Intellectual Property Risks: Trademark,
copyright and patent infringements, including suppliers stealing designs and
selling customer's products.
Transportation Risks: Products damaged during
shipment, port strikes, piracy, and emergency air freight costs to obtain
critical parts.
Reputation Risks: Damage to your company’s brand
and reputation and associated restoration costs, including public relations
expenses.
Marketshare Risks: By
offshore sourcing your die castings you run a very high risk of
creating a new competitor for your products. Your products can be
copied and developed using your specifications, your marketing, and
even you own tooling. Imagine parts made from your tooling being sold
in stores under a foreign company's name! And good luck trying to take
legal action in another country where betrayal and covert actions are
acceptable.
Technology Risks: Any
time you relase proprietary or secret technology to an offshore
supplier, you run the risk of finding your technology being shared with
your competitors - at home or abroad.
Miscommunications: Even
simple miscommunications can add extra costs to the process such as
casting design changes, tooling design changes, shipping instructions
and shipping costs, machining and other secondary processes. And don't
forget commonly overlooked travel time and expenses which add to part
costs. Overcoming language barriers, distance and culture can be
expensive.
Long Lead Times: Long
offshore production lead times and delays are common. If a company's
product demands increase or decrease, commitments to overseas suppliers
aren't easily changed and may not be accepted at all. Short-term
cancellations are virtually impossible.
Cheap Dies and Frequent need for New Dies: Cheap
overseas die cast molds made from sub-standard die steels, and with no
guarantees of tooling life, often fail prematurely, forcing you to pay
unnecessarily again and again for new tooling.
Legal Liability Risks: There
is a high risk of liability for any company using offshore die casters
and other overseas suppliers using uncertified aluminum or zinc alloys
that may contain dangerous amounts of lead or other toxins. Such
materials incorporated into products can lead to product failures and
product recalls and can amount to high risks and costly legal
liabilities.
Payments Due Before You See Products: Due
to advance payment requirements, you must pay for parts first before
you even get to see them and you have no right to review shipments for
quality or quantities. You must pay upfront and take what you get.
Bad Quality Castings - No Responsibility: Not
only are bad quality castings common, but you have to pay for castings
before you receive them and you tak the risks and financial
responsibility for bad quality casting supplied by offshore sources.
Click Here
for more about "U.S. Manufacturing Making Comeback - Some
exported jobs return home amid rising costs of Chinese labor, shipping."
Click Here for more about the "Risks of Protecting Proprietary Information in China."
Click Here
for insights into "American Manufacturing and U.S.
losing 1.9 Million Manufacturing Jobs due to the Trade Deficit
with China". Click Here for more about "Hidden Costs Bring Manufacturing Back to U.S. Shores."
