If you’re considering manufacturing a product, you should be aware of your options before defaulting to overseas factories. Here are five things to know about U.S. manufacturing so you can make the best decision for your business:
1. It’s not as expensive as you’d think
There are a lot of bottom-line benefits to keeping your manufacturing close to you, especially if you’re trying to sell a new product. The most apparent cost savings come from shipping and logistics because you avoid international freight and customs fees. However, local manufacturers are also always looking for new ways to help you save money and some have been able to improve their processes enough to become similar in price to Chinese manufacturers.
2. Using local manufacturers protects you against variability
Especially selling new products, there is a lot of variability that can hurt your business if you’re not adequately prepared to manage it. Having a local manufacturer gives you more flexibility to prepare for variations by keeping your lead time short. The flexibility allows you to more easily adapt to fluctuations in your supply and demand, gives you freedom to change the product quickly and prevents additional costs that could come from obsolete inventory.
3. Manufacturers are not designers or developers
A very common misconception people have is that manufacturers should be able to take an idea and do everything necessary to get it ready for manufacturing. Though there are a few companies who have both design and manufacturing capabilities in-house, the expertise required to design something and the ability to make it are two very different things, and typical manufacturers make money by building things, not designing them. If you have an idea, it’s important to realize that the step before manufacturing is design and development, and it’s not realistic to expect that you can bypass the design step by going directly to a manufacturer.
4. Manufacturing is not dead
Many people unfamiliar with the industry have the belief that manufacturing is dirty, dull and dangerous work, so nobody wants to do it. However, this couldn’t be further from reality and manufacturing is very much alive and well in the U.S. There are domestic manufacturers for just about any product you can think of, and there has been incredible growth in the industry due to new technologies and processes.
5. There is a growing skills and labor gap in the manufacturing industry
Despite the innovations and advancements in the industry, one of the biggest frustrations about manufacturing in the US comes from the lack of interest from younger generations in manufacturing. The manufacturing industry is comprised mostly of older generations who are approaching retirement, and there are not enough young people entering the market to fill the gap that is being created. Because of this, it’s getting harder and harder to find manufacturers in the U.S. ,and prices will continue to increase until that gap is closed because there’s simply too much demand and not enough labor to do the work.
Related article: 5 Tips for Manufacturing in China
Companies are recognizing that with the use of the refined metrics of total cost of ownership (TCO) to uncover the hidden costs and risks of offshoring and reducing costs with sustainable strategies such as robotics, improved product design, innovation, automation, and LEAN they can increase competitiveness and manufacture in the U.S. profitably.
The Reshoring Initiative found that combined reshoring and foreign direct investment (FDI) added 77,000 jobs in 2016, surpassing the rate of offshoring by 27,000 jobs! In comparison, an average of 220,000 jobs were offshored each year from 2000 to 2003.
Reshoring Initiative 2016 Data Report: The Tide Has Turned http://reshorenow.org/content/pdf/Reshoring_Initiative_2016_Data_Report.pdf
The Reshoring Initiative Can Help
In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the not-for-profit Reshoring Initiative’s free TCO Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/tco-estimator/
I wholeheartedly agree! The TCO Estimator is a great tool! It’s important to understand the full cost of manufacturing overseas vs domestically and most people are surprised at how competitive it can be to manufacture here. There are also other tools available to those trying to make the decision of whether to produce overseas or domestically for new products, or those who don’t currently have processes overseas. If anybody is interested in those, please feel free to contact me!