Product Features vs Price Traditionally when sourcing a product, the key factors associated with competitive…
What to Keep in Mind
- Does offshore production always mean loss of US jobs
- Environmental and Worker Rights issues
How to determine if makes sense
- Weight vs cube issue. Shipping costs.
- Material cost
- Labor cost
- Technology transfer – risks
- Intellectual property
- Typical US vs Offshore costs by industry
- Own investment in plant and equipment vs contract manufacturing
Picking a manufacturing partner
- Use of a trade partner
- Financial ability of partner
- Management ability
- English skills
- Vertical or distributed
- Compliance with UN labor guidelines
- Will what you don’t know affect you? How to get comfortable with distributed manufacturing.
- What kind of goods are being produced where
Things that will get you in trouble
- Customs issues
- Taxes on ingredients and raw materials exported from the US
- Quality control firms – useful or not?
What to worry about and what not to worry about
- Worker Training
Most common problems
- Assumptions that are not spelled out
Paying for goods
- Wire Transfer
- Credit Terms
That free trade results in benefits to both the exporter and the importer, is generally not questioned by any economist and most governments. Chinese manufacturing may have led to a loss of hundreds of thousands of US jobs, but it has also lowered the prices of goods in the US for over a decade.
Lower cost of goods helps both consumers and businesses. A booming Chinese economy buys US goods and services. US companies who shift their manufacturing to China generate more profits that get invested for growth and create jobs.
Who does this benefit?
In the final analysis, trade is beneficial for, both, the importing and the exporting countries.
However, real life is quite different from economic theory. In the pain-benefit equation of offshore manufacturing, the benefit of lower cost of goods is spread over hundreds of millions of consumers and businesses while the pain is borne by a few hundred thousand workers who lose their jobs. Also, the pain of losing one’s job (and not finding the next one readily) is a lot more than the few dollars a consumer saves on her monthly household budget.
Undeniably, free trade has delivered for consumers. A trip to the mall, where the variety of suits, shoes, shirts, toys, gadgets, games, TVs, and appliances abounds, makes the case. But what has it cost our country?