Calculating the true cost of offshoring, ensuring the best value for your money
One of the lures of purchasing offshored products is price; cheap labor is often a key element of price calculations. Price, or more accurately cost, can be calculated in different ways and has subtler elements. Did you know that 60% of companies that offshored products only considered price per unit? Besides just the price per unit there are less obvious costs such as inventory holding costs, facility space, lead-time and overall availability, and the cost of lost sales that should be considered to accurately determine TCO (Total cost of Ownership). The interplay of these variables impact the ability to be flexible and responsive, as well as a company's process efficiency, sense of value, and perceptions of quality. So while offshoring may provide the cost out opportunities initially it may be to the detriment of sales and operations.
DECA Offers Great Value
US-based companies like DECA Manufacturing offer the best value for the money. In addition to the quality of our products, you don’t have to worry about things such as inventory bloat, transportation problems and communication barriers. DECA prides itself on being flexible and responsive so we can adjust our manufacturing program to:
implement design changes quickly
flex quantity up and down to suit your sales cycles
ship your finished components faster
In short, using a local supplier means that you lower your risk of missing a sale due to availability issues or the need for a customer-specific design tweak. You can also optimize you inventory holding costs, cash conversion cycle, and available floor space.
Issues to Consider when Reshoring
If you chose to offshore your components here are some issues you will have to grapple with and things you must consider when determining the cost of offshoring.
How many pieces do you really need? One of the problems with offshoring is determining how many pieces you need to buy vs how many you need. This consideration includes the number needed to obtain a "good" price and the number needed to make sure you have enough quality pieces to support your manufacturing requirements.
What will shipping take? This answer must be answered in terms of time and cost. Many electronic components come from China. Lead-times for sea freight from the Far East are between 20 and 30 days and that doesn’t include 2-5 days for moving components to/from a port facility on either end. Economy air freight is faster but that still runs between 7-12 days and is much more expensive. If your components are on a ship, how long will it take your components to travel to the US, clear customs, and be delivered to your facility.
With the new year, there have been reports about the cost of containers rising significantly. Routes from Asia to the West Coast are said to have risen 145% since February of 2020. When factored in, will the costs of transportation eliminate off-shored manufacturing savings?
Design Change Challenges
Given the rapid changes in product development, functionality changes, and consumer expectations, can design changes be made quickly? Keep in mind changes are also needed due to product component availability or customer specific requirements. Working with a local manufacturer who is responsive should ensure that you have what you really need are not stuck with cheap but unusable components.
Most orders require the inclusion of some related information about the final product. It is virtually impossible to be sure that any intellectual property concerns will be addressed for either components or final products. Intellectual property is an ongoing concern with products coming out of Asia.
Even if you are assured of an English-speaking contact, will that contact have enough technical knowledge to handle your concerns properly? Will someone who can address technical concerns or business-related issues really be available during regular US business hours?
The list above doesn’t even include issues such as the:
environmental impact of extra packaging and fuel needed to transport components from the other side of the world
industry benefits of supporting manufacturing jobs and local companies
development of local, skilled labor
local investment in manufacturing facilities and equipment
Contact DECA Today
If you are looking for a responsive, flexible and smart supplier to reshore a current project or build products for a new product contact DECA today. We offer peace of mind so you can focus on what you do best, your final product.
Call us: 419-884-0071