Regardless of your manufacturing needs, there is no doubt that other nations make valuable outsourcing partners. Whether you seek custom motor manufacturers or critical components for medical devices, it’s vital to understand the nuances of outsourcing. A successful outsourcing experience is possible if you understand the risks involved and have the right partners on your side.
Offshore Manufacturing and Establishing Global Relationships
While a more careful cost-benefit analysis is now required, offshore manufacturing is still a viable option for U.S. companies. In addition to helping an organization save money, establishing global relationships can help increase productivity and local job growth by up to 20 percent.
Just as you’d form partnerships with domestic businesses, it’s vital to establish global relationships to ensure quality control. If you seek, for example, custom motor manufacturers, it’s to your advantage to go beyond email messages and telephone conversations; do face-to-face meetings whenever possible. While such meetings require a lot of traveling, you gain the opportunity to make a personal connection with an offshore manufacturer and better ensure the protection of your company’s intellectual property, interests and image. Also, the latest video conferencing technology can be beneficial during follow up meetings with overseas partners.
Global Outsourcing Tips
There are a few tips that can help small-business owners navigate and build global relationships. For those who wish to outsource products, from BLDC motors to textiles, below is some advice:
- Understand the market’s transportation infrastructure and have a plan
Low tariffs, attractive labor costs and appealing rates are one thing. Getting your goods from Point A to their final destination is another. Have a good understanding of a prospective market’s seaports, airports and ground transportation so you know how easy or difficult it may be to get your goods between destinations.
- Examine economic growth and trade trends
For those companies that need custom motor manufacturers, seek a country that makes outsourcing simple and examine national import trends. You’ll find that the countries with the most opportunities are those that have a steady increase of imports, as well as a per capital income that rises at the same time.
- Seek a compatible workforce
The factory that you work with should have enough staff members to fulfill your order by the agreed upon deadline. In addition, the workforce should meet the needs of your company.
- Factory audits
Never take an offshore factory’s claims and promises at face value. A factory that I once considered in China promised that it had the workforce needed to fill an order. Upon inspection, I discovered that the “workforce” was really a one-man operation. You or a company representative should visit prospective factories and perform an on-site audit to ensure they meet your qualifications and standards.
Outsourcing Risks & Tips for Success
There are several issues that pose the greatest risks to companies seeking custom motor manufacturers. These risks include:
- Factory selection
To reduce the chances of choosing the wrong factory, find an outsourcing partner that’s familiar with the parts that you need and is willing to send a representative to visit the facility to verify its claims. An outsourcing partner may also have good professional relationships with reputable factories that can meet your needs.
Poor quality is the biggest risk that North American companies face in regards to outsourcing. You can mitigate the risk with regular factory visits and audits that a company representative or outsourcing partner regularly performs to catch problems early.
- Commercial risks
Sometimes factories have management changes, a lack in excess capacity, defective products or are unwilling to take corrective actions. Prevention of such risks comes with inspections and audits before and during the production process.
It takes a mix of cultural understanding with the right language and interpersonal skills to successfully negotiate a contract. In addition to bids that are too high, be aware of the risks that come with those that are too low, like sacrifices in quality.
- Logistics and design maturity
Logistical risks like delivery delays and damaged products are always present, but can cost you even more when you outsource.A good outsourcing partner mitigates logistical risks related to the design of a product by having clients work with engineers who are familiar with the types of design drawings, specifications and details that factories need. The representatives in the outsourcing country should then monitor the work in progress at the factory-level.
- Intellectual property
Patent laws are weak in some countries. An outsourcing partner can provide guidance about how to best protect your ideas and interests.
- Credibility and cost
If you don’t have an established relationship with an international factory, it may charge you more or place a low priority on your order. With the right banking techniques and an outsourcing partner that has an established relationship, you can mitigate such financial and production risks.
- Political risks
Labor strikes, demands for higher wages and the like can halt production in a factory. You can also experience difficulties if the there are external political events, like the relationship between the U.S. and the respective country turning sour. Be aware of the political risks a country may pose before executing your project.
If you’re ready to expand your business, consider going global. The best way to ensure a successful outsourcing experience is with the help of knowledgeable outsourcing partner that has offices in the country of interest and continually advocates for your best interests.
About the Author
Michael Bloom is president of Sinotech in Portland, Oregon. Sinotech is a custom motor manufacturer that provides engineered mechanical products, metal and plastic components, and magnets to a variety of industries. Sinotech has over 20 years of experience in the industry with engineers personally supervising all tooling and production to ensure quality control. Michael is certified by the U.S. Small Business Administration as a Global Trade Counselor and by NASBITE International as a Certified Global Business Professional (CGBP).