What is “off-shoring” and why do people do it?
Offshoring occurs when steps or entire processes of the production or assembly of a good are relocated to an overseas factory/manufacturer. This could occur for a variety of reasons ranging from the cost of raw materials being cheaper in the offshore location, the cost of labour being cheaper in the offshore location or them having access to “better” technology or methods of production/assembly. While off-shoring has not been a wide practice for an immense amount of time, it has become quite popular with many businesses across the world in recent years and decades. It is a cheap alternative to traditional methods of production. But, it comes with its own set of risks which have been more and more off putting in recent years due to the damage it can do to your business if the potential risks come to fruition. In this article we will explore why off-shoring is not the godsend that it touts itself as and why so many businesses are steering away from it and opting for local manufacturing (be it in house, or through third party manufacturers).
What Are 3 Major Cons Of “off-shoring”?
1. How Long Are You Willing To Wait?
Synchronization issues between the offshore manufacturer can occur. As a result, sometimes communicating change between the manufacturer and the business can take time. Therefore, changes may take longer to implement than would be necessary if the product was locally manufactured. This can prove particularly taxing in times of crisis or situations where for whatever reason the supply of goods may be restricted. If a global crisis impedes the transportation between countries or political climate leads to failing relationships between your off-shore nation and your own nation, you may find yourself unable to continue producing and meeting customer deadlines. This will very quickly damage customer relations. In terms of assembly/manufacturing businesses such as ourselves, we want to ensure that you can have an open line of communication with us that is direct and responsive. Because, ultimately we want to deliver a product built to your specifications and we understand those can change. You can spend less time having to predict how economic changes will affect your manufacturers supply chain, and focus more on your business by choosing a local manufacturer such as Redline Engineering making it easier for us to communicate and adjust accordingly in times of crisis or restriction.
2. How Can You Ensure They Are Following The Rules?
You are not always aware of factory conditions/methods being used, and as such the conditions and methods of work are based on trust to a degree as you can not always be present/regularly visit. As a result you may only find issues in the manufacturing process after the product has already been distributed to consumers. This can negatively impact your businesses reputation and reviews. The more severe potential risk of off-shore manufacturing is that if you operate in a country with less strict industry regulations and standards there can be ethical and even legal lapses in what conditions are deemed acceptable for the factory to operate under (extending to the workers in these factories and their treatment). If these issues come to light, the effect can be catastrophic for your businesses due to prevalent stigma around “sweatshop” factories being operated for businesses that choose to employ off-shoring via certain countries that have a reputation for not following rules and regulations when it comes to manufacturing goods. When it comes to Redline Engineering, we are certified and undergo all necessary checks to ensure we are operating and treating our employees as we should be. Additionally, you have the peace of mind that we are operating as we have promised and using the same materials and methods as we claim; which is backed by the aforementioned certifications and checks by industry authoritative bodies.
3. Covert Costs That Can Run You Dry
While production costs may be lower, other cost factors may come into play that end up costing more than anticipated (covert costs). While not always the case, sometimes the appeal of off-shoring may come from the low production costs at face value. However, once you begin taking the initiative to make the off-shoring a reality you may soon uncover hidden costs. These can range from emission taxes in the country of production, certain materials may be more expensive than in the local market, logistics costs can vary greatly depending on where you choose as the off-shoring location. However, when dealing with local manufacturers there is less running around and trying to comprehend any foreign laws or regulations that may hinder the operations of your business. Working with a local manufacturer such as Redline Engineering means that the risk of covert costs is diminished as we are transparent in our pricing methods. If any unexpected fees come up you can easily have them inspected to ensure their validity. Rather than confusing yourself by dealing with off-shore manufacturers who could potentially deceive you or misinform you about costs and end up costing you far more than you expected.
Why Are Local Manufacturers A Better Choice For Your Business?
1. Helping Out The Local Economy
By using local manufacturers as opposed to off-shoring, there is the potential to increase the value proposition regarding retail prices. That is to say, often if a business is shown to support the local economy through using local manufacturing there is an acceptable increase in the retail price. Many would rather pay a little more for a product made locally as opposed to one made overseas that can be seen as “taking jobs away from the local market”. Here at Redline Engineering we are proudly Australian owned, and love helping other local businesses expand and achieve success through our manufacturing services. By working with local manufacturers such as us, it allows for local businesses to build networks and relationships. Strengthening all parties involved while also helping contribute to our home of Australia. And you can be sure that this is something customers love to hear too. Not only does working with a local manufacturer build new business relationships but also helps add value to your product/business in the eyes of customers that also value businesses that support Australia.
2. Quality Assurance Everytime
Better quality control and manufacturing process presence and control in local manufacturing is possible as the ability to properly monitor the processes is a key factor for considering local manufacturing. When it comes to off-shoring there is a likelihood you will rarely be able to visit the manufacturing site. You would be unable to assess whether they are maintaining the proper techniques and necessary guidelines set in place. And while, it is not always the case that shortcuts are being taken, it is a risk you must either come to accept when opting for offshoring. While the repercussions can be minimal there is a risk that these shortcuts coming to light can damage your business or even lead to sub-par materials/products being produced. Not only will this have ill-effect on guarantees your business makes, but also lead to products that do not properly represent you or your business.
3. Logistical Nightmares Are Diminished
Lower logistics cost (lack of shipping internationally), is a big factor in considering local manufacturing. When it comes to transporting part/the product back to either your warehouse/business or even sending it directly to customers; the logistical costs can be excessive when you take into account shipping and mailing costs. Additionally, this can take a considerable amount of time that customers need to be aware of. If these wait times are seen as unreasonable then they may take their business elsewhere. With a local business, logistics are generally much cheaper and the customers are able to get their products much more efficiently; especially if time is a pressing matter. When it comes to Redline Engineering your products are packaged directly in our warehouse and distributed from there. So you know the time taken to get it from us to you will be minimal. In addition to this, we ensure every product is packed properly and with the necessary protection to minimise the risk of any damage occurring during transportation. And in the case damage does occur, you have the peace of mind communicating it with us and getting the replacement product.
4. Environmental Impact/Sustainability Matters
By using local manufacturing it is possible to better regulate the expenditure of resources and reduce wastage to decrease the overall environmental impact of your business, whilst also helping operate in a more efficient manner. By reducing the footprint your operations leave, you ensure that you are operating sustainably. You can track exactly what resources are going where and can even inspect to ensure the manufacturer is in fact doing as they claim. Rather than simply trusting that an off-shore manufacturer is in fact using the resources in the least damaging manner for the environment, without ever really being able to make sure their claims are true. Redline Energy strives to follow regulations and guidelines put in place to minimise our environmental impact. Given that Australia has rapidly been moving towards greater sustainability (particularly in industries such as manufacturing), you can rest assured that we are doing our best to improve our methods and resource sourcing to help improve our sustainability too.
5. Customer Feedback That Sees Positive Change
When you use an off-shore company to manufacture your products there is a chance that the customer may have complaints with the final product and may attempt to relay these issues to no avail. This is because of the aforementioned latency of communication between your company and the product. This can mean implementing changes based on customer feedback can take longer than necessary. With a local manufacturer, the feedback can quickly be communicated. It is likely they are going to be quicker to implement these changes so your product sees immediate improvement. Leaving customers satisfied and you assured that your business is taking steps forward to rectify errors instead of steps back. When dealing with Redline Engineering, a simple phone call or email is enough to receive a prompt reply . This is vital in both you being able to develop the optimal product and for us to nurture a business relationship, where continual growth and improvement is implemented. As opposed to sweeping issues under the rug or creating possible strife which can occur when dealing with off-shore manufacturers who may value quantity over quality.
It’s Your Choice, But We Know Which We Would Choose
And so, as you can see there are many who may consider off-shoring as a potential means of cutting down production costs. But for the reasons listed in this article (among many others), it is an option that comes with a plethora of risks. Is it a risk you are willing to take? And is the drop in production costs really worth the potential headaches that come with dealing with an entity you may never even meet face to face? While we cannot tell you that off-shoring is outright bad, the appeal of local manufacturing lies in the fact it is a tried and trusted method of production that has worked in the past and will work in the future for both businesses and clients alike.