Real Cost Of Global Offshore Problems

Is it really cheaper to buy my metal production materials from overseas? 

For years, the concept of offshoring — moving production and/or sourcing operations to a foreign country — has been the mantra of any supply-chain manager looking to cut costs for metal production materials. However, amid volatile oil prices and an uncertain global economic future, this analysis is no longer a certainty. 

Recently, Archstone Consulting conducted an in-depth survey and reported that 40% of manufacturing executives experienced an increase of 25% or more in “core” direct costs on offshored supply (materials, components, logistics and transportation) over the last three years.

An interview with an expert in the field: 
 
William Sinn, a business strategist that aligns U. S firms with Chinese companies, was recently interviewed on this rise in cost. Here’s an excerpt:
 
Q: What happens when a company decides to go straight to China and eliminate the “middle man” U.S. manufacturing firm that normally supplies it with products? 
 
A: Neither the U.S. distributor / retailer nor the Chinese manufacturer has expertise or experience with the product design — when a problem arises, no one in that supply chain knows how to fix it. 
 
Q: When a U.S. company needs to have a new product quickly, one engineer told me that the Chinese company cannot respond fast enough. What is the problem?
 
A: Most Chinese marketing and engineering staffs do not understand our needs thoroughly enough, especially our market needs. [Their strong point is replication rather than the innovation the American market requires.]

Are products from China really cheaper in the long run? 
 
This is a multi-dimensional issue and involves much more than patriotic issues of supporting local industries. China is willing to buy up American scrap metal at premium prices; most scrap yards are only going to be pleased about that. The Chinese buyers ship it over, melt it down, and then manufacture metal-stamped products to be shipped back over to the states at low prices. The actual ticket price of the metal product may be lower but some serious problems can quickly arise: 
  • Logistics: the distance alone can radically drive up costs. Any quality issue that needs to be addressed will require return shipment at steep air freight prices. This becomes extremely expensive and time consuming. The trickle-down effect is that it also slows down the service and speed you offer to your customers.
  • Innovation: Chinese mass producers don’t seem to grasp an understanding of American manufacturing needs. We have fiercely competitive markets and a need for innovation and customization. China’s strong points are reproduction and mimicked design: not out-of-the-box, creative solutions. If you need to present a new way to address an old problem, you are not likely to find the solution via offshore production.
What’s the American solution to the offshoring problem? 
 
American suppliers for customized metal stampings, Tool & Die products, and manufactured parts such as Unique Tool can offer you local solutions at a better price in the long run. It is possible to have an edge over the companies that are relying on imports. Use reliable suppliers that use dual sources, maintain high performance with lean production practices, and possess industry savvy that empowers you with knowledge you can use. Avoid running your business in a short-sighted, cheap manner; remember to consider the hidden costs when tallying the cost of business overseas. For more information or to speak with someone who can help empower your business in today’s manufacturing market, call 1-734-850-1050 or send us a message using the contact form below.
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