Why Contract Manufacturing in America Makes Sense
The low labor rates of the Far East have enticed U.S original equipment manufacturers (OEMs) to outsource the manufacturing production of their electronic equipment. Despite this appeal, there are downsides to this process that point to outsourcing to American-based contract manufacturers as the better option. Our experts at MiQ Partners list some of these downsides below in the context of contract manufacturing.
Although the promise of cheap labor is appealing, all good things must come to an end and so will cheap labor costs. In fact, China is currently experiencing a wage inflation in professional and technical jobs, a process that will soon increase labor costs and make outsourcing much less appealing for businesses involved in contract manufacturing.
Time Is Money
On average, manufacturing orders take approximately 60 days to be received stateside from China. When considering transportation and logistics, outsourcing production to the Far East can be quite costly and with the increasing labor costs mentioned above, it will likely grow much less appealing to American OEMs in the near future.
In countries such as China, at times their gross domestic production can be lost to black market activities, which is something that American OEMs need to consider. By outsourcing production to companies in countries such as this, you run the risk of having your intellectual property pirated and losing business opportunities to corruption.
Choosing offshore production by solely focusing on cheap labor costs is a risky decision as you are ignoring the complexity of the supply chain that you are investing in. This includes increased transportation costs, additional inventory buffers and rapid market expansion.
For OEMs currently considering their contract manufacturing practices, our experts at MiQ Partners strongly encourage you to consider outsourcing to U.S-based contract manufacturers instead of offshore manufacturers. The rapid changes that Far East economies are currently experiencing make them unpredictable and far less reliable than the U.S economy.