Sourcing Products from Overseas

With the process of globalization in full swing and an increasing number of companies popping up in every industry to compete, one of the best ways to lower your costs are to source products from overseas. Most people are probably aware of the biggest benefit, cheap labor; but there are a lot more reasons to import from foreign manufacturing. On the flip side, there are a lot of risks as well. This article will look at a few of the pros and cons of sourcing from overseas.

Advantages

The most obvious advantages are cheap manufacturing and labor. Prices can be a huge driving force behind your sales. If you cannot be competitive with your pricing, you may be missing out on a lot of sales and ultimately revenue. Alternatively, even if you are experiencing strong sales volume, you can increase profit margins by reducing the costs of securing inventory.

While some countries like China have a reputation for cheap goods, many people unwittingly mistake it for low quality. While it can be true in some cases, its poor quality reputation stems mainly from its past issues in low-wage labor and negative western associations with the country.  However, many quality goods have been manufactured in China. If you don't believe it, ask where Apple produces their phones.

More and more overseas businesses have become increasingly welcome to international trade. Especially over the last decade, tariffs and barriers to trade are being overturned, and foreign companies are being more encouraged to invest. It is now easier than ever to open up relationships with foreign suppliers to drive the growth of your business.

With advanced logistical networks and supply chains, the issue of receiving the goods from foreign countries is becoming easier than ever. Previously it could take up to 6 weeks to receive goods, which isn’t that helpful if you operate a lean business. However now, with many factories being located ideally close to transport links, the turnaround time can be as little as a week.

Disadvantages

However, while there does seem to be quite a few strong benefits, there are things you need to be careful of. Finding a reliable supplier itself can be a challenge, there are many services that act as direct manufacturers but in reality they are mediators who profit from the spread. Small distributors could work depending on the order size but the price will always be more expensive. 

Intellectual property right laws are different for every country.  Furthermore, even in the US they are murky and difficult to enforce. If you have a closely guarded product you may be taking the risk of it being counterfeited or stolen.

Finally, by outsourcing your manufacturing, you lose a degree of control. Depending on the country, being so far away creates a time delay and a hassle to do business in person. In addition, you may not be able to address issues immediately and language barriers can cause miscommunication which would at best, delay any resolutions.

Overall, if managed properly, sourcing from foreign companies can give you a competitive edge in business. It can provide a much healthier margin on your products and result in financial reward, but it can be a difficult task to get right. Many of the risks can be reduced with careful planning and due diligence, so it is advised to carefully do your research to ensure everything goes smoothly.

Previous
Previous

Motivating Unmotivated Employees

Next
Next

Growing Sales for Small Business