Labor costs are the highest expenditure for any company. This is especially true for factory operations that need to pay premium salaries to their skilled employees, as well as long term benefits. For this reason, finding low-labor costs is the number one reason companies have for moving their operations overseas. To many manufacturers, the cost of offshoring seems to greatly outweigh the benefits maintaining their current operations in North America. Offshoring appears to be a quick, cost-effective solution; but in business, there are no quick solutions.
Save Your Factory is dedicated to providing manufacturers the necessary resources they need to fully and objectively analyze the advantages of technology and the hidden costs of offshoring before deciding to move their operations overseas. Too often manufacturers only look at the benefits of low-labor costs when they are deciding whether or not to outsource to foreign countries. Only a few actually look at the total costs of offshore manufacturing and do not realize that North American factories are remaining globally competitive because, despite labor costs, they can offer higher quality, greater flexibility, and superior efficiency.
The disadvantages of outsourcing lies in the price tag. While low-labor costs will increase profit margin, this is negated by the increase in the total cost of production. Companies that use offshore manufacturing have to pay higher costs in:
Transportation of Final Product Back to America
Customs and Duties
Negotiating with American Labor force, Due to Closure
Price of Raw Materials
Increased Lead Time
Loss of Flexibility Due to Communication Barriers
Higher Overhead in Supply Chain Management
In addition, many companies found that the true costs of outsourced manufacturing included the loss of proprietary knowledge and product failures due to poor workmanship. Manufacturing companies have moved back to the United States because they found that offshoring ruined the quality of their end products and greatly damaged their relationships with their clients.
Learn the real costs of offshoring. Save Your Factory invites you to use our audit and analysis tools that examine the costs and timing related to both automating and moving overseas.
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