Choosing Between Domestic and Foreign Manufacturers

Pros and Cons of Manufacturing Your Product Overseas and Domestically

Workers using digital tablet in factory
Workers using digital tablet in factory. Getty Images/Jetta Productions

When you have a product you want to mass produce and sell to the public, choosing where and how it is manufactured is a big decision, essential to your business' success. When deciding between manufacturers based in the United States or those overseas, there are many factors to consider.

Depending on your product and your needs, the decision may already be made for you based on what domestic or foreign manufacturers can offer.

Domestic Sourcing

If you have a specialized product that is in high demand and needs to be delivered reliably on a schedule, domestic sources are probably the best choice for you. The United States has higher manufacturing and labor standards, ensuring a quality work environment, safe employees and a better product. Compared to some disasters at overseas factories, this is vital. Not only is it a more ethically sound choice, it can also help you avoid a public relations disaster, such as an expose on poor working conditions.

Domestic manufacturers also maintain strict intellectual property right protections; your product cannot be copied and mass produced. And because the majority of Americans speak English, there isn't a language barrier, limiting confusion in communications.

Without customs and shipping time, orders can be turned around faster and shipped much sooner. If there are any issues, you can also meet with manufacturers in person.

Finally, using a domestic manufacturer allows you to use the "Made in the US" stamp, a valuable marketing tool.

The drawbacks to domestic sourcing are mostly associated with cost. Labor laws in the United States require higher wages and better facilities than other countries, increasing your payroll and infrastructure expenses.

Foreign Sourcing

Foreign manufacturers are much cheaper than domestic sources; your costs of labor could be reduced by as much as 80 percent. This can allow you to funnel more money towards marketing and development for your products.

Some countries have also implemented incentives to attract companies, such as minimal taxes and fewer regulations or red tape. This allows you to start your operation quickly and scale the business as needed.

There is also a vast amount of workers available who are willing to do the labor for much lower wages; this keeps delays to a minimum since there are always employees ready.

However, foreign manufacturers have some issues too. Many still view foreign sources as inferior in terms of quality and other countries have fewer intellectual property protections, putting your business at risk. Shipping time can be weeks or even months instead of days, due to a lengthy customs and import process.

Ultimately, the decision lies in your manufacturing needs. There is no one right answer for all companies or all products. What makes the most business sense is dependent on your unique needs and your company goals. Do you sell a product which isn’t time-sensitive, or do you sell a highly-specialized product which has to be produced on a reliable timetable?

There are a number of factors to consider in making the best choice for your business. Don’t go with the cheapest option; choose the one which will deliver the most value in the long-term.