25 Jun 2012

6 Key Considerations for Overseas Manufacturing and Importing

A significant part of VOX’s business is direct importing from overseas manufacturers. We import hundreds of containers every year with products ranging from a basic promotional key chain, to highly customized brand items such as clothing, backpacks, handbags, and watches. All of which require an extensive sourcing network to deliver.

It has taken us years to forge relationships with the many suppliers and factories necessary to provide such a wide array of products and services for our customers. Over the years we have learned much—often at great cost—but each lesson has prepared us to better serve our customers.

That being said, here are 6 key things to keep in mind when deciding to source domestic vs. overseas:

Timelines:

With timelines there is a simple formula applicable in most cases:

More Time = Better Product +Better Price

Starting early and allowing more time to adequately go through the sample process. Each sample is simply a prototype and each sample gets you a step closer to the exact item you want. 2-3 sample rounds are ideal.

Factories do not inventory any source materials. So for every order a factory receives, they must then source all the materials that go into the making of that product. Allowing more time for sourcing will help ensure that the best materials (within budgets) are used. The result is a better product.

90 days lead time is a good measure of what it takes to manufacture overseas and deliver to the US.

Holidays:

One of the things you simply cannot get around when manufacturing overseas, particularly in China, are the holidays. There are two big ones that will affect your timelines.

Chinese New Year
Chinese New Year (CNY) is the longest and most important festivity in the Chinese calendar. CNY begins according to the Chinese calendar and can begin anytime between late January and mid-February. Next year, 2013, is the year of the Snake, and CNY begins February 10th.

Many factories will close or run only a skeleton crew beginning two weeks before CNY, and the holiday can last 20-30 days. An interesting note about China is that the factories never know when—or if— their laborers will return, often causing further delays in production. Because there is a shortage of workers in China, the worker can very quickly find work at another factory should they be fired.

Chinese National Day
Typically beginning around October 1st, National Day is a government mandated holiday that is arranged so that workers always have seven continuous days of holiday. This is a highly traveled week and as with CNY the factories don’t know which of their laborers will return.

Freight:

Often companies choose to manufacture overseas to save money; however, because of timeline constraints they often lose any savings in the cost of freight.

Ocean freight is by far the best option for large quantities, and anytime your timelines allow for it.
Air freight is fast and costly. It can be appropriate for small items/orders requiring only a few boxes.

Also, there are both export Customs and import Customs that each shipment must pass through. These Customs departments do not care about our timelines. This can affect delivery.

Quantity:

You must be very careful when considering your product and the cost versus quantity aspect. It is only cheaper to manufacture overseas if you have the right quantities. Freight can also greatly affect your cost vs. quantity when considering domestic versus overseas.

Customizing:

If your item requires customization beyond logo placement then you may have no choice but to go overseas. Therefore, for a custom item you need to consider all of the above.

Price:

Doesn’t everything typically boil down to this—price.  This is the reason that the majority of product manufacturing happens outside of the US.

However, overseas is not always the best option or the best price.

As discussed above, there are three factors to go consider when evaluating overseas vs. domestic:

1-      Quantity. Are you ordering sufficient quantities to meet factory minimums and make it cost effective?

2-      Time. Do you have 60-90 days to wait for your products?

3-      Customization. Is your product highly customized?

 

Takeaways:

TIME. TIME. TIME. The amount of time allowed affects every other aspect of the overseas process. Start early!

If you are going overseas to save money, don’t lose that money on the shipping end.

Overseas manufacturing is a great option, but only under the right conditions of ample time and quantity.

Quality is not a quick process.