Question and Answer Time
After a recent meeting with a prospective manufacture I thought I would give the answers to some of the most commonly asked questions I get about overseas manufacturing.
How much can I save?
Possibly a lot, possibly nothing, it depends on what you are making. Plastic like ABS or Polypropylene are commodities and as such are subject to market pricing. If you are producing injected molded goods like cups or toys it is not necessarily cheaper overseas, the material cost would be the same. In fact I would suggest a domestic manufacturer just for ease of communication. But, and this is a big but, if there is labor associated with the product, say all those little plastic pieces need to be assembled, then overseas may be cheaper. Also, it is not uncommon to have molds made overseas and then to have them shipped to the US for use in factories.
Is Overseas All The Same?
Definitely not. Take for example Taiwan and China. Fifty years ago Taiwan was the Asian manufacturing power house. China was going through the Cultural Revolution and people were starving. Taiwan was stable and open for business. Prices were low, labor was cheap and “Made in Taiwan” flooded the US market. Fast forward fifty years and as Taiwan’s technology has progressed so has the cost of labor. A modern toothbrush is a good example. It is injection molded with up to five different colors of plastic in it. The machines that make these are very complex. Different types of plastic, different cooling rates, inserting the brushes in the head, different colors of bristles and shapes, a very complex machine. Most of these machines are made in Taiwan or Japan, then shipped to China for use because of the low labor rate. The labor rate in Taiwan is much higher than China. Taiwan is also much closer to the US in cultural values and is easier to navigate. You can step off a plane in Taiwan and rent a car with your US drivers license. That is not happening in China. As a general rule I have found, the more western and advanced the country is, the higher the labor rate. As a matter of fact, the iPhone is made in a factory located in China but owned by a Taiwanese firm.
A Note About The Cost of Living
Why is the labor so much cheaper in countries like China and India? Basically it’s the cost of living. The average factory worker is not paying $300 a month for health insurance, they are not paying $115 for cable TV. No $300 a month car payment and forget the $1000 a year car insurance. And certainly not $8 a day for the fast food combo meal or $5 for the Starbucks latte in thee morning. Things are cheaper, life is cheaper so the average worker can easily live on $1000 a month salary and still save money. I have easily gotten by on $10 a day for meals in China, of course I’m eating Chinese food from the same vendors all the locals are using but I’m fine with that, I like Chinese food!
My Advice Is…
If you are just starting out, stay local. If it is a new product and something needs to be changed or there is some design issue you are better off with local manufacturing. I’ve just seen too many problems occur because either the direction was unclear or the files sent to the manufacturer were the old revision or a million other different other things that ended up in receiving product that was not usable. And to be honest, most of the time it was not the factory’s fault. Now having said that, if you have your designs perfected and can go to the factory at the start of the run to quality check and approve the products, great! On a volume order you can probably save a lot of money.