Off-Shore Outsourcing – Hit or Miss?

In recent years, the commonly accepted wisdom has been that off-shore outsourcing of manufacturing is the way to go. We now know, however, of many companies that have chosen to have their manufacturing done in Asia or South America only to be very disappointed by the results.  Some of the less pleasant experiences we’ve heard include:

  • “The  sample was perfect but the production goods did not meet standards”
  • “The supplier gave assurances that the goods would be delivered on time but failed to meet the schedule”
  • “The chemical formulation was ‘almost’ right”
  • “The order was delayed because the manufacturer gave priority to a ‘huge’order from its best customer“
  • “Labeling instructions were not followed properly, resulting in significant charge backs from customers”
  • And for anyone who remembers the West Coast dock strike several years ago, “late shipment resulted in a client having 160 containers sitting on boats during the Christmas season, representing 75% of the company’s annual revenue.”

In all cases, these companies were left with a fractured supply chain, the inability to get the right amount of the right product to the customer on time, and in many cases, severe financial hardship and lost business and customers.

If you are, or are considering, outsourcing your manufacturing, it is essential that you have quality and time control at the source.   You must have a quality control expert at the plant to ensure that you get what you ordered, labeled properly, and on time.  Having the expert there can result in significant financial gain by avoiding the shipment of shoddy or mislabeled product, and at the very least, early warning of production issues or delays in shipment.

Some companies choose to have an employee travel to the manufacturer periodically, while others place an employee there full-time.  A third option is to retain one of the reputable QC/QA firms specializing in representing importers at their foreign manufacturers’ plants.

Perhaps just as important is to have plans in place that increase the likelihood your company can deliver product to customers on time no matter what happens.

  • First, maintain an extra order cycle on hand of your best selling items only.
  • Second, develop multiple domestic sources for back up.  Even if the domestic supplier is more expensive, by having multiple quotes in hand (make sure they’re continually up to date), you can activate a vendor with the fastest turnaround time in a crisis or you might spread either products or quantities over several vendors to get required quantities on time. You will lower profits gained from outsourcing, but reduce the chance of not shipping orders and possibly losing customers.

These fundamental measures can head off significant problems before they develop and allow companies to hit, rather than badly miss, their revenue targets.

About Roy Strauss

Roy has over 30 years consulting and executive level line and staff management experience assisting companies in improving both their profitability and competitive edge. Included are projects for domestic and international companies from Fortune 500 to smaller, privately held businesses in a wide range of industries. Key areas of expertise include: creating contingency-based operational growth plans with monitoring tools to ensure the success of the client’s marketing growth plan; providing growth based space requirements and layouts to ensure that clients will be in the right amount and type of space and using it properly and continuously; plan, design and implementation of new systems for distribution and manufacturing centers at every level of automation; defining optimal product mix and inventory levels for maximum profitability and effecting their change; and determining, and/or specifying Supply Chain software and hardware and assisting with their acquisition and implementation. Roy’s broad experience and diverse skills result in high ROI solutions with minimal risk to clients. Prior to consulting, Roy held management positions at numerous levels for a national food distribution company for over ten years. He planned, implemented and ran purchasing, inventory, and warehousing operations in a hyper growth environment with a very strong trade union presence. As the company grew tenfold in ten years, Roy is an expert in planning, monitoring, and executing in a hyper growth environment. As there were no software packages available, he designed the company’s ERP/WMS software with the company’s IT consulting firm. Roy was a partner in a major national consulting firm and has a BA in management and an MBA in Executive Management.
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One Response to Off-Shore Outsourcing – Hit or Miss?

  1. Don says:

    Great post Roy. Spot on . One of our portfolio companies Asia America has been helping manufactures reduce costs for over 20 years through low cost sourcing in Asia a coupled with assembly, kitting, QC & engineering services. . We employ many of the tactics you mention (QC on the ground in country) and we employ safety stock levels.

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