The Disadvantages of Manufacturing Sites in Other Countries
Finding cost-efficient methods to manufacture goods is vital to the success of any business that sells physical products. Some companies choose to outsource production to foreign countries because workers in other countries are often willing to accept lower wages than domestic workers. Although outsourcing manufacturing may lower production costs, it also introduces a variety of challenges and risks hurting profits.
Sending production to foreign countries can introduce barriers to communication that may get in the way of timely production and delivery of goods. Foreign managers and workers may not have a solid understanding of English, which can lead to confusion or miscommunication about production quantities, costs and deadlines. Time zone differences can make it harder to schedule meetings and create a lag in response time with electronic communications.
Outsourcing production abroad makes a business dependent on foreign suppliers. The wages in other countries can increase and foreign manufacturers can jack up their prices, which may reduce the cost benefit of manufacturing abroad over time. In addition, if a supplier falls on hard times it may be unable to complete orders, resulting in an interruption of the supply chain. If a company chooses to move production back to domestic facilities, it may take years to reach the level of performance it would have enjoyed if it had kept production at home all long.
Sending manufacturing abroad means managers won't have the same level of control over costs and production processes as they do over domestic facilities. If suppliers make poor choices, it could result in higher costs, declining product quality and inefficient production practices. When a company owns and directly controls the means of production, it is able to reap the full benefits of production methods and innovations that increase productivity.
The reputation of a company and its brands can be damaged by sending production abroad. Companies that use manufacturing sites in other countries may be viewed as giving domestic jobs to foreign workers, which can lead to a negative public image. Businesses may need to spend extra money on advertising and public relations to make up for sales lost due to bad press.