Choosing Between Domestic and Foreign Manufacturers

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

If you're developing an item for mass production, choosing where and how it's manufactured is essential to your trajectory and brand as a business. When deciding between manufacturers based in the United States or overseas, there are many consequential factors to consider.

Domestic Manufacturing

If you have a specialized product that's 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 manufacturing and labor standards, ensuring a higher quality work environment for employees and other guarantees to help consumers feel good about purchasing the product itself. Domestic manufacturing can help your brand avoid a public relations disaster, such as an exposé on the poor working conditions that accompany your product. Being physically closer may also offer you deeper insights into the quality control and supply chain elements of your business.

Below are a few more perks to having your product manufactured domestically:

  • Domestic manufacturers must maintain strict intellectual property right protections, making it more difficult for your product to be covertly copied and mass produced.
  • There are fewer opportunities for a language barrier to confuse your communications with the manufacturer.
  • Without customs and shipping time, orders can be turned around faster and shipped much sooner that if manufactured overseas.
  • If there are any issues, you can meet with manufacturers in person, and track your product closely at each stage.
  • Using a domestic manufacturer allows you to claim the "Made in the US" stamp, a selling point and marketing tool in itself.

The flip side to domestic sourcing is mostly associated with cost. Labor laws in the United States (which enforce a minimum wage, restrict the hours that children under age 16 can work, and much more) require higher wages and better facilities than other countries. These factors will drastically increase your payroll and infrastructure expenses.

Foreign Manufacturing

Foreign manufacturers are often much cheaper than domestic sources; and while your product may be made by a debt indentured worker in an ecological wasteland, your costs of labor could be reduced by as much as 80%. This can allow you to funnel more money towards marketing and developing your products.

Other things to consider when choosing foreign manufacturing:

  • Some countries have implemented incentives to attract foreign business, such as minimal taxes and fewer regulations or red tape. This allows you to start your operation quickly and scale the business as needed.
  • Shipping time can be weeks or even months instead of days, due to a lengthy customs and import process.
  • People may still view foreign sources as inferior in terms of quality.
  • Many people are aware that unsavory working conditions exists overseas and may associate your product with unethical or careless labor practices.
  • Some countries have fewer intellectual property protections, putting your business at risk.

Ultimately, the decision lies in your manufacturing needs and what ethical considerations will keep you awake at night. There is no 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?

Don’t automatically go with the cheapest option. Choose the one that will deliver the most value to your brand and your product.