Offshore vs local manufacturing

Marc — Tue, 23 Jun 2009 15:00:37 +0000

Despite popular opinion, the Australian manufacturing sector has reportedly grown by 22% over the past 3~4 years. Surprisingly, over the past 10 years, Australian manufacturing exports has increased by 400%.

If local manufacturing capability is growing (and as a result becoming internationally competitive), why would you choose to take your manufacturing off-shore?

I got thinking about how one might choose between local and offshore manufacturing suppliers. Your decision may be determined by a number of criteria, including:

Production volumes
Design complexity
Your budget
Production technology and equipment requirements
Relationships and rapport with manufacturers
Your ability to travel locally, interstate and overseas
Price: for both pre-production setup and ongoing supply

Using a simple evaluation model, called ALOU (Advantages, Limitations, Opportunities, Uniqueness), I’ve prepared the following table comparing local and offshore options:

ALOU evaluation

	Local manufacturers	Offshore manufacturers
Advantages	Easier / cheaper to visit	High production volume capabilities
	Fewer language barriers	Lower labour, setup and ongoing costs
	Same or similar timezone	Typically more cost-effective longer-term
	Lower freight / logistics costs longer-term	Fast turnaround depending on your requirements
Limitations	Higher labour and material costs	Expensive to visit during setup and production
	Can be more expensive upfront	Communication (language) can be problematic
	Can be slower despite being closer	Higher management effort
		Quality expectations need careful and detailed communication
Opportunities	Joint ventures to reduce upfront costs in exchange for share of profits	Access to global markets with the right products and concepts
	Lower volume pilot productions more manageable and cost-effective	Access to production processes and technologies that may not be available locally
	Easier to obtain advice and support during development
Uniqueness	Low-volume specialists	Global market exposure and access
	Good local market knowledge	Globally focused - many offshore suppliers are very eager for business
	Good local networks

Be aware that confidentiality is crucial to all your business and manufacturing dealings, so it is wise to have any supplier, contractor or adviser sign a Non-Disclosure (Confidentiality) agreement prior to discussing your project. You can find more information about that here

What are your local and offshore manufacturing experiences? Do you agree with the above local/offshore comparisons? Would you like to add anything to the ALOU table?

I look forward to your comments.

MANO Design » limitations

Offshore vs local manufacturing

ALOU evaluation