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The Challenges and Real Cost of Offshore Manufacturing

For high volume manufacturing, the low cost and readily accessible labor pool from offshore manufacturing is a key advantage for many companies. However, as technology drives increased customization, shorter production runs, and a move to an extensible platform based product families, the advantages begin to disappear for a growing population of companies with low to medium volume production requirements.

These smaller programs face several key challenges when looking overseas for a contract manufacturer, including the requirement to guarantee large order quantities. If they do find a willing vendor, the US-based OEM will have to bear the full cost and risk of poor quality from the lack of standards and processes, as well as administrative overhead from language, culture, and time zone differences. With each of these challenges, the total cost and time-to-market begin to rise. Add in the requirement for upfront payment of fees and production costs and many companies start to get locked into a bad situation. The window of opportunity for product launch begins to fade, your competition beats you to market, and the opportunity is lost.

Even if you escape these initial challenges, the logistics and customs delays, IP theft and counterfeit products, and poor quality will further erode the benefit of cheap labor. At the Velocity Group, we have heard all too often the story of an entrepreneur who put his project up on social funding sites only to find his product for sale online a few days later, for a cost he could never match.
Once a company overcomes these product launch hurdles, they face the harsh reality of social media and a fickle customer base. The all-too-common practice of undisclosed design and material changes will eventually lead to permanent brand damage as quality issues and product failures spread like wildfire through social media channels.

The solution to these challenges is a partner you can trust. One with experience and capabilities spanning from initial concept all the way into production. One that is flexible to your needs and takes seriously their commitment to providing single source accountability for your project. This allows entrepreneurs and middle market companies to focus on selling and growing their business, not costly and burdensome oversight of offshore production.

The Velocity Group was created with the vision that a Full-Service Product Development and Production company can leverage speed and proximity to market, lean manufacturing processes, and an integrated capability portfolio to create a competitive advantage for the US-based OEMs. Building this capability on 100% domestic operations and providing dedicated project management, we help our customers accelerate time from idea to profit from their low and medium volume production programs.

Need help overcoming some of these challenges? Learn more about Velocity Group’s Lean Manufacturing.
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