Offshore sourcing can help small businesses compete
OSI, Inc., is basing hopes for its Scruffer, a new barbecue grill cleaning device it hopes to sell to the big box stores, on a manufacturer in southern China. The cost, explains Brad Carpenter, president of the Aurora company, is "literally one-third" the cost of producing the Scruffer domestically.
Offshore production "puts a small business like me into a position to compete with the big guys," Carpenter says. "We looked at injection molders in Chicago. At their prices, I'd have to retail the Scruffer for $25. I'm trying to get it in at $12.95."
Although less expensive production is crucial for many businesses, finding manufacturers to work with - here or abroad - can be a daunting task. Carpenter made his China contact through Donna Zoellick, a veteran purchasing consultant and since April president of her own firm, Global Sourcing Specialists, Inc., in Carpentersville.
In spite of problems with pet food, people food and toys, "China is still the place to go" for lower cost manufacturing, says Zoellick. "China has new factories and equipment. Many have ISO certification. And you get a quick turnaround."
The clincher, though, typically is lower cost. "The average Chinese worker makes 95 cents an hour," Zoellick says. "In Mexico, the average worker makes between $2.40 and $2.95 an hour. It's the same in India."
When Zoellick signs on, "I go into your company and say 'Show me what you do. Show me the blueprints.' We talk about the quantity involved, and we evaluate whether it makes sense to go overseas.
"We look at what makes sense for (your) company.
"If it makes sense to go offshore, I send the blueprints or a sample to my contacts." In addition to China, Zoellick has sources in Poland, Sweden, Germany, Mexico and Thailand. The producers who get your materials are selected by Zoellick, based on her knowledge of manufacturers' capabilities and costs. Bids come back to Zoellick from interested firms; the ones that fit your range then produce samples.
If the samples pass muster, tooling - gearing up for actual production - is next. At this stage you're pretty much married to your offshore producer. Tooling normally "requires 50% upfront," Zoellick says.
"They'll run some pieces - called 'first article productions.' I go over the pieces with you. If it's a ball bearing that you're manufacturing offshore, for example, we'll put it in a machine to make certain" the machine and your bearing work together.
If there's a problem, Zoellick says the offshore manufacturer "will tweak" its production. When all is well, the producer "makes the run." It's at this point, Zoellick says, that "You may want to pay for a third-party on-site (quality control) inspection."
When the manufacturer "gives up your product" - turning it over to your customs broker or freight forwarder, for example - the remaining 50% of your bill is due.
JKendall@121MarketingResources.com.