Over the past twenty years there has been a sea change in global manufacturing, with a shift from North America to Asia as the ‘factory to the world’. For many companies, offshoring some or all of their manufacturing is the only way to survive in an increasingly competitive environment. Custom sourcing, the process of working with an offshore manufacturer to produce some or all of a company’s products, often allows companies to achieve lower costs, high quality and consistent production.
But custom sourcing comes with risks. How does a business take advantage of the opportunity to produce in a lower cost environment, while balancing the need for ethical and sustainable practices, financial protection and quality assurance? Executives need to ask many questions and gather complete information in order to make a decision to custom source. In today’s post, we’re taking a look at the three most important factors to consider when custom sourcing, and what Comtrad has learned through providing its custom sourcing services over the last 40 years.
Pricing
The most common reason that North American companies look at custom sourcing is the opportunity to reduce costs. It’s a well-known and understood benefit. Whenever a new company approaches Comtrad for help with custom sourcing, this is almost always the number one objective they share with us. Over the last 40 years, we’ve dealt with a long list of overseas vendors. We’ve seen how the intersection of quality and price represents a critical element in the sourcing of any product.
Here’s the common problem that North American companies face when they are trying to set up a new relationship with an offshore manufacturer. A vendor offers an appealing price, undercutting the company’s existing cost structure or other vendors they’re working with by a substantial margin. It’s a difficult offer to pass up when the cost-savings is so attractive. But all too often, the method employed to obtain the price involves cutting corners on materials or assembly/packaging and quality control. That’s a dangerous risk that results in an unsuccessful purchase in the end.
While it’s important to keep costs low, it’s also crucial to maintain a high standard of quality. The key lies in finding the balance between the two, and in going through a rigorous process to confirm the exact specifications of the products that will be delivered, and the vendor’s ability to deliver what it has promised.
Sustainability
When sourcing an item from an overseas vendor, it can be difficult to get an accurate view of the manufacturer’s factory practices. Different countries are characterized by different industry laws, and it can’t be assumed that all overseas manufacturers operate with the same ethical standards you’d expect from local vendors.
Take the time to research your vendor’s practices and choose the vendor that demonstrates it can meet (and has met in the past) all regulations for your jurisdiction and industry, and best aligns with your company’s practices. Consider the following factors:
- What certifications does the vendor have
- Has the company manufactured products that meet regulations for your jurisdiction and product
- How does the vendor treat employees? Are they compensated fairly?
- How do the vendor’s factory practices impact the environment?
- How does the vendor source their materials? Are they made in compliance with environmental standards?
In today’s market, sustainability is a growing consideration for consumers. Choosing a product that is manufactured in accordance with sustainability guidelines is both an ethical choice and a critical business decision to ensure the long-term reputation and brand integrity of your company.
Quality
Perhaps one of the most difficult challenges associated with sourcing items from overseas is quality assurance. Many companies have had the unfortunate experience of placing a large order with an overseas supplier, paying for it, having the order arrive and discovering quality issues or damage caused by improper packaging.
What recourse do they have? Very little. If they’ve paid by deposit and/or COD, they’ve tied up substantial cash flow and most often have no ability to recoup the expenditure.
You don’t have to do custom sourcing on your own
One way that companies get the benefits of sourcing overseas while avoiding the costs and risks of independently identifying vendors, qualifying them and negotiating contracts is to work with a custom sourcing partner. As your global sourcing partner, the Comtrad team brings forty years of experience building relationships and working with a trusted network of overseas vendors. In working with us, our clients know that they will get a reliable vendor, be financially protected, quickly scale the learning curve and ramp up rapidly.
Here’s what Comtrad provides as part of its strategic sourcing service:
Logistics
Comtrad takes care of the entire logistical strategy for your purchase, ensuring that your delivery arrives at your facility when needed.
Finance
Comtrad clients benefit from the immediate cost savings of eliminating COD delivery. In many cases, we work with clients to arrange Just-in-Time delivery, keeping their items stocked off-premises while allowing them to pay as they need a shipment.
Quality
Unlike direct sourcing from a manufacturer, Comtrad’s rigorous quality assurance standards ensure that the products you receive are durable, reliable, and functional. In the event of a deficiency, we take financial responsibility and handle the exchange on your behalf.
Summary
Sourcing overseas offers many advantages, including reduced unit costs, access to flexible capacity, specialized design and manufacturing capabilities and consistent delivery. But sourcing from an overseas vendor can be a daunting and risky proposition. It takes time to build trust. Doing business with a foreign supplier that you have no existing relationship with is challenging. Language barriers, time zone differences, and logistical struggles all take time and experience to manage smoothly. A strategic sourcing partner like Comtrad is one way to get the benefits, without all the risk.
For more information on how Comtrad’s custom sourcing can help your organization find exactly what you’re looking for, contact our team today.