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Pitfalls of Overseas Manufacturing

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  1. Pitfalls of Overseas Manufacturing Larry Butz GEA Consulting LaCrescent, MN

  2. Agenda • Why Manufacture Overseas • Types of Manufacturers • Finding a Manufacturer • What to Expect • Evaluate the Differences • Risks • “Insourcing” Advantages

  3. Larry Butz • President and Founder GEA Consulting • 20 years with Trane specializing in • Product Development • Technology & Product Globalization • Technology Transfer & Factory Start-up • Environmental Sciences • Five Years as Engineering Manager in France

  4. Why Manufacture Overseas? • Lower Cost Product • Access to Overseas Markets

  5. What to Expect • Lower labor costs • Lower raw material prices • Lower component/sub-assemblies costs • Range of quality levels available • Fewer constraints (regulations) on factories

  6. Where to Manufacture?Forbes Top Ten for Outsourcing • India • China • Malaysia • Czech Republic • Singapore • Philippines • Brazil • Canada • Poland • Chile

  7. Types of Manufacturers • State Companies • Wholly Owned Locally • Joint Ventures • Wholly owned Foreign • Your Own – Build or Buy

  8. How to Find • Government Agencies • Industry Directories • Web Bidding • Networking • Shows & Exhibitions

  9. Be Prepared for Change • Longer Pipeline • Reduced Flexibility • Change Control • Cultural Differences • Societal • Value Systems • Language • Business Customs • National Laws

  10. Be Prepared For Change • More Administrative Personnel • Logistics - Import/Export • Banking/LC/Currency • International Law • Communication • Time Difference • Language

  11. Product Modifications The relative cost of equipment vs. labor is significantly different. Expensive labor saving equipment used in the US may not be the best choice overseas. Be prepared to make minor changes in your design specifications to obtain best results.

  12. Location Legal/Patent Language Cultural Resources Political System Logistics Taxes Laws Safety Standards Currency Infrastructure Environmental Business Customs Evaluate the Differences

  13. Risks • Currency Variations • Proprietary Design Info • Political Stability • Hidden Costs

  14. Hidden Costs • Packaging • Communications • Import/Export Taxes • Waste/Shipping Damage • Legal • Product Redesign • Administrative Personnel

  15. Do Your Customers Care……??? • Where your product is made? • What the working conditions are? • Environmental impact? Does “Made in America” have value to your customers? Today? Tomorrow?

  16. Advantages of “Insourcing” • Quicker Response Times • Flexibility (“Specials”) • Customer Visits to Factory • Proximity – Designers & Manufacturing

  17. Opportunities to Grow • Customer Intimacy • Emerging Customer Needs • New Products • Service your Product • Partnerships

  18. Thank You for Your Time Larry Butz GEA Consulting, Inc 2420 N. Pine Creek Rd. LaCrescent, MN 55947 Tel: 1-507-895-6826 Fax: 1-507-895-4001 Email: LButz@gea-consulting.com www.gea-consulting.com Questions?