As a leading manufacturer, you are continually navigating an increasingly complex global competitive landscape. That requires successfully managing challenges while simultaneously leveraging opportunities.
Black Line Group’s Vice President and Manufacturing Practice Leader, John Madsen, is here to share his experienced insight on how to manage your business from a global perspective.
It is common to feel price pressure from foreign competition. Many times, customers will compare quotes without considering the hidden costs related to working with an overseas supplier. “We would quote projects for long-standing customers only to learn (at times) that our competitor was pricing the project for less than our raw material cost,” says Madsen. “This was a frustrating process and we lost work.” Madsen shares a few of the commonly overlooked costs involved in doing business with a foreign supplier:
“Often the U.S. buyer is required to pay for the shipment before the product leaves the shipping port,” says Madsen. “If any product needs to be expedited, the cost to fly product to the U.S. can be very expensive.” Customers dealing with a quality error could also incur cost to return the product or potentially scrap the shipment.
“If an international supply chain is part of your company's strategic plan to lower cost, make sure you have a contingency plan with U.S. suppliers representing at least 60 percent,” says Madsen. Based on how the international supplier is performing, along with other seemingly ever-changing geopolitical considerations, the allocation can easily be shifted. This approach allows for re-balancing as needed and also provides a plan to lower costs.” Other tips and considerations include:
“After you understand all of the hidden costs, doing business outside the U.S. may or may not necessarily be the best and lowest cost way to grow your business,” says Madsen. “Understand your risks and the full costs before jumping in.”
For more manufacturing guidance, check out our Manufacturer's Guide in 2020: Top 8 Issues Facing the Manufacturing Industry in 2020.