As our economy evolves into a more global and competitive marketplace, outsourcing is becoming more of a reality than an option. The extreme competitive nature on some price-sensitive products forces a company to continually search for cost-reducing, efficiency enhancing strategies. Outsourcing a subassembly or a single part in the United States, rather than overseas, has several major benefits.

The first major benefit of outsourcing in the United States is realized when a company can strengthen and market core competencies, which supports economies-of-scale theory. Outsourcing to another country, however, impedes and diminishes this ideal because, most often, the foreign supplier is known for moving large volume orders out the door. This translates into some suppliers having little interest in supporting the OEM on core competencies. Outsourcing in the United States, on the other hand, increases efficiencies because, most often, the domestic supplier has a vested interest in the OEM’s business model, not just delivering a final part or subassembly. For example, the supplier may have a diverse set of value-added services that can be tailored and customized, such as engineering design/layout, prototyping, software development, marketing support, material selection expertise, financing strategies, idea generation, packaging design, product upgrades, referral networks, intellectual resources, stocking programs, legal affiliations and/or logistics support.

The second major benefit of outsourcing in the United States is reduced costs. As any business professional might expect, there are additional costs associated with outsourcing overseas. For instance, outsourcing to an overseas supplier based on price alone is risky because there are hidden costs that relate to cultural interferences, interpretation hindrances, time-zone constraints, political differences, proximity delays, privacy/piracy issues, handling/delivery damages, warranty claims, engineering changes, quality obstacles, lead time concerns and/or learning-curve theory. Outsourcing to a supplier in the United States drastically reduces these cost-producing, efficiency draining issues. In fact, it’s so easy for an OEM and a supplier to join forces that it’s common to conduct and complete business the same day.

A third major benefit is speed-to-market and product lifecycle extensions. With some products, time-to-market is a core competency for many U.S.-based companies. Hypothetically, if I had an idea yesterday for a new product, it’s realistic to locate a supplier in the United States who would begin the design work today — see if you could do that in China or India or Japan without time-zone constraints or language barriers. Suppliers based in the United States have the flexibility and responsiveness, not only bringing products to market faster, but also to assist OEMs in product lifecycle extension. For example, the smallest change in design or upgrade can be implemented in a matter of hours, where on the other hand, working with an overseas supplier could be costly as a result of delays and distance for the same small change.

OEMs are encouraged to conduct business with suppliers in the United States rather than overseas; there are numerous benefits as mentioned. Do not let price alone drive the decision-making process. Forming a partnership with a domestic supplier is an opportunity for an OEM to strengthen and leverage its business model by acquiring new core competencies. Suppliers based in the United States have value-added services that are offered before and after the sale. They also have a strong loyalty that an OEM may never find overseas; the slogan “Made in the USA” shines with great pride. With this in mind, there is every reason to keep outsourcing in the United States.

Kurt H. Hartwig, MBA is the director of marketing and sales for Fort Atkinson-based Electronic Technologies International, www.etimfg.com.

By Issue Guest

An Issue Guest Author supplies editorial on their expertise, and can be read each month in the "My View" department.