7 Things to Consider When Sourcing Overseas vs. Domestically

When it comes to starting your own e-commerce business, few decisions are more important than choosing the right manufacturing and fulfillment partner. After all, while a quality fulfillment partner can help you develop a successful and fast-growing store, the wrong selection could leave you with dissatisfied customers and less-than-stellar profit margins.

When trying to narrow down their decision as to who they should use for sourcing their products, many entrepreneurs start by analyzing whether they should use a domestic or overseas partner — or if they should try manufacturing their products on their own.

Here at Sourcify, we understand that some people worry about overseas partners' reliability and quality. However, as we’ve found in our own experience, choosing a properly vetted overseas partner ultimately offers several significant advantages over domestic suppliers and self-manufacturing.

Here’s a closer look at some of the considerations that make sourcing overseas the best option for your startup.

1. Cost Savings

Unsurprisingly, the most immediately apparent benefit of sourcing overseas is the potential cost savings. Sourcing in China allows you to save on both manufacturing and labor costs, as these overseas facilities tend to have much lower overhead. Even improved access to raw materials and other manufacturing resources can help lower costs.

A 2017 study comparing factory workers in the United States, China, and Germany help put these numbers in perspective.

While American and German factory workers both have an average wage exceeding $23 per hour as well as health insurance benefits, Chinese workers are only paid $1.36 per hour due to their lower cost of living. These savings are ultimately passed on to your business with significantly lower manufacturing costs.

2. Service Availability

One of the biggest problems in trying to land a domestic supplier is that many local manufacturers are limited in what they are able to produce. You might be able to find a local company that manufactures some of your products, but not all.

Alternatively, a local supplier may not be as willing to work with you on custom branding and other essentials for differentiating your products from the competition.

With overseas manufacturers, finding a provider who specializes in your desired product category becomes much easier. At Sourcify, our current manufacturing partners work in over 300 product categories, ranging from watches to Go Pro accessories. With overseas partners, you’re far more likely to find someone who can deliver customized products perfectly suited for your store.

3. Scaled Production

China is one of the biggest economies in the world, and this is largely fueled by its ever-increasing production capabilities. 2017 saw the country’s fastest increase in manufacturing in five years, further highlighting that Chinese suppliers are well-equipped to handle the mass production needs of businesses around the world.

Whether you need to place a large product order or you’re simply planning ahead for the future, working with an overseas provider guarantees you’ll have the production capacity needed as your company grows.

While a domestic supplier may not have the capacity to fulfill large orders, overseas fulfillment partners are well-positioned to meet your needs — and of course, many of these suppliers offer additional discounts for bulk orders.

4. Flexibility

Changes happen all the time in the business world. An unexpected increase in demand could require that you produce more units each day to meet customer expectations. Alternatively, you might need to place a smaller order than originally expected. Unfortunately, many domestic suppliers are inflexible in their ability to adapt to your business’s changing needs.

As Jan Van Mieghem of the Kellogg School of Management at Northwestern University explains, “The more expensive it is to pay overtime, hire extra workers, run weekend shifts and extra shifts, the more inflexible you are from a capacity perspective.”

Tighter regulations, unionization, and other factors limit flexibility for domestic suppliers — limitations that don’t have the same effect on overseas providers.

When working with an overseas partner, you’ll have a much easier time adjusting production schedules and capacities to meet your ever-changing needs.

5. Faster Production

Many entrepreneurs have the misconception that sourcing products from overseas will delay product availability, offsetting their potential cost-saving benefits. While the nature of overseas logistics does increase shipping time, these manufacturers are able to make up for this with their much faster production capabilities.

Larger factory spaces with more equipment, a greater number of employees, and longer operating hours allow overseas manufacturers to complete orders more quickly than their domestic counterparts. When your business sets up automated orders or shares inventory forecasts with your supplier, you can further decrease lead times for quick delivery of your items.

6. Product Samples

It doesn’t do you much good to order a product but have the finished result fail to meet your expectations. Because of this, ordering a prototype or sample product before finalizing a major manufacturing order is essential for any startup.

Once again, overseas suppliers can make a big difference. You may not have the capacity to develop a quality prototype on your own. Local partners often charge excessive fees for a single sample product. By working with an overseas provider, you can cut costs and save time on this important part of the manufacturing process.

7. Increased Time for Other Tasks

Manufacturing a product in-house requires a lot of time and energy. Rather than worrying about the ins and outs of creating your own products, outsourcing to an overseas partner allows you to put more focus on other vital tasks that will grow your business.

After all, there are only so many hours in the day. As Elizabeth Grace Saunders of the Harvard Business Review explains, “You can achieve more success by fully leveraging your strengths instead of constantly trying to shore up your weaknesses.”

By outsourcing your manufacturing needs to an overseas partner, you’ll be able to place greater emphasis on customer outreach, improving your website, and other essentials that will help you make more sales.

A Better Partnership

From helping you save money to increasing the overall efficiency of your business, it’s clear that working with an overseas manufacturer can make a big difference for your startup.

While you still need to do your due diligence to ensure you select a reliable and trustworthy partner, overseas sourcing can ultimately allow your business to become far more profitable and sustainable than if you chose a domestic manufacturer.

About the author: Nathan is a serial eCommerce entrepreneur that spent years living in China to learn about the overseas manufacturing process. He later founded Sourcify, to help others improve their sourcing process.