Help the economy -- keep outsourcing in the U.S.

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 U.S. 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. That translates into some suppliers having little interest in supporting the original equipment manufacturer, or 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 a steep learning curve. Outsourcing to a supplier in the United States drastically reduces these cost-producing, efficiency-draining problems. In fact, often times an OEM and a supplier are able to conduct and complete business the same day.

A third major benefit is speed to market and product life-cycle extensions. Time to market is a core competency for many U.S. companies. Hypothetically, if I had an idea yesterday for a new product, it would be realistic to find a supplier in the U.S. who would begin the design work today; could you do that in China or India or Japan without time-zone constraints or language barriers? U.S.-based suppliers have the flexibility and responsiveness not only to bring products to market faster, but also to assist OEMs in product lifecycle extension. For example, a small change in design or upgrade could be implemented in a matter of hours in the U.S. but could take days and result in higher costs with an overseas supplier as a result of delays and distance.

OEMs are encouraged to conduct business with suppliers in the United States rather than overseas, but don’t let price drive the decision-making process. Forming a partnership with a domestic supplier is an opportunity for an OEM to strengthen and leverage their business model by acquiring new core competencies.

U.S.-based suppliers 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.