One of the main advantages of domestic versus overseas production, is that the turnaround time on orders made here in the US can be significantly faster than ones made further away. Because shorter lead times allow designers to be more flexible and creative, prevent lost business, and increase cash flow, having a consistently quick turnaround helps businesses gain traction and outpace their competitors. Further, it’s arguable that these benefits may trump the advantage of lower labor costs in cheaper foreign factories.
It’s not that domestic manufacturing operations are speedier than those overseas; it’s that with quality control checks, shipping, and importing activities, getting an order to it’s final destination can just take longer!
Some overseas suppliers (particularly smaller ones) do not have Quality Managers or Quality Assurance procedures in place, so the burden of ensuring quality falls more heavily on the shoulders of the buyer. Before a designer can ship her goods for example, she must hire a 3rd party agency to perform a ‘Pre-Ship Inspection,’ wait for the results, and then handle any errors that arise (often dealing with a time difference which delays communication). While it’s a good idea to oversee your own QC (quality control) in domestic factories too, the ability to visit the factory yourself, communicate clearly with managers about quality expectations, and ship bad back product at a relatively low cost if something is wrong, lowers risk and speeds up the process.
The biggest source of wasted time is in the actual transport of your product. In the US, shipping with a commercial freight provider takes no more than a week. The industry-standard for transporting goods internationally however, is by boat, which takes an average of 3 weeks. Further, in order to get the best price with a freight forwarder (the company you hire to move your shipment), smaller companies must consolidate their cargo, meaning their products share a shipping container with other company’s products. Consolidated shipments are organized to leave each port only once or twice a week (and they fill up fast), so if you’re a day late delivering your goods to the freight forwarder or they are very busy, you can literally “miss the boat” and be forced to wait.
Finally, regardless of whether you are importing by sea or using the quicker (and very pricey) Air Freight method, everyone bringing goods into the US must go through US Customs and Border Protection. Paperwork has to be filed, duties are paid; the whole process adds time. Importers also run the risk of having a shipment ‘held’ by Customs, who perform frequent inspections of shipping containers in order to ensure their protocol is being followed. It’s arguable that people producing domestically reduce both time and stress by avoiding this facet of logistics.
So what specifically do designers gain from choosing suppliers with a shorter lead times?
1. MORE FLEXIBILITY
The first benefit is the ability to be more flexible and creative. Have a genius product idea that you want to get done before a trade show? Is a style selling quickly and you’d like to capitalize on the momentum and add more colors? The ability to implement last-minute decisions like these turn entrepreneurs into more nimble, aggressive players than their outsourcing counterparts. This can be particularly attractive for those in fashion, who strive to keep up with changing trends, and thrive by staying ahead of the curve.
2. FEWER LOST ORDERS, MORE RE-ORDERS
Agility also prevents lost orders. If you see that an item is moving faster than expected, a quick lead-time allows you to replenish your stock and avoid back-orders or lost sales. No business owner wants to be in the position of receiving a PO from a critical client that they can’t fill on time. Saying ‘no’ once could cost you the relationship and put money in the pocket of a competitor! If working with a big retailer (who may have strict delivery deadlines), saying ‘yes’ and then being late could jeopardize the account and result in chargebacks or deductions on your invoice.
3. INCREASED CASH FLOW
One of the most appealing advantages of short lead times is the uptick in cash flow entrepreneurs can experience. Say you’ve sold an order for 1,000 units of product to Company X. If you’re like most in the retail industry, you’ll be paid 30-60 days after Company X receives the product. If the lead-time is 8-10 weeks in your overseas factory, this means you have put out cash that you won’t get back for 3-5 months.
Producing domestically on the other hand can shorten this interim period dramatically, and the results are like compound interest. If you use your additional freed-up cash to produce more stock, you’ll have product on hand to refill Company X’s supply as soon as they need it. You may also decide to introduce some creative new products and launch a marketing campaign, which increases Company X’s order volume and attracts the eyes of Companies Y and Z in just a few short months. Meanwhile, Competitor B is still getting by on a shoestring budget waiting to get paid!
All companies want to be faster and stronger. For new entrepreneurs and start-ups however, the stakes associated with being quick are usually higher. Just one well-timed idea has the potential to create breakthrough success. Likewise, losing an important client or big order can threaten your existence. As such, exploring how shorter lead times can benefit your particular bottom line is a valuable exercise as you set up your supply chain.
What do you think? Have you experienced any of the above? Post in the comments below!