Why 'New-Shoring' Is the New School of Manufacturing for Small Business
June 24, 2014
Small businesses that have the wherewithal are manufacturing locally and near their consumers. Doing this from the get-go, rather than bringing manufacturing back from abroad, they are "new-shoring" due to the same reasons: decreasing foreign wage disparity, time-to-market, and product personalization.
You may get your product faster and cheaper, but manufacturing overseas has its pitfalls. Through a combination of one of the new manufacturing trends, “new-shoring” -- creating new jobs closer to home -- and smarter international manufacturing practices, small businesses are helping protect their valuable assets.
With the increased cost and environmental impact of shipping goods overseas, a decreasing wage disparity, and cheaper domestic energy, many businesses are bringing their manufacturing closer to the consumer. All those aforementioned financial factors -- coupled with an increased desire for product personalization and a decreased tolerance for waiting around -- have resulted in a trend toward local manufacturing. And “new-shoring” likely expresses it best because these localized projects are new, not the same products and jobs that were offshored years ago.
When it comes to deciding how and where to manufacture your product, you’ll want to look closely at how new-shoring and international manufacturing stack up against one another. In the not-so-distant past, taking your product abroad meant cheaper expenditures but inconsistent quality control. Today, with updated production facilities, cutting-edge tools, and more sophisticated design capabilities, manufacturing overseas can not only prove to be more affordable, but also more reliable. Pretty easy decision then, right?
“Here’s the short-term view,” explained Victor Wong, CEO of Austin-based Music Computing, a digital musical instrument maker. “Overseas manufacturing makes great sense. We get to produce products for 10 cents on the dollar, we get great quality, and we don’t have to pay for insurance. It comes to the States, and we can sell it at a lower price than our competitors, or at the very least we can compete at the same pricing level as other people who manufacture overseas. The long-term view is… never ever do that.”
Here’s why: For Wong and many of his fellow business owners, manufacturing in places like China means rolling the dice with intellectual property (IP). Whether it’s at the hands of an enterprising, opportunistic employee or a shady subcontractor, having your idea stolen and duplicated is a very real possibility, especially if it’s a proprietary creation with potentially high demand overseas. In the music-industry (MI) space, particularly, clones not only eat into the bottom line, when the fake product doesn’t perform, it creates a false sense of inadequacy with the product that can damage the company’s reputation moving forward. So what do you do?
Unlike reshoring -- which implies bringing jobs back to the United States that had previously left -- many small businesses are new-shoring their products, which means starting from scratch right here in the States. The advantage? It may cost a little more, but by locally prototyping and building the first few batches of your product close to you, you’ll be able to see and fix potential issues and confidently get your item to mass market. For Wong, the first step is having reliable tools.
“While I usually design most of the products in my head to start with, they have to be recreated in AutoCAD so there is an accurate model to be used as the reference for manufacturing," Wong said. "Oftentimes, we will need to make quick changes due to substitution of components or new features.”
Another issue to consider with new-shoring is the cachet of the “Made in America” label. For many, the phrase is a beacon that helps attract clientele, but what about consumers who are a bit more skeptical? Wong has a solution. Rather than trumpet the USA, he advertises Music Computing products as “designed and assembled in Austin.”
“Austin has an active tech business, and we’re a big music town,” he explained. “We market toward the strength of Austin, and secondly Texas.”
Try as they may, however, some small businesses just can’t afford to start fresh in the United States. If new-shoring is a goal your small business is working toward, make sure you take the necessary steps to protect your IP overseas. If you’ve got a product with multiple parts, don’t manufacture everything in the same location. For example, in instances where electronics are being produced, procure your hard drive from one company, have the shell manufactured at another location, and obtain things like keyboards from a third partner. Then assemble locally.
“It’s the Wild West out there,” Wong said. “Make enough money to stay in business, and produce it close to you to handle emergencies or changes. Once you’re up and walking -- not running, walking -- then you can start optimizing your cost and your supply chain. Of course, the real secret is to make sure the product is unique. Then you can rely on that newness to demand a premium for it, which will offset your cost of having to produce it here in the U.S.”
Are you incorporating new-shoring into your business, or do you have a story you’d like to share about manufacturing overseas? Please tell us about it below in the comments section.
Top photo credit: Music Computing Rich Thomas is an internationally published, award-winning journalist whose writing has been featured in over 30 magazines, newspapers, and websites, including the Los Angeles Times, Ray Gun, RollingStone.com, and Flaunt. As a copywriter, his client list includes retail and entertainment companies Mattel, Red Bull, Restoration Hardware, and the Sony Playstation Network. Rich is an author for the Line//Shape//Space blog of multinational 3D design software maker Autodesk. This article was adapted from Line//Shape//Space with permission.