Offshore manufacturing vs local manufacturing: What is the right manufacturing location for your brand?
Years ago when the British manufacturing industry was thriving, there would have been no question as to whether local manufacturing would have been your first option or a preferred one. However, during its decline, the rise of alternative options offshore was too attractive to brands to overlook. In this article, we will talk about what the right manufacturing method is, for your brand – offshore manufacturing or local manufacturing.
Before embarking on production for your fashion start-up, it would be wise to research the differences between local manufacturing or offshore manufacturing.
The main reasons designers and brands choose either of these options is rarely on personal grounds. Usually, it has something to do with one or more of the following:
- Tangible factors of consideration: cost, minimum order quantity (MOQ), skill, location (distance)
- Intangible factors of consideration: level of experience manufacturing, trust, communication
Making a choice, to begin with, is not easy. It gets easier with experience, but even then, selecting a maker for a new product range is always lengthy and can be costly.
Often, designers and new brands at the start of their fashion business journey will prefer to start close to home. That can be the UK for those UK based or another country, depending on the business’ location.
Developing the idea close to home where multiple visits can be made to the maker and many lengthy discussions in person can take place is invaluable at the start. The learning curve for new designers and start-ups is vast and having the opportunity to spend time in factories and sampling studios, learning first hand as much as possible about the process of manufacturing as well as having the luxury to see the idea develop into a product, is priceless.
Brands launching products that are price sensitive or very skill specific may not be able to find suitable maker close to home.
However, that often comes at a cost. While travel expenses may be minimal, cost of sampling and development can be much higher compared to manufacturing in another geographical location. Also, brands launching products that are price sensitive or very skill specific may not be able to find suitable maker close to home.
Another point of consideration is the fact that for some, while they may sample locally, production with the same maker may not be an option. This means doubling up of costs and going through the somewhat stressful process of manufacturer selection another time.
While, from designer to designer and from one brand to another, products and priorities may vary, most of the pros and cons remain constant. So let’s see what they are in brief:
LOCAL MANUFACTURING POSITIVES
- The ‘ Made in Britain’ or “Made in ….” label is an important point of branding, USP or market positioning tool for some brands.
- More flexibility: Emergency, top-up orders or just-in-time production can be fulfilled relatively quickly with local manufacturing.
- Costs: You will have more control over your production costs. They will be higher but won’t fluctuate as widely.
- Quality Control: Regular visits to the factory will be possible so checks on quality control can be done more efficiently and inexpensively.
- Smaller quantities: U.K. and some European factories are happier to produce smaller quantities compared to further afield and offshore factories.
- Communication: Communication will be easier in your own language, although you will still have to be organised with your production processes and spec packs.
- Manufacturing: You won’t have to allow extra shipping time, which results in more efficient production.
- Delivery costs: You won’t have to worry that your goods will get stuck in Customs, so delivery costs will be lower.
- Set up own production: As a start-up based in the UK, you’re in a good position to create a mini factory.
LOCAL MANUFACTURING NEGATIVES
- Costs: The price of production will be high as labour costs are far more expensive in the UK and Europe, compared to offshore manufacturing, due to legal minimum wage rates.
- Machinery: It may be hard to get a complicated product made due to a lack of machinery investment in some locations, like the UK for instance.
- Digitalization: Manufacturing processes have been vastly improved with CAD/CAM systems. However, the cost of these systems has been prohibitive for many UK factories.
- Skilled workers: Manufacturing in Britain had been in decline, although there has recently been a resurgence in the industry. However, it can be difficult to find an experienced sample and production machinists and cutters. A lot of factories have a fast turnover of workers so issues with consistency can sometimes occur.
Brands and designers that are more experienced and working on price sensitive products often have no choice but to go down the offshore manufacturing route.
While the process itself is not much different in essence, it does take a while sometimes to become accustomed to various cultural behaviour patterns and forms of communication. The initial setting up period may be a little more arduous, but ultimately, once the relationship has been established and at least one season has been completed, natural working flow can set in and lead to successful long-term relationships.
As brands grow and evolve, sometimes the manufacturing also has to evolve, which requires a move to a foreign location (or offshore manufacturing). These can be a consequence of needing to improve margins by increasing manufacturing volume and decreasing simultaneously production costs. Or it can be for reasons of bringing in new specialist techniques, like for example hand embroidery from India, machine embroidery from China…etc.
While on the whole, costs may be reduced or appear to be, it is worth examining the cost in detail as a whole – including time spent in communication, travel, cost of shipping, duty and taxes before a full comparison like for like can be made.
Sometimes moving to offshore manufacturing can still be a viable option despite a minimal cost reduction, while other times the initial reduced costs and potentially improved margin may be misleading and not worth it.
Offshore factories specialising in larger volume manufacturing are more likely to have the most up-to-date machinery, especially in the production of accessory or shoe.
Such choices are very personal and often driven by the “bigger picture” business strategy, but here is an overview of the pros and cons such a move may have for brands:
OFFSHORE MANUFACTURING POSITIVES
- Costs: While production costs will vary from country to country, offshore production is generally more cost-effective, especially when producing large volumes.
- Shorter manufacture to market time: With access to more manpower, production turnaround can be very fast.
- Machinery and technology: Offshore factories specialising in larger volume manufacturing are more likely to have the most up-to-date machinery and CAD/CAM systems. This is especially applicable to accessory and shoe production.
- More work is delegated to others: Greater delegation of various aspects of production occurs in offshore manufacturing, especially if you choose a Fully Factored operation.
- Access to a large pool of skilled labour: There is a large pool of skilled specialist workers in some countries, particularly in craft areas and embellishment. If the process is time-consuming, with cheaper labour you are able to be far more adventurous.
- Availability of Auxiliary services: A great offshore support network of skilled workers can make additional items, such as trimmings, for your products. If they can’t create it they can source someone who can but at a much lower price than it can be produced in the UK. However, large order minimums will be necessary.
OFFSHORE MANUFACTURING NEGATIVES
- Costs: Economies of scale dictate that small volumes would not achieve favourable costs, and some factories have high production minimums. This is changing, however, and more and more overseas operations are gearing up for smaller volumes. Also, you will most likely be subject to currency fluctuations, which can affect your profit margin.
- Communication: How easy will it be to communicate with a factory that employs no English-speaking staff? Can you speak the local language? You also have to take into account time zone differences, and whether they have good broadband internet connections. Also, even if they do speak the same language as you, sometimes there are other communication challenges, like the use of terminology and etiquette.
- Quality control: Unless you can afford to pay for the services of a Quality Controller it will be harder for you to control your production. Travelling to an overseas factory will incur costs that will have to be included in your product pricing formulas. Working through an agent is a possibility but they will charge you a fee, and it is not always easy to find an agent you can trust and who will respect your high standards.
- Risk of damage: The possibilities of damage to your products is higher if you choose offshore production. Get insurance.
- Cash flow: A factory may require an upfront deposit from you, and final payment on delivery, prior to starting your production and until you build a relationship with them.
- Logistics: Having samples made overseas will incur unanticipated costs, especially if you are providing all of the materials. This would be avoided if the factory is sourcing everything locally. The courier costs for posting toiles, samples, and materials back and forth will all add up. Additional time for shipping items must be factored into your production schedule and you must also be prepared for delays or Customs issues. Costs for transportation, delivery and insurance must also be considered.
- Cultural Differences: Working with countries in other geographical areas means having to learn different business etiquette, respect local traditions and religious and national holidays that may affect your manufacturing and timelines (e.g. Chinese New Year, Indian Diwali, Italian August holidays…etc)
Having examined both options, it is worth to consider the possibility that sometimes it is also good to have a combination of both options.
If a brand receives a large order from a buyer, it may be worthwhile considering an overseas factory; however, it’s worth getting your sampling done locally, as it will minimize fit issues and pattern fails, and should problems occur at least they can be rectified in the safety of home turf.
Eliminating the occurrence of initial expensive mistakes in an overseas factory is key. It’s also worth considering getting manufacturing quotes for both your country (or local manufacturing) and overseas production so that you can offer competitive prices to a buyer wanting to place a large order.
As with anything in business and life, some decisions are never simple and easy to make. The concept of “perfect” does not apply. More often than not, the process of finding a manufacturer is stressful, let alone trying to find THE right one for your product and for your business.
Therefore being clear on what you are looking for – cost, MOQ and quality – right at the start of your search, goes a long way in helping set you in the right direction. Knowing what is right for your brand and what will add or take away from the perceived value of your product is ultimately a decision lever that also affects decisions.
With more and more companies returning to the UK to manufacture their goods, issues such as a lack of good machinery and skilled workers will gradually improve. This will have a positive effect on start-ups who want to manufacture, for whatever reason, locally. Offshore manufacturing will always thrive and be in demand for companies thinking bigger and who are unable to find specialists on home shores. Whichever direction you choose to follow, ensure that you have done enough research to proceed with confidence.
There is no right or wrong decision. Where to manufacture often is not a choice but a necessity driven by commercial factors. Manufacturing where is right for your product and business results in a viable and commercial product is the ultimate deciding factor.
HELPFUL TIP: Work out the rough cost of what your product should cost to make via this helpful online calculator.