Ready to Move Your Manufacturing to a New Region? Here’s How to Do it

Developing a contingency plan to avoid supply-chain breakdown might seem like a daunting task in the current climate.  

However, the supply chain chaos over the past couple of years has shown that as a retailer, you need to think about diversifying where you manufacture — and you need to do it as soon as possible.

So how can you establish another manufacturing operation without losing too much ground? This article will outline how you can begin your journey and what you need to consider ahead of time.

Begin by assessing the following three things:

1. What region is the most strategic location for your secondary manufacturing?
2. What do you need to know about the region before setting up shop there?
3. How can you find the best manufacturing partner for your needs and get to work?

Let’s break down some of the specifics and how you can set yourself up to enter a new era of manufacturing.

[Check out our article The Future of Manufacturing: Why it's Shifting and Where it Will Go Next for more information on how regional differences factor into your choice of manufacturing partner.]

Read About CBIP's Adaptable 4PL Logistics Services

Criteria for choosing a new manufacturer

When you’ve figured out where it makes the most sense to set up operations, you next need to establish a good understanding of the political and regulatory environment.

Consider the following:

• Labor Costs and Availability 

  • Regions like Central America have lower labor costs. They also feature large, comparably young populations.

  • Research the region’s regulatory environment. For example, the labor laws in a country like Germany will be quite different than those in China. Make sure that you understand the costs associated, and that any potential manufacturers are operating following local laws. If you prioritize flexibility or quick turnaround, build that into your plan early on.

• Regulatory Environment

  • Policies and laws can greatly influence both the cost and the time needed to start up a manufacturing outfit.

  • The best thing to do here is to consult with a specialist in the region. That way you can get a clear view of what possible taxes, start-up fees, and permits you may have to deal with — not to mention how long everything will take.

• Trade Agreements

  • If you plan on exporting your product for final sale in another country, you need to be aware of the associated costs, the time needed, and the challenges associated with import/export.

  • Favorable trade conditions between the country you intend to manufacture in and the one you are ultimately selling to can be a huge plus, so be sure to include trade costs in your cost analysis.

Do your research and make the right connections ahead of time

To start your search, you can browse a database with regional filters  — such as the manufacturing page of business intelligence firm Global Database — to find a factory for your given product anywhere in the world. Alternatively, you can work with a consultant or skilled partner who can steer you toward the right fit.

What does the ‘right fit’ look like in reality? Due diligence means researching the following categories:

Production competency

When choosing a manufacturing partner, you want to make sure they are already producing a similar product to yours. Luckily, you’ve got a wealth of data and information on your site and there’s no need to take a shot in the dark. As the years have gone by, different regions have established their respective niches.

Producing textiles? You may consider Vietnam, which has long been a production hub for the likes of Nike; further, Vietnam’s garment exports are projected to reach $43.5 billion in 2022. Making something more high-tech? Taiwan leads the pack and already accounts for 60% of global semiconductor contracts.

Choosing a region with established competency means you can feel more confident through the entire process, from testing to any unforeseen bumps in the road later on.

Reputation

Do some research into the manufacturer. Do they work with any retailers you are familiar with? What kinds of retailers do they work with, and what reputation do those retailers have? These days, some companies even use their ‘shared factories’ as selling points; as such, it’s never been easier to get an inside view.

Additionally, be sure to check if they have any outstanding fines or if they’ve committed any infractions. The last thing you want is to be in a situation where your production is disrupted because your manufacturer is in hot water legally.

Upstart costs 

Your upstart costs are likely to include the following:

• Production testing
• Factory inspection
• Travel to send experts to the new location to assure product quality and delivery

While these initial costs can add up, a more resilient supply chain gives your business a competitive advantage in the long run. In fact, research from The Hackett Group found that companies with a diverse supply chain had lower operational costs and cut back spending on raw materials by as much as 20%. 

RELATED: How Automation is Bringing Warehouses into the Future

You found a manufacturer that seems to fit the bill. What now?

After finding a factory that checks all of your boxes, you may be tempted to jump right into production. However, taking the time to inspect every aspect of the potential manufacturing partner before you begin full-scale production with them will likely save you time and energy down the road.

What questions should you really be asking to get the clearest picture? Check out the list below:

Questions to ask a potential manufacturing partner 

• Who are your current clients?
• What types of products do you have experience producing?
• How long will it take you to produce my specific product?
• What are your minimum requirements for order size?
• Do you outsource materials? Do you make materials in-house?
• Will I need to source my own materials, or are you able to source materials for me?
• Do you do all work for your clients in-house, or do you subcontract work out to any other factories?
• Can you provide documentation proving recent inspections or audits completed by a third party?

Shifting production is risky — but it pays off. That's why you need on-the-ground resources

One of the biggest hurdles to finding a new partner to work with is figuring out who you can trust. Making the right connections is key, and you need someone on-site to perform tests, establish a rapport, and continuously check up on your operations. 

Running a business is complex enough as it is. Save yourself the hassle of playing detective and opt to work with a 4PL that knows what to look for in regional manufacturers. 

At CBIP, we provide our clients with a wide variety of options. We also have the expertise to consult you on how to make the right choice based on your unique needs. With on-the-ground partners located around the world, working with CBIP means your company gets a built-in network to help you navigate new markets.

Want to get started on your diversification plan? Contact us today to set up a meeting with one of our specialists.