During the past few decades one of the biggest industry trends has been to outsource production overseas, often to developing markets where labor and overall costs were traditionally a lot less.
However, the changing economic climate has meant that costs in many developing countries are now catching up with the traditionally expensive Western markets, while transport costs have risen considerably due to significant hikes in the price of oil.
On top of this there is also more and more pressure to cut down on shipping miles, in turn reducing the environmental impact associated with the manufacturing of products.
Costs, the environment and flexibility
The changing reality means that more companies are checking out their options on a more local basis, in a move that can both help to drive local and national economies, as well as proving to be a savvy business move, O.Berk says.
The company has identified five principle reasons for sourcing more locally, including rising labor and transport costs, quality assurance, being more green, speed to market, as well as providing outstanding service.
In its report, O.Berk make particular reference to the narrowing gap between pricing for US companies and Asian companies, particularly those in China, where wages have risen sharply over the past ten years.
Increasing labour costs in Asia
“As anybody who drives a car know, the cost of fuel has gone up dramatically,” said Jim Anderson, O.Berk’s senior operations manager. “Rising transportation expenses, combined with increasing overseas labor costs, are offsetting any real or perceived advantages of souring abroad.”
With respect to quality assurance, the company states that similar business culture, a common language and adherence to national safety standards can all serve to make the issue of quality assurance much easier to navigate.
The reduction in transport costs not only serves to reduce the carbon footprint, but can also helps to reduce the carbon footprint associated with manufacturing process, a potentially big bonus with increasingly discerning consumers.
US consumers will pay more for greener products
“Research continues to point to the face that US consumers are generally willing to pay a bit more for American made products, even in economically challenging times, and especially when the product in question is environmentally friendly,” said Joel Simposon, VP of sales and marketing at O.Berk.
Distance can also slow the delivery of the packaging, a point the company says can be resolved if the product is sourced closer to the production site and increasing a business’s flexibility to deal with problems, especially if they are based in the same time zone.
Ultimately the main points raised in O.Berk’s research indicate that sourcing more locally can also lead to a better service and considerable improvements in business efficiency.