Deciding where to locate a manufacturing facility or a node in the supply chain is complex and goes beyond the sole focus on hourly wage comparisons between locations. Firms should consider additional questions to fully assess costs and risks, including:
- Will wage rates in other countries remain stable?
- How productive is the workforce and how easy is it to find and retain staff?
- How much time will U.S. managers have to spend overseas, and how much will it cost?
- How much time will it take the goods to arrive in the United States?
- How stable are shipping costs?
- How do export and import regulations affect costs and time of delivery?
- Will inventory carrying costs grow when sourcing from abroad?
- How much do other important inputs, like energy, cost overseas relative to the United States?
- Does the foreign jurisdiction protect and enforce intellectual property rights?
- Are special arrangements needed to finance goods purchased abroad?
- How does the regulatory environment compare with the United States'?
- Will the quality of the goods meet expectations?
- If a quality control issue arises, how quickly can it be resolved?
- How difficult and costly will it be to resolve a contract dispute?
- How quickly can an overseas supplier react to changing product specifications?
- How stable is the political and economic climate?
The Assess Costs Everywhere (ACE) tool provides businesses with the analytic framework and resources to enable informed decision making. When considering all factors, the United States offers many competitive advantages, from a strong business climate to a highly-skilled and productive workforce. Additionally, companies that are expanding their workforce within the United States or bringing jobs to the United States may be eligible for assistance from the Commerce Department's Manufacturing Extension Partnership, Commercial Service offices, SelectUSA, Economic Development Administration, or other agencies.
One resource many companies may find valuable is MEP Total Cost of Ownership (TCO) tool. Building upon the Assess Costs Everywhere framework, MEP created the TCO tool to help businesses determine the total costs of one supplier relative to up to three others under multiple scenarios. TCO focuses on minimizing the total costs while maximizing value to the customer. It encourages a sharper focus on the big-picture concept of complete supply chain optimization. To learn more about TCO, visit MEP’s Reshoring page.
We encourage you to use the resources provided on ACE to help your business succeed and to contact us anytime if you have additional questions or need more information.