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Doing Business Overseas Isn’t Always Worth It

November 14, 2016

Many companies have been looking overseas to order parts due to what at first glance seems like much lower costs.  This isn’t necessarily the case, because of many different factors that can add time and money to your order process.  When doing business with companies in the United States, including us at Mid-West Screw Products, there are many advantages that you will not get if you are dealing with overseas companies.

happy traveler waiting for the flight in airport

One of the biggest differences between doing business overseas and in the U.S.  is the demand for smaller inventories on the customer side and higher inventory on the vendor side, which is more difficult to manage when working with offshore companies.  In the U.S., manufacturers use a KANBAN systems so the customer can release only what they need and do not receive more parts than they currently need bases on what they originally ordered.  Flexibility in production run is very important to the customer, and in the U.S. that can be accommodated.

When customers put in orders for parts, they expect to take in increments of parts. An example is 500 pieces per Kanban, but the manufacturer must have 2500 pieces on shelves at all times.  However, that quantity of 2500 could be the amount that the Customer establishes on their PO of 10,000 parts. This is because they do not want to be stuck with parts that may have a Revision change during the length of their PO. This is a win win for the Customer. Here we quoted 10,000. However, we only get to run 2,500 at a time. The increment system allows the customer to request changes to parts if they realize improvements need to be made between runs.  This requires a juggling act by the supplier as they must make sure they have enough parts on hand to meet each delivery date, but do not want to have too many parts made that would go to scrap if a customer requires changes to the design that would make the parts useless.  When going offshore for parts, the price you are quoted may be cheaper than in the U.S., but you will receive the total order at one time, which means you the customer will have to stock all those parts somewhere, and you cannot make adjustments if changes are needed.  This could lead to the customer having to place a whole new order if they realize the original parts they ordered did not meet their needs.

While the price for parts, they are given may be initially low; many times it goes up as the process moves forward.  Extra costs for air freight services, shipping, and customs can all be a part of unexpected added costs, as it is expensive to move large amounts of product from one country to another.  Many times you must also work with multiple middlemen, as they are many times necessary to do business with a foreign company / country.  This can all lead to increased costs.

At Mid-West Screw Products we believe in the ISO and Kanban process.  We work with all our customers to make sure they get the correct parts they need for their projects, when they need them.  Please contact us for more information on how we can meet your manufacturing needs.

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