Location Matters: Learn More About Regional Advantages

Original equipment manufacturers (OEMs) primarily outsource manufacturing to save money and/or time plus focus resources on the aspects of their business that provide unique advantage. That equation has not changed. However, the equation governing whether an outsourcing strategy is achieving lowest total cost has. Gone are the days where labor cost dictates lowest price. Similarly, logistics costs have risen to the point that unless there is significant touch labor content in a product, outsourcing to a low cost labor market may be more costly than outsourcing closer to the end market.

Does this mean that offshoring is always a bad idea? No. However, it does mean that more attention should be paid to location choices by asking a series of questions:

• Does this location provide logistics cost advantages by being near our higher level assembly facility, distribution center or end market?
• Does this location help us fulfill local content requirements to mitigate tariffs?
• Does this location provide a proximity advantage for projects in which our team may need to have a closer interface with the electronics manufacturing services (EMS) provider?
• Is there a technical competency advantage that makes this location a better choice for our complex products?
• Given logistics considerations, does this location support the responsiveness we need?
• Do we need a regional manufacturing strategy to best balance our needs for responsiveness and competitive cost?

The variety of questions illustrates the complexity of most outsourcing decisions. There is rarely a perfect choice. It is often a tradeoff among benefits and disadvantages. This whitepaper looks at considerations in choosing the U.S., Mexico or Asia as a manufacturing location option.

Read the full whitepaper here.