The “Made in China” stamp seems ubiquitous on everyday items. In fact, 94 percent of American flags imported into the United States are actually made in China, and some retailers have been called out for selling “Made in America” paraphernalia that was actually produced abroad. But is it really that much more affordable to product materials outside the United States? If you’re just starting your business and are trying to decide the means of production, the answer might be no. Here are five reasons to produce your products locally regardless of business size.
Local Tax Incentives Reduce Costs
Many local and state governments offer tax incentives to businesses that open large factories or offices in their areas. These tax incentives can significantly reduce the cost of producing locally instead of sourcing your products abroad. Instead of looking for the best country to source your products, you might just have to look for the best state or city.
The goal of these incentives is to facilitate job growth. Not only are you benefiting financially from sourcing your products locally, but you’re also helping reduce the unemployment rate in your local community.
Local Production Isn’t as Expensive as You Think
Most people try to weigh the expenses of shipping and taxes against the financial benefits of producing in a seemingly affordable country, but it’s not as cheap as most people think. For example, Amway is a large national and international presence in the health and beauty industry, but most of its products are manufactured in America. The fact is, between 80 percent and 85 percent of its finished goods comes from raw materials, and labor accounts for an additional 5 percent to 10 percent. As long as you can source your materials for the same price (and labor costs remain flat), you won’t see much fluctuation in production costs.
Distance Increases Time and Expenses
Although the actual production process might cost less internationally, the cost of shipping your items to the United States and then distributing them to your vendors is going to skyrocket. Not only will it cost significantly more to move product, but it will also take much longer — especially if you have to ship your wares by sea. There are also smaller expenses that you take on by choosing an international supplier: travel expenses to visit the plant, border tariffs, and international taxes are just a few.
International Production Increases Risks
There are also significantly more risks to consider when producing your product internationally. While following the American government’s policies for business management, you also have to be aware of how your production country feels about international business and labor laws. You also have to keep an eye out for mother nature. A hurricane or tsunami could hit and halt production (or damage the factory) for several days or weeks. Suddenly, you have become an international businessperson.
There are also national risks to producing an international product. In 2015, the West Coast port labor dispute actually slowed the American economy as thousands of businesses couldn’t access products and materials that were sitting in port waiting to be unloaded. By the time the dispute was solved, some of the perishable materials had gone bad, and other materials (such as that season’s hot fashion items) were out of style and season.
Local Production Creates Opportunities for Community Building
By producing your items and processing your materials locally, you’re able to build long-term relationships within the community. You can really get to know your materials suppliers and build a strong working relationship with the production company. The fact that you’re creating jobs means that you can have a significant effect in your local community and create a better world for the next generation of Americans.
Every business owner has to decide where he or she wants to produce products, and sometimes it might not make sense to run production in the United States. However, just because international production seems cheaper doesn’t mean it always is.