When entrepreneurs begin their companies, low overhead costs and sales volumes should allow for them to make their products in-house. However, as the number of products the company needs to make and then ship increases, each one of those products needs to absorb more and more of the increasing sales and administrative costs, which then leads to the necessity of outsourcing production. If this is an option you’re considering, understanding how to use a foreign supplier will assist you with the decision of whether this is the right step for your business.
Production Costs
One of the great advantages of opening a production facility, like those opened with maquiladoras in Mexico, is that the costs of manufacturing tend to go down. Labor is generally one of the highest costs when it comes to manufacturing, and labor in foreign countries can be incredibly cheap when compared to the cost of labor in the US. Lower expenses for materials, taxes, real estate, and utilities can also assist with the cost of manufacturing products outside the US.
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