Price vs. Cost When Outsourcing

When many companies face a decision of whether or not to outsource certain productions, one of the biggest factors is price. Why pay a local company $5 for a part when the same part can be made in China for $2? Especially now through the economic downturn, more companies than ever are trying to save every penny possible to make it through to the other side. However, the realization is that the costs incurred in most outsourcing ventures overseas end up being much more than the company ever expected.

Take for example Boeing, who decided to outsource the majority of components for its latest and greatest project, the 787 Dreamliner. The lighter and more fuel-efficient Dreamliner is Boeing’s first major new airplane in over a decade. The decision was made to rely on hundreds of foreign suppliers for the majority of the parts, which proved disastrous to production. Originally scheduled to start delivery in May 2008, Boeing now expects delivery in December 2010, over two years late. Not only that, but the project has ended up costing Boeing over $2.5 billion more than planned because of the inconsistencies of the suppliers.

Boeing’s misfortunes highlight a very real issue that companies must face when it comes to the decision of whether or not to rely on foreign suppliers. While it can be a very profitable venture, the hidden costs are often not seen until it is too late. Shipping, training, logistics, legal counsel, project management, duties and taxes, and the cost of intellectual property and quality are just a few of the total cost factors that need to be examined very closely before a decision is made.

Local suppliers offer a higher-quality advantage than most foreign manufacturers due to more experience and a superior standard for quality. At Wolverine Machine, we uphold our commitment to quality during every step of the process, guaranteeing absolute customer approval. Our customers do not need to worry about fluctuating production, late deliveries, inconsistent products, or increasing costs because we have been successful in ensuring satisfaction for over 86 years. If you would like to learn more about Wolverine Machine and how we can help with your next project, please visit www.wolverinemachine.com.