Global Operations Management: A DiscussionWhen an entrepreneur first launches a company, most of the labor and materials can be covered domestically and in-house. However, as the business expands, it makes more and more sense financially to move the production overseas. For many companies, using a foreign supplier is the answer to absorbing the bulk of the burgeoning sales and administrative expenses. There are both marked benefits in the development of manufacturing outside of the United States, as well as significant disadvantages. Engaging in such an endeavor requires much preparation, flexibility and overall understanding of cultural diversity among nations, races and ethnic groups. Such an endeavor is best for only highly skilled managers who have experience in managing both delicate and nuanced interactions between peoples and cultures.
Benefits
The most obvious advantage of creating a manufacturing operation outside of America is reduced cost. “Choosing to outsource your manufacturing can potentially reduce your costs of labor by up to 80% depending on the labor intensity of your product. The reduced operating capital will allow you to channel more funding towards marketing, research and development, salaries, as well as other areas that can help improve your bottom line” (sourcingoverseas.com, 2017). When one opens up a production facility in another country, the manufacturing costs are markedly lower than those in the United States. Labor tends to be one of the biggest manufacturing costs and foreign labor is often markedly less expensive than domestic labor. When one combines this with lower utility costs of running a plant, lower costs of real estate, and lower overall taxes and material expenses—it makes the endeavor of manufacturing abroad extremely attractive.
Another advantage to manufacturing outside the United States is actually not as well known, but many small business owners have argued that they get better service outside America for their manufacturing needs. Many entrepreneurs who have smaller businesses, such as ones half the size of behemoths like Target or Wal-Mart, have argued that when they contact domestic manufacturers, they don’t even receive the decency of a call back. Many domestic manufacturers refuse to do business with companies that aren’t massive. As one entrepreneur wrote, “On the other hand, I never had difficulty finding a Chinese factory that was willing to work with me as a smaller company” (Shugar, 2016). Another benefit that companies speak of when it comes to doing business overseas is that there is more of a pervasive “can-do” attitude. For example, as one small business owner explains, “I never experienced a factory in China that was unable to produce a large order for me. Most times, when a Chinese factory tells you they can produce your order in four weeks, they produce your order in four weeks” (Shugar, 2016). There have been numerous complaints from business owners who have manufactured domestically that there are limits to the domestic capacity of orders or often delays in time. Foreign manufacturers are known for the their aggressive turnaround times that often exceed expectations of the American company.
The benefits of manufacturing overseas are numerous, and much of these reasons are connected to the more positive attitude towards business and the enormous manpower available. This means that American companies can experience a shorter manufacture to market time, meaning that they can grow their business more aggressively. The access to more manpower means that entrepreneurs can delegate with greater skill and to a greater extent, allowing them to refocus their energies on their main abilities and the development of their overall business. Hence, having access to a large group of skilled workers is highly significant and nothing to underestimate...
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