McCombs School of Business
Knowledge

Manufacturing
Choices

There are many places to have a product manufactured. Before deciding on a specific factory, company, or country to manufacture a product, the inventor must have a very good idea of his/her manufacturing goals. What type of product is it, are there government regulations on the product, how expensive will shipping be? It is vital to understand why a specific manufacturing location is chosen, and what that choice means to costs and production time.

There are pluses and minuses of manufacturing in all countries. Depending on what is most important to a certain inventor, there are several options to consider. Manufacturing in the United States keeps manufacturing close to home and production can be monitored inexpensively; as opposed to Asian manufacturing, where a trip to the factory can cost a trip half-way around the world. It is also important to consider where the potential customers who will buy the product are located. Thyssen Budd, a major auto parts distributor to Asia, saved their company and increased profits by moving manufacturing from the United States to Singapore: "We will follow our customers into China, India, Thailand and so on (Phelan)."

Perhaps the most important factor in deciding where to manufacture is cost. Manufacturing in Asia gives a low cost approach for companies bringing new products to market. Worker compensation costs are low in Asia because of the poor economy and value of their currency versus the US. Asian manufacturing has maintained a positive growth rate during the last five years, but hourly compensation cost growth slowed to well below that of the United States (Sparks).

It may be cheaper to manufacture in the Pacific Rim, but there are many drawbacks to the Asian approach. If manufacturing in a country far away, there are many unknown variables. How can an inventor make sure the manufacturer is doing what they are supposed to? Will the finished product be reliable, or will it fall apart? Are hours being billed appropriately, is the company stealing the inventor's money? All these problems and more arise when working with a manufacturing company outside of the United States (or where the inventor lives). One good way to make sure a company will have reliable quality standards is the OSI 9000 Standard.

The intent of the ISO 9000 (International Organization for Standardization) Series is consistent customer satisfaction through the timely supply of products or services that conform to the requirements and expectations of customers (ISO1Stop). Manufacturing companies that are ISO 9000 certified pay a fee to be registered and are continually audited for quality manufacturing processes. Inventors planning on using an overseas company need to make sure they go with a company that is ISO 9000 compliant.


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Check out the Silent Timer Web site to see the product Erik took to market. Contact him with any questions.

 

 
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