Offshoring Your Product

Obviously, you would prefer to manufacture your product in the good old U. S. of A. There’s no need for me to list the benefits of manufacturing at home, especially as they relate to project command and control.
But if you have to work in part or whole overseas because of cost efficiencies, let’s review some guidelines.

Does It Make Dollars and Sense?

Lower labor costs are clearly the reason you would consider taking your product overseas. But be careful. Run the numbers. Do the math. In addition to the cost of taxi fare, consider every aspect of the decision, from labor costs and labor skills to turnaround times, profit margins, shipping, taxes, and duties, to name just a few items on a long list of must-knows.
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U.S. Customs and Border Protection will facilitate about $2 trillion in legitimate trade this year while enforcing U.S. trade laws that protect the economy and the health and safety of the American people. For information about U.S. trade laws, go to www.customs.gov/xp/cgov/trade/basic_trade.
Last, but far from least, is your order large enough to qualify for offshore production? Unless you have large volume, foreign manufacturers typically have no interest.
Be honest in your estimates. Do not promise large orders unless you have booked them. Factory owners and managers have heard all the stories. Just have a long-term plan and stick to it.

“Toto, I Have a Feeling We’re Not in Kansas Anymore …”

Things are different on foreign shores. You are no longer in the land of the free and the home of the brave. You are in a land of strangers. The red tape is different. The culture is different. The customs are different. The currency is different. The language may be different. Very little you encounter will be equivalent to the United States. As Kipling reminds us, “All the people like us are We, and everyone else is They.” And They come at a price that may be too high for a small business to pay.
Do your homework. Hire a consultant to help you flesh out the pros and the cons of foreign manufacture, country selection, etc. Study up on any trade agreements between the United States and the countries under consideration. You need to light a candle of understanding. You are contemplating travel through uncharted waters into uncharted territory from your point of view.
Inventions Wanted
IBM, a pioneer in information technology, has established a formal channel for unsolicited inquiries. The company is interested in seeing proposals for marketing and development relationships; software and software technology proposals; equity, acquisition, and joint venture proposals; patents, including those issued and pending; and ideas relating to IBM products and services. All proposals need to be submitted electronically. To that end, go online to www-01.ibm.com/contact/submissions/extsub.nsf/BusinessProposal?OpenForm to find how to proceed.

Find a Local Lieutenant

Once you decide upon a country of manufacture, you are well advised to hire a foreign national based in-country, on your payroll, to represent your interests. It is too risky to depend 100 percent on the factory. This is like trusting the fox to watch the hen house. Set up a system of checks and balances that is under your control.
Get recommendations from three different people before you hire anyone, and for sure arrange a face-to-face meeting here or in the country of manufacture.
Many people are out of work today and looking for consulting assignments. I’m sure that if you go to a trade show and ask people for manufacturing contacts, they will be generous with their recommendations. Pros like to help other pros get work. One day you might be able to repay the favor.

Kick the Tires

Visit factories to evaluate them firsthand. Many people work with foreign makers through United States-based agents, often relatives of a factory owner based here for the purpose of drumming up business and serving as liaison between you and the factory.
If you opt not to go overseas and to work through a United States-based agent, odds are good that you will be put in the agent’s factory of choice. You won’t get the benefit of having makers compete for your business.
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Fast Facts
U.S. Customs and Border Protection’s (CBP) Office of International Trade has developed a new online trade violation reporting system called eAllegations. If you suspect trade violations, you can report them anonymously via https://apps.cbp.gov/eallegations. CBP has established this reporting system to make it easier for the public to notify CBP of possible trade violations. CBP will confidentially research concerns, determine the validity of the allegations, and take any actions required based on the subsequent review.
I cannot be more emphatic about factory visits. Nothing is more reassuring than meeting the owners and managers of your factory and building a personal relationship. Walk the floors. Get a feel for the workers and their environment. Be sure they understand your product. Independent inventor Ken Thorne, who is making his Window Wizard overseas, warns that with offshore companies your product could be as foreign to them as an artichoke is to an Eskimo.
A visit will pay major benefits when there are problems (and there will be problems) and you’re trying to make sense of things from thousands of miles away, working with people who don’t have a command of English.
On a personal note, when Mike Sanders at Alpha Books decided to offer me a contract to write the first edition of this book, my wife and I took a trip to Indianapolis for the sole purpose of meeting Mike and his team. We have since been back two more times.
A project several years ago had us working with an electronics engineer in San Jose, California. After a few months, I noticed some communication problems between us and this engineer. I asked the team if anyone had ever met the engineer face-to-face. No one had ever laid eyes on him. He was hired through references.
I picked up the phone and told the engineer I wanted to fly to San Jose from the East Coast and take him and his wife to dinner. “Pick your favorite restaurant,”
I said. I landed at Mineta San Jose International Airport, rented a car, and went to a Sheraton in a nearby suburb. That evening we had a wonderful dinner and talked on into the night. That dinner and the postprandial exchange cemented our relationship, and everything was smooth from there on.
Sometimes the travel works in reverse. When we were developing Furby, there was so much technical mechanism data to transfer to the Chinese engineers that I suggested a delegation from the factory travel to see us in the United States. Two days later, several engineers landed, and we had a seamless transfer of information. In this case, it made more sense for them to come our way.
I could not agree more with Ben Stein: “Personal relationships are the fertile soil from which all advancement, all success, all achievement in real life grows.”

Making You Feel at Home

Foreign manufacturers are most hospitable when customers come to visit. They love to roll out the red carpet and lay on meals and entertainment in an effort to get to know you, make you feel comfortable, show off their capabilities and their country, and hopefully get your business.
We always take gifts when we go overseas on business. We like to take handicrafts or books of photographs from the USA, especially from the area where we live. When I had contacts at NASA, I would get satellite photographs of their country or, if possible, their city. People go wild for such mementos. If you would like to purchase prints, go to http://earth.jsc.nasa.gov/sseop/EFS/vendors2.htm.
In many Asian countries, there is something called “debt of the spirit.” This means that for every gift you give, you’ll get a gift in return. And in these cultures, it is important for them that they give the last gift. I recall once in Taiwan we found ourselves in the battle of gifts. At one point, we ran out of gifts and started to buy local curios and gewgaws in an effort to keep pace with the generosity of our hosts. It was quite a scene. After four or five rounds, we allowed them to win.
In summary, create linkages. Sound business is about relationships, not just commerce.

Diplomatic Missions

Contact a country’s embassy in Washington, D.C., and have a word with people in its trade or economic mission. See if they can send you booklets about doing business in their country. The mandate of international trade missions is to encourage and facilitate trade and investment in their countries. Google and Bing are great ways to track down the web pages, phone numbers, and e-mails for these United States-based organizations.
Bright Ideas
Christopher Latham Sholes (1819-1880), Collector of Customs during the Lincoln Administration, and co-inventor Samuel Soule patented a numbering machine in 1866. Two years later, they joined forces with another inventor, Carlos Glidden, and patented their first typewriter. In 1873, Sholes developed the QWERTY keyboard, still the standard for keyboards, to help keep the keys from jamming.
Make it a point to learn about the local culture, its customs, and its business practices. Memorize some phrases in the local language to prepare for your visit.
Having lived in Spain, France, Italy, and Panama, and traveled worldwide, I know firsthand the value of language proficiency and how far simple words like hello, good-bye, please, and thank you go in establishing relationships.
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