When you run a wholesale business there are a lot of factors to consider that have an effect on the success of your business. The global economy affects the United States wholesale economy directly. Other things like natural disasters, political changes, and changes in the wholesale business environment shift the way your products are made. In this blog we are going to explore the advantages and disadvantages of outsourcing production overseas. We are also going to take a closer look at how the wholesale economy is affected by certain factors around the world and domestically.
Factors That Matter For Wholesale Companies
To understand how the United States wholesale economy is affected by global matters, we first have to understand what makes a wholesale business succeed. In order for a wholesale business to be successful it must function well in specific key areas. These areas are what can have a huge influence on the wholesale economy altogether. This success starts with a comprehensive analysis of the entire wholesale business.
An analysis of the wholesale business should include the company’s mission, as well as, long term goals. The mission that is chosen reflects product quality, the reputation of the brand, what value can be provided for customers, and how this mission can be achieved. The long term goals should be a detailed approach to the established mission as a whole. Once this mission and the goals are in place, then we can tackle the main factors that influence wholesalers.
The place your business holds in the industry is a determining factor for economic success. As a wholesale business it is necessary to interpret industry trends and retail demands. Product forecasting and marketing campaigns are ways that you succeed in this type of business. Efficient operations and inventory management control are two additional areas you can work to improve. Production and delivery operations are other areas that you can always improve to maintain a competitive edge too.
Changes in the business environment can directly affect the economic health of your business. Natural disasters, reliability of your supplier, the political climate, and changes in customer buying habits are all ways in which the business environment may fluctuate. Anticipation of these shifts in the environment is how your wholesale business will survive in this economy. Have solutions to challenges ready in your pocket in the event that you need them suddenly.
Major Factors That Can Affect the Global Economy
Natural disasters disrupt the wholesale supply chain directly. The impacts of a natural disaster on production can be felt decades after an event. The statistics show that the number of these disasters has doubled over the past 20 years due to climate change. These disasters can have a major effect on global economic growth too.
For example, Japan had an earthquake and a consequential tsunami that damaged a massive amount of ports and airports in 2011. The damage from the tsunami stopped about 20% of the world’s semiconductor equipment and parts. Many parts for airlines are also manufactured in Japan. As a result, this natural disaster halted production of Boeing’s 787 Dreamliner. 22 Japanese auto part plants had to close as well, causing the United States domestic gross product to slow in 2011. That is a huge ripple effect on the global economy from one disaster.
These effects on the global economy came about after just one natural disaster overseas. There have been many more natural disasters including floods and hurricanes. Other disasters play a major role in the global economy, such as, the spread of the new Coronavirus in China. The larger problem here is manufacturing managers outsourcing jobs. These negative effects on the wholesale economy can be avoided entirely by domestically filling jobs.
Next, other changes in the business environment have an effect on the global economy. The reliability of your supplier, the political climate, and changes in customer buying habits are other important ways in which the economy can be influenced. Changes in the political climate include new trade deals that may affect the shipments of your materials and products. These are all things to consider when you’re dealing with international manufacturing.
Communication Within Your Wholesale Operation
More often than not, communication is overlooked in wholesale partnerships. When outsourcing production, communication is required. How this communication happens is essential to the success of the business. If you’re considering a manufacturer in a different time zone, how will it affect communication? This is a question that can have a serious impact on your products.
The time zone difference, alone, can prevent important decisions from being implemented. There are ways to improve the situation, but overall it is not ideal. You want to be able to make changes as they happen in the marketplace. This flexibility is essential for wholesalers.
Language barriers and cultural barriers can also have an impact on how successful your operations become. If you cannot communicate, then you won’t get anything done in a timely manner. Having conversations and responding to emails quickly should be things you factor into your communication habits. These habits must be monitored as closely as possible to determine whether your operation, as a partnership, will succeed. Communication is just one major obstacle of outsourcing production to international companies. This obstacle can be overcome, but there is a cost.
Why Do Wholesalers Outsource Products?
Wholesale companies typically outsource most of their jobs to countries that experience a lower cost of living. The global manufacturing output of products is largely focused overseas in places like Asia. This dominance can have a negative effect on wholesale companies in the United States when something happens that halts production. The real question is, is it worth it to save money and outsource overseas?
A majority of wholesale businesses in the United States import their products from suppliers overseas. One of the primary reasons businesses choose to import is the cost. Overseas manufacturers can take advantage of lower wage costs and fewer regulations to charge lower prices. Essentially, importing saves the company money in some areas.
By saving money on labor and cost of products, there is often a decrease in the quality of the products. You cannot guarantee that the quality of the products you are going to get is on par with the quality your customers expect. So while you may save money in some areas, you may be losing money in terms of sales and product quality.
Product Quality Matters
Quality is definitely the most important thing to consider when outsourcing. It can be difficult to control in-house, so imagine how much more complex it can be overseas. When you decide to outsource production overseas, quality control is almost impossible to improve. The manufacturer you partner with has to have quality standards. Observing, tracking, and reporting on quality is crucial to the success of production.
It’s important to note that quality is more than just the business’s standards and practices. You can gauge quality by taking a tour of the plant, reviewing other projects they are working on, or simply taking a look at their organization. These standards are different for each company. They also differ based on the products being manufactured. When you choose to outsource production, quality control discussions are the most important to have.
There are a variety of reasons why a wholesaler may choose to outsource production. Sometimes a wholesaler may not have the technical expertise to achieve production goals. In this case, the business may look to other countries that are capable of providing these services. In other cases, a wholesale business may already be at capacity and an overseas option is the best solution. Whatever the reason may be, there certainly are advantages for some companies to outsource production. However, in a majority of cases the costs outweigh these advantages. Domestic production is the best option for wholesalers.
The Advantages of Domestic Manufacturing
There are many disadvantages when it comes to outsourcing the manufacturing of your products. However, each wholesale business is different. Maybe outsourcing works well with your goals and customer demands. It just depends on your requirements for production. Let’s take a closer look at the advantages of manufacturing domestically instead of outsourcing.
Firstly, you have the flexibility to change your product whenever you want. The ability to implement last-minute changes is much easier with domestic products. This allows you to change your product to better fit the changing market without losing time or money. Being able to keep up with market demands is a huge bonus.
Secondly, you have better control of the quality of your products. Quality control is a huge aspect of the wholesale industry. It can directly influence sales and customer opinion. With outsourcing quality becomes a problem. The company you outsource from will likely have many clients. Unless your order is large enough, they won’t give it a lot of attention. If you’re manufacturing the product domestically you can hold it to a higher standard of quality control. You can also keep a closer eye on the specifics of the manufacturing of your products.
Wholesale Management and Logistics
Thirdly, management costs are a lot lower. This happens because there is no need to hire managers to keep an eye on the outsourcing. Foreign outsourcing requires that someone speaks the language and is in the country to ensure your materials are being produced as expected. A more direct control over production eliminates this extra level of management. As a result, it will cost you less to make your products. When you have more control over production, then it is easier to meet customer demands. In the wholesale industry, meeting customer demands is everything.
Fourthly, you also have less to worry about when it comes down to logistics. Transporting products across international borders is eliminated completely. Any number of factors can influence the shipping of your products across borders. Whether it’s trade deals, the spread of a disease like the new Coronavirus in China, or other financial obstacles, you don’t need to worry about these hindrances. You don’t need to factor customs duties into your costs either. Overall, transporting your products is more cost-effective. Saving money on shipping costs is always a great thing.
Lastly, your brand will maintain its reputation in the wholesale industry. Public relations is another aspect you have more control with when you manufacture products domestically. Negative press over outsourcing can hurt your product sales directly. A majority of customers tend to avoid businesses that outsource. This bad press over outsourcing can hurt the growth of your wholesale company. Manufacturing domestically can prevent any involvement in this negativity and improve your brand’s reputation.
How Do You Connect With Domestic Wholesalers?
What happens if you’re a wholesaler who already outsources production? Well, there are a number of remedies you can turn to. The number one solution being the internet. A lot of wholesalers tend to shy away from digital solutions, but this is where the marketplace is heading now.
One of the solutions that e-commerce provides wholesalers is the ability to search online for domestic businesses to partner with. There is no need to buy your products overseas anymore. Wholesalers have access to a vast network of manufacturers and distributors right here in the United States. The advantages to domestic sourcing are a supporting factor too.
Wholesalers are adopting digital trends that are the most popular in the b2b industry. The next logical step is for wholesalers to start sourcing products and supplies domestically to avoid any potential complications. New technology exists for wholesalers to connect and find domestic manufacturing partnerships.
Social media is fast becoming the go-to way wholesalers connect in the industry. If you’re really wanting to connect with local and domestic wholesalers, then social media will help. There are other platforms too that are made specifically to help wholesalers grow their businesses online. Become familiar with these new b2b trends as they emerge. You can use any number of new technological advances to find the right partnerships for your wholesale business.
To learn more about how you can domestically source wholesale production visit https://www.seebiz.com/