If you are a business owner, having well-developed procurement strategies is very important. When sourcing for your products, you may have turned your attention to overseas companies in low-cost countries like China and Indonesia in the hopes of lowering production costs. It’s true. Sourcing internationally usually costs less, and if you take into consideration important factors like order quantities and production timeline, you’re set to reap profitable results!
But before you make a sourcing decision, it’s crucial to understand how both domestic and international sourcing works, and consider the two options against the needs of your business. If you’re unsure about the differences, worry not—this blog will cover the key pros and cons of the two aforementioned options.
Minimum order quantity (MOQ)
In the realm of sourcing, the minimum order quantity—a.k.a MOQ—is a term you’ll hear often, which means the minimum number of products you, as the buyer, need to purchase from the manufacturer or supplier in a transaction. Depending on where you’re sourcing from, the MOQ can be high or low.
▶︎ International
Overseas factories in countries like China usually purchase raw materials in bulk and therefore require a higher minimum order quantity in order to start production. There are a few factors that influence the MOQ, including product type and quality, the level of customization required, and the types of raw materials used. For example, inexpensive goods that are simple to produce (like stationary or small items) tend to have high MOQ, while products with high production costs (like electronics) have lower MOQ.
▶︎ Domestic
If you source locally, the MOQ is typically lower, though the price per unit will be higher. Since you’re based in the same region and time zone as your supplier, you can build stronger relationships. However, you’ll miss out on the diverse offerings by international suppliers, as well as higher profitability.
Lead time
▶︎ International
In relation to the MOQ, overseas suppliers will require more time as products are manufactured in bulk. Additionally, you’ll need to account for shipping time, which lengthens the production timeline. You also need to consider the political situation of the country—political instability may cause disruptions to the supply chain. Which is why planning ahead is important when sourcing internationally. If you take unforeseeable circumstances into consideration and plan your timeline accordingly, you’ll be at an advantage.
▶︎ Domestic
On the other hand, the lead time is shorter when you source domestically. Ground carriers can be utilized, which are generally more flexible in terms of costs and timelines compared to ocean carriers. It’s great when you need to restock urgently and don’t mind the higher production costs.
Material options
When you source locally, you may encounter limitations in your material options. If you need a special material, you’ll need to look to suppliers in other countries. This is where international suppliers can offer better material solutions by having more options.
International vs. Domestic: which one should you choose?
- If you are a small business with tight deadlines, and need only small quantities, the local supplier is the way to go. Moreover, you can be more involved in the production process as you’re in the same time zone and region.
- If you want to have unique materials to go with your brand, with bulk orders and lower unit prices in mind, go with an overseas supplier. You’ll be able to explore a wider range of material options with higher production capacities, and expect greater profits!
At INNORHINO, we specialize in custom packaging projects that can meet your business needs. We’re always excited to collaborate with business owners like you to create memorable and on-brand packaging. So what are you waiting for? Shoot us an email today!
This article is written by: Leonni Antono – BBP
Image source: INNORHINO, Unsplash, Pexels
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