December 17, 2012, 1:15 PM — To paraphrase the old saying: The road to China is paved with good intentions.
For many businesses, outsourcing work overseas promises a road to business success, offering low-cost production with high quality results. For some, a business wouldn't be financially possible at all without outsourcing.
But outsourcing isn't easy, and trusting your business to someone half a world away takes a giant leap of faith that many aren't ready to take. And many times, that leap has indeed ended in disaster.
How do you ensure you aren't making a huge mistake when you start an outsourcing program? We talked to numerous entrepreneurs who'd been down the outsourcing road before, sometimes with great success stories to share, sometimes with miserable failures ("Never again!") to report. Their collected wisdom can be found within.
What work to outsource
While outsourcing of just about everything has been attempted, it isn't always successful. One of the big determinants of success is what exactly you're attempting to outsource, as certain tasks are generally easier than others to offload overseas. Here's a guide to the most common outsourcing options.
Offshoring began with manufacturing, and it remains perhaps the most common target for sending overseas. Why? Cost, pure and simple. "Made in America" may be great for the country, but for many small businesses, it's simply impossible to use a local factory or production center to make tangible goods and still turn a profit.
That said, outsourcing manufacturing is not an endeavor to be undertaken lightly. Colleen Lloyd-Roberts of Top Notch Nail Fileshas been outsourcing production of her products for nine years to both China and European factories. She says a comparable U.S.-manufactured nail file would cost 100 to 150% more to make--the equivalent of the price she charges her wholesale clients. Says Lloyd-Roberts, "I feel bad with all of the Americans who need money and employment, but they all want to charge so much. As far as manufacturing however, I don't know that I'll ever be able to get costs as low in the U.S. as I am getting now. I have made peace with the idea that I am employing people all over the world, because at the end of the day, all people have families to support, and no matter where we live, we all need money."
Her key to success? "Settling in to a long-term relationship with a particular manufacturer,"Lloyd-Roberts adds. "My manufacturer will take back any products that are flawed. In nine years I've only had two issues."