Capitalism today has grown greatly and covers many more industries today than the early days of England’s Industrial Revolution, and today, it is not just textiles and tools that are made (though China does export 42% of the textile market). International manufacturing services are part of today’s capitalist method, and overseas manufacturing can produce anything from home computers and smart phones to automobiles, radios, shoes, toys, and more. International manufacturing services involve many parts of the world, with the United States, Japan, and European nations owning many means of production while importing electrical products, textiles, and more from offshore manufacturing in countries like China, Mexico, and more. How can big business make use of this, and how is it done?
According to Chron, international manufacturing services basically involve moving production from the United States or a similar developed nation to another country, otherwise known as offshore manufacturing. Various, well established reasons exist for this business practice, and most of them have one thing in common, and that is cost reduction to increase profit margins and expand the business.
Labor costs for manufacturers remains one of the biggest expenses to consider when drawing up financial plans for the future and managing company assets. After all, employees on the payroll need to be given competitive wages and salaries, and most employers have to give their employees health benefits as well, which adds to the overall cost. Sometimes, this is addressed by hiring mainly temporary workers domestically, and these particular workers can be hired through temp agencies. The advantage for the company is that temp workers receive lower pay than payroll employees would, and temp workers may not even get health benefits. The employer also gains greater flexibility in terms of increasing or decreasing the total number of workers.
Another reason that companies pursue international manufacturing services is reducing the price of overhead. That is, running a factory or other plant in the United States itself can be costly, with electric, gas and water bills adding up, not to mention auxiliary staff such as quality assurance officials and equipment technicians, not to mention shipping personnel.
Flexibility in manufacturing is another reason that capitalists will pursue overseas manufacturing. Contract factories in other nations such as China may have more workers and facilities than American companies, so if the requested number of produced goods increases, the manufacturer can keep up. In fact, some contract manufacturers can produce goods for two or more client companies at once. And if the production requirements go down, the factory will lower its production accordingly, but can increase it again when needed. The capitalist investors are avoiding the scenario of building costly new infrastructure of their own, only for production requirements to drop and thus make the new infrastructure useless.
Finally, international manufacturing services can act as a form of relegating labor and allowing every part of the system to play to its strengths. An American or European company, for example, may have staff and capital investments better suited to marketing, research and development, and other lofty aspects of the business while their own factories or plants are small or inefficient. Instead, the company can focus more of its capital and manpower on RandD or marketing while a contract company overseas concentrates all of its power on the manufacturing itself, and together, these two halves make for a more robust whole that relegates its work appropriately.
Products made in China and similar nations are then imported to the client company’s home country, and often, large freight ships will cross the Atlantic, Indian, or Pacific oceans to deliver these goods to the client company and its intended market and consumer base. This may involve expenses and coordination with shipping companies and international customs, along with port staff and delivering these goods from the ports across the mainland by means of trucks, freight trains, and freight jets to reach distribution centers and other capitalist points of interest. Outsourcing labor and manufacturing will involve executive coordination with these additional aspects of transportation, and that can factor into the company’s financial plans as well.
