Evaluating Overseas Investments in Manufacturing and Distribution
Posted March 21, 2019 in Articles
Overseas investments in manufacturing and distribution can provide benefits ranging from global efficiencies to tax savings and workforce reductions. However, before investing through a targeted acquisition or the development of a new overseas operation, it is imperative to critically assess all of the various organizational and operational issues, financial considerations, and risk factors involved.
7 Key Considerations for Overseas Investments in Manufacturing and Distribution
Some of the key considerations involved in evaluating potential overseas investments in manufacturing and distribution include:
• Tariffs and shipping fees charged to foreign corporations – Among other considerations that are unique to overseas investments and operations, tariffs, shipping fees and other taxes imposed on foreign corporations can add unexpected costs to otherwise-viable manufacturing and distribution investment opportunities.
• Quality of materials and products – The quality and type of materials available domestically can vary widely among foreign nations. Ensuring efficient and cost-effective access to necessary materials – as well as machinery, equipment, tooling, and other products used in the chain of production – can be crucial to the profitability of an overseas manufacturing or distribution investment.
• Compatibility with brand image and quality standards – If you are currently manufacturing products in the United States, will shifting production overseas have an impact on your brand’s reputation or position in the market? Will quality suffer if you move your manufacturing operations offshore?
• Legal and operational risks – Legal and regulatory landscapes also vary widely among international jurisdictions. Once you complete the necessary legal steps to establish your overseas operation, what legal and operational risks might you face that might not also exist with domestic manufacturing or distribution operations?
• Import, export and quality control – Whether you are shipping supplies into your offshore facility or exporting manufactured products to wholesale or retail destinations around the globe, the impact of import and export regulations and quality control standards will need to be carefully considered as well.
• Integration potential with existing sourcing and distribution channels – When establishing offshore manufacturing operations, it is also important to consider how easily they will integrate with your company’s existing sourcing and distribution channels. From timing constraints to technological incompatibilities, various issues can potentially cause significant disrupts in the chain of production.
• Compatibility with future investment targets – What other investments are you planning in the future? When investing in overseas manufacturing or distribution, in addition to examining compatibility with existing systems and procedures, it is also important to look ahead to how your investment might fit into the bigger picture. Even if an investment makes sense in the near term, it may not ultimately be profitable as a long-term investment.
While this list is by no means exhaustive, it should give you insight into the types of issues that need to be considered. For more information, please contact us for a confidential consultation.
Contact Mithras Investments
If you would like to speak with a consultant about evaluating your potential overseas manufacturing or distribution investment, we encourage you to get in touch. To schedule an appointment as soon as possible, please call (305) 517-7911 or tell us how to reach you online today.