Manufacturing overseas
You might consider manufacturing overseas to reduce component costs while keeping research and development and design and short-run manufacturing in New Zealand. Manufacturing offshore can reduce the cost of production, help get your product to market faster, and reduce delivery costs.
Approaches to overseas manufacturing
The approaches to manufacturing overseas include:
- contract or licensed manufacturing
- joint venture with an overseas company
- buying an existing manufacturing facility
- setting up a new manufacturing facility.
It is common for companies to gradually increase their commitment to overseas manufacturing from outsourcing through to ownership of a factory.
Contract manufacturing
Contract manufacturing entails an overseas firm manufacturing all or part of your product under contract to your specifications. Your relationship with the manufacturer is essentially ‘customer and supplier.’ In many cases, you might supply a mould or detailed manufacturing specifications.
If your products rely heavily on your design, to stay competitive, you should be very wary about who you give access to this information. You may consider manufacturing only certain components overseas to protect your intellectual property (IP). It remains your responsibility to market and sell the product.
Licensed manufacturing
Manufacture under licence includes both manufacturing and marketing rights in a defined territory, using your IP. Lower production and transportation costs can increase your ability to compete. Offshore production and manufacturing capability may also enable you to overcome import restrictions and focus on your strengths, such as R&D or design, rather than production.
Setting up, buying or joint-venture manufacturing facilities
Setting up or buying your own manufacturing facilities overseas can be extremely expensive. You will need to have significant volumes of business to realise a return on your investment.
Running an overseas factory as a joint venture with a local party can reduce the risk to your business in New Zealand and lets you take advantage of local knowledge.
Some countries put conditions on foreign-owned businesses and may have laws relating to foreign investment. Make sure you get advice from your accountant and other business advisors before you invest in overseas production facilities.
Getting help
It is important to get advice from experts and specialists who understand the options, know your company, and understand the market.
There are a number of options for finding experts and specialists to advise you:
- Contact New Zealand companies and individuals who have ‘been there, done that’ and are willing to help newcomers.
- Find a business mentor with export experience.
- Hire a specialist or consultant. Take care in selecting a specialist, ask for references and follow these up.
Steps to finding a manufacturer
- Learn the regulatory requirements of your target industry.
- Research the market or industry to find out its structure – it can be very different to what you might expect.
- Define your needs accurately.
- Research potential manufacturers.
- Short-list the candidates and get quotations or references. If you do not have anyone in-market to assist, ask potential manufacturers for New Zealand (or Australian) reference clients. Follow these up.
- Do a proper legal background check on the final candidates to verify the information provided, including ownership, registrations and business scope.
- Personally visit the top candidates with a trusted translator and experienced resident.
- Use a proper legal translation from a law firm for final contracts. Make sure the company you hire for this has experience in structuring offshore manufacturing contracts and is familiar with the law in the country concerned.
How to manage quality
A big issue facing companies considering local manufacturing is quality control.
You can outsource quality inspections for your products or employ someone to be on site to oversee quality. Independent inspection companies can visit your manufacturing partner's plant and do quality controls and production audits.
Make sure quality standards are specified in your service level agreement.
Getting help
It is important to get advice from experts and specialists who understand the options, know your company, and understand the market.
There are a number of options for finding experts and specialists to advise you:
Contact New Zealand companies and individuals who have ‘been there, done that’ and are willing to help newcomers.
Hire a specialist or consultant. Take care in selecting a specialist, ask for references and follow these up.
This guide is provided subject to NZTE's terms of use:
Use of the information contained in this guide is at your own risk and we are not responsible for any adverse consequences arising out of such use. This is a complex area and we recommend that you seek legal advice before taking any related action.
- This information is provided by New Zealand Trade and Enterprise
Manufacturing overseas
