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The hidden cost of overseas manufacturing ️? #d2c #directtoconsumer #ecommerce #containershipping
The hidden cost of overseas manufacturing ?️? #d2c #directtoconsumer #ecommerce #containershipping
If you're selling baseball caps and you've leveraged platforms like TikTok to scale your business, you might find yourself in a situation where growth is rapid and the need for inventory skyrockets. For instance, you might receive a $ 50k investment and use it to stock up on inventory. However, as sales hit a thousand hats a day, your inventory needs could suddenly jump to half a million dollars' worth.
Managing this supply chain can be complex. First, you need to coordinate with your factory to go into production. Predicting how much inventory you'll need is challenging, often leading you to purchase four months' worth of stock at a time. Once the inventory is produced, it has to be shipped, typically by boat, which takes additional time. Only after the shipment lands can it be brought to your fulfillment center and then shipped to your customers.
This entire process makes converting inventory back into cash quite difficult. The primary challenge is cash flow. While having lower COG (Cost of Goods) when manufacturing overseas is advantageous, it comes at the price of more complicated cash management. Essentially, your cash is tied up in inventory and shipping, leaving you with limited liquidity to cover other expenses.
Keywords
- Inventory management
- Supply chain
- Cash flow
- Overseas manufacturing
- Fulfillment center
- TikTok marketing
- Direct-to-consumer (D2C)
- E-commerce
FAQ
Q: How does overseas manufacturing affect cash flow? A: Overseas manufacturing ties up your cash in inventory and shipping expenses, making it difficult to have liquidity for other operational costs.
Q: Why is predicting inventory so challenging? A: Market demand can be unpredictable, and purchasing several months' worth of inventory increases the risk of either running out of stock or overstocking.
Q: What are the logistical steps in the supply chain for overseas manufacturing? A: The steps include coordinating with the factory for production, buying and receiving inventory forecasts, shipping by boat, and finally bringing the shipment to the fulfillment center for customer distribution.
Q: Are there any benefits to overseas manufacturing? A: Yes, the primary benefit is often lower manufacturing costs, which can improve margins if managed properly.