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Offshore vs domestic manufacturing: which lands cheaper?
Offshore sourcing wins on piece price and tooling. Domestic wins on lead time, flexibility and everything that happens after the part leaves the plant. Compare landed cost, not quotes: unit price, amortized tooling, freight, duty, brokerage, inventory carrying cost and quality travel. Offshore usually pays off on stable, labor-heavy parts at steady volume; domestic usually wins below a few thousand parts a year.
What does a part really cost once it lands?
The same part, priced both ways by the SSG estimator, then landed line by line. Move the volume and the duty rate and watch which lines grow.
Duty is yours to set. Rates depend on the HTS code and country of origin and change often; look yours up in the Harmonized Tariff Schedule.
- Sewn case: labor-heavy, offshore wins even at high duty.
- Stamped bracket: material-heavy, domestic wins at any duty.
- Die-cast, turned: it depends on volume and duty. Find the line.
Part
Offshore freight
Offshore lands $0.18 (5%) lower for a die-cast aluminum housing at 10,000 a year and 25% duty.
Domestic
8–12 weeks
Offshore
13–20 weeks
| Per part | Domestic | Offshore |
|---|---|---|
| Unit price | $2.32 | $1.36 |
| Tooling, amortized | $0.73 | $0.40 |
| Setup, lot and entry fees | $0.36 | $0.46 |
| Freight (ocean offshore) | $0.10 | $0.25 |
| Duty | $0.00 | $0.44 |
| Inventory carrying | $0.07 | $0.22 |
| Quality travel | $0.05 | $0.30 |
| Landed cost | $3.62 | $3.44 |
Assumptions in this model
- Program life 3 years; tooling amortized over 3 × annual volume.
- Domestic runs 6 lots a year by truck; offshore ships 4 lots a year, each with a customs entry and a third-party pre-shipment inspection.
- Freight: domestic LTL about $0.35/kg; consolidated ocean from the shared estimator; air about $5.50/kg door to door.
- Duty is applied to customs value: the ex-works part price plus amortized buyer-paid tooling (an assist). International freight is not dutiable in the US.
- Inventory carrying cost 25% a year on stock held: 4 weeks domestic, 16 weeks by ocean, 8 weeks by air.
- Quality travel and audits about $3,000 a year offshore, $500 domestic.
What goes into landed cost?
Eight lines. The quote shows the first two; the other six are where offshore comparisons usually get optimistic.
LineDomesticOffshoreWatch for
Unit price
DomesticEx-works or FOB at the factory
OffshoreOften 20–50% lower on labor-heavy parts; less on material-heavy ones
Watch forQuote terms: an FOB Shanghai price excludes everything below this row.
Tooling
DomesticMolds and dies at US rates, typically in hardened or pre-hard steel
OffshoreOften 30–50% lower, built in 4–8 weeks
Watch forTool steel grade, cavity count, shot guarantee, and who holds title. Buyer-paid tooling is dutiable as an assist.
Freight
DomesticLTL or truckload, days
OffshoreOcean: consolidated or full container, 4–8 weeks door to door. Air: many times the ocean cost per kg
Watch forHeavy, low-value parts carry the most freight per dollar. Incoterms decide who pays which leg.
Duty
DomesticNone
OffshoreGeneral rate for the HTS code plus any trade action on the country of origin
Watch forSet by classification and origin, and it changes. Look it up per part; never assume last year's rate.
Brokerage and entry fees
DomesticNone
OffshoreCustoms broker, bond, merchandise processing and harbor maintenance fees on every entry
Watch forSmall per part at volume; material on small, frequent shipments.
Inventory carrying cost
DomesticAbout 4 weeks of stock
Offshore12–16 weeks: pipeline on the water plus safety stock
Watch forCommonly costed at 20–30% of inventory value a year. Longer pipelines tie up cash.
Quality and travel
DomesticLocal visits, incoming inspection
OffshoreSupplier audit, third-party pre-shipment inspection per lot, periodic travel
Watch forA bad lot found at your dock is 6–10 weeks from a replacement by ocean.
Risk: IP, communication, disruption
DomesticLow
OffshoreTime zones, language, drawing interpretation, IP exposure, port and policy disruption
Watch forRarely priced, often paid. Budget an expedite allowance for air freight on late lots.
The full worked example, with every number and its basis, is in the guide Domestic vs offshore landed cost. Terms: landed cost, amortized tooling, Incoterms.
How long does each route take?
Order to dock for a repeat order. Add 4–8 weeks of tooling and a first article for a new part.
Domestic, by truck
Repeat order to dock
- Production 2–4 wk
- Truck 2–7 days
2–5 wk
Mexico, by truck
Nearshore, border crossing included
- Production 3–5 wk
- Truck and border 4 days–1.5 wk
4–7 wk
Asia, by air
Samples, first articles, rescues
- Production 4–6 wk
- Air, door to door 4–7 days
5–7 wk
Asia, by ocean
The default for production
- Production 4–6 wk
- To port, export 4 days–1.5 wk
- Ocean 2–6 wk
- Customs, drayage, inland 1–2 wk
8–16 wk
What does a long pipeline cost?
Every week on the water is a week of parts you have paid for and cannot use. Twelve to sixteen weeks of stock at a 25% annual carrying rate adds 6–8% to the landed value of every part, before a single container runs late.
Air freight cuts the pipeline to about a week but can cost more than the part on heavy items. It is for samples, first articles and rescues.
Where do China, Vietnam, India and Mexico fit?
Each country has a supplier base it is strong in. The right one depends on the process, the part and the origin rules that apply to it.
CountryStrong inTransit to the USWatch for
China
Strong inThe deepest supplier base: molding, die casting, stamping, machining, electronics and assemblies. Fast, low-cost tooling.
Transit to the USAbout 2–3 weeks port to port to the West Coast
Watch forChina-specific trade actions such as Section 301 add duty on many parts. IP protection and supplier concentration.
Vietnam
Strong inSoft goods, furniture, footwear, electronics assembly; a growing plastics and metals base.
Transit to the USAbout 3–4 weeks to the West Coast
Watch forMany components still come from China. Country of origin follows where the part is substantially transformed, not where it ships from.
India
Strong inFerrous castings, forgings, machined parts, textiles.
Transit to the USAbout 4–6 weeks to the East Coast
Watch forLonger transits and tooling cycles. Quality varies more supplier to supplier; audit first.
Mexico
Strong inAutomotive, appliances, electrical, die casting, machining and assembly, close to US plants.
Transit to the US1–7 days by truck, border crossing included
Watch forLabor costs above Asia. Goods that qualify under USMCA rules of origin can enter without duty; goods that don't pay the normal rate.
United States
Strong inEverything that changes often, ships fast, or is regulated: ITAR, medical, low volume, urgent.
Transit to the USDays by truck
Watch forThe highest labor rates. Capacity for labor-heavy work such as sewing and hand assembly is thinner.
Moving production to Mexico or back to the US is its own project. See reshoring and nearshoring for the transfer plan, and tariff management for origin rules and USMCA.
What minimum order quantities should I expect?
Typical, not fixed. Offshore minimums are set per order because every order carries freight, an entry and an inspection.
ProcessDomesticOffshore
Injection molded parts
DomesticA few hundred to 1,000 per run
Offshore1,000–5,000 per order
Die castings
Domestic500–1,000 per run
Offshore1,000–5,000 per order
Stampings
Domestic250–1,000 per run
Offshore1,000–5,000 per order
Screw machine parts
Domestic500–1,000 per run
Offshore5,000 and up per order
Soft goods
Domestic100–250 per style
Offshore500–1,000 per style
Offshore suppliers quote a unit price at their minimum and add a premium below it. Blanket orders with scheduled releases let a supplier run economic lots while you take smaller deliveries, at the cost of holding the stock somewhere. See MOQ and blanket PO.
When does offshore win, and when does domestic?
Decision rules, not a ranking. Most programs pass three or four of these tests one way.
Domestic usually wins
- Annual volume below a few thousand parts, where fixed costs per order dominate.
- The design is still changing. Each revision costs tooling rework plus a freight cycle.
- Heavy, low-value parts: stampings, brackets, castings where material is most of the price.
- Lead time or responsiveness matters more than piece price.
- ITAR, defense, and sensitive-IP programs.
- High duty exposure on the HTS code and origin.
Offshore usually wins
- Labor-heavy parts: soft goods, hand assembly, multi-operation castings.
- Stable, released designs with steady annual demand of 5,000 parts or more.
- Tooling-heavy programs, where lower tool cost is a real saving.
- Light, compact parts that freight well.
- Duty on the HTS code and origin is low or zero.
- A second source is needed for capacity or price leverage.
If the landed saving is under about 10%, the risk lines usually eat it. Stay domestic, or dual source and keep a domestic principal on the tool.
What risks don't show up in the unit price?
None of these are on a quote. All of them cost money when they happen.
- Intellectual property
- Drawings and tools sit in another legal system. Limit it with NDAs and NNN agreements enforceable where the supplier is, split tooling or assemblies across suppliers, and keep sensitive programs domestic.
- Communication
- A 12–13 hour time difference turns one question into a day. Drawings with complete GD&T, a written quality plan and approved samples do more than email.
- Quality escapes
- The cost of a bad lot is the replacement lead time. Pre-shipment inspection to an AQL plan (ANSI/ASQ Z1.4) catches most of it before it ships.
- Policy and duty changes
- Duty rates on the same HTS code have changed several times in recent years. Programs with thin savings can flip to a loss overnight.
- Logistics disruption
- Port congestion, blank sailings and canal restrictions add weeks. Safety stock and a domestic second source are the insurance.
- Currency and payment terms
- Offshore suppliers often ask for 30% deposits on tooling and orders, which moves cash earlier than domestic net-30 terms.
How does SSG run an offshore program?
Offshore sourcing is one of SSG's core lines. The steps are the same whether the part ends up in Asia, Mexico or back at a domestic principal.
- 1
Landed-cost analysis
Piece price, tooling, freight, duties, tariffs, brokerage, inspection, and inventory carrying cost are compared against a domestic quote.
- 2
Supplier selection and audit
Candidate suppliers are vetted for capability, certifications, and capacity, often with an on-site or third-party audit.
- 3
Tooling and first article
Tools are built offshore, and first article samples are air-shipped for measurement and approval, with PPAP documents where required.
- 4
Pre-shipment inspection
Each production lot is inspected at the factory to an AQL sampling plan before it ships.
- 5
Freight and customs
Goods move by ocean or air, clear US customs through a licensed broker, and deliver to the warehouse or line.
- 6
Ongoing quality and cost review
Corrective actions, periodic re-audits, and tariff and freight changes are tracked so the offshore decision stays current.
- One RFQ goes to domestic and offshore principals at once, so you compare landed cost on real quotes.
- First articles are air-shipped and approved before production ships.
- Every lot is inspected at the factory before it is loaded.
Questions buyers ask about offshore sourcing
Is offshore manufacturing cheaper than domestic?
Often on the quote, less often once landed. Freight, duty, brokerage, carrying 12–16 weeks of inventory and quality travel often add a third or more to an offshore unit price, and can double it on small orders or heavy parts. Labor-heavy parts at steady volume usually stay cheaper offshore; small, heavy or material-dominated parts often land cheaper at home.
What is landed cost?
Landed cost is the full cost of a part delivered to your dock: unit price, amortized tooling, freight, duty, brokerage and entry fees, inventory carrying cost, inspection and quality travel. It is the only fair basis for comparing a domestic quote with an offshore one.
What duty rate should I use?
The current rate for your part's HTS classification and country of origin, including any trade actions such as Section 301 or 232. Look it up in the Harmonized Tariff Schedule at hts.usitc.gov and confirm it with a licensed customs broker. The model on this page lets you set it yourself for that reason.
How long does offshore production take?
For a new part, about 12–20 weeks from purchase order to first delivery: 4–8 weeks of tooling, air-shipped first article samples, then production and 4–8 weeks door to door by ocean. Repeat orders run about 9–15 weeks order to dock.
When should I stay domestic?
When the design is still changing, when annual volume is below a few thousand parts, when parts are heavy and cheap, when lead time matters more than price, and for ITAR, defense or sensitive-IP programs.
Can I source both offshore and domestic?
Yes, and many OEMs do. A common split is offshore for steady base volume and a domestic principal for surges, engineering changes and backup. It costs a second set of tooling and a second approval, and it buys protection from freight and duty shocks.
Does SSG source offshore?
Yes. Offshore sourcing is one of SSG's core lines. SSG places work domestically first and offshore when the landed cost, lead time and risk still come out ahead, with supplier audits, first article approval and pre-shipment inspection built in.
Quote it both ways.
Send one RFQ. SSG routes it to domestic and offshore principals and lays the landed cost side by side, so the decision rests on real quotes.