When purchasing products from overseas there are many costs that businesses overlook. Included in these unforeseen costs are the costs associated with the political and safety risks of the country your supplier is located in. The Department of Commerce’s “Asset Cost Everywhere” site discusses in-depth the costs of utilizing an international supplier - specifically, the political and security risks with working with international suppliers in certain countries.
This blog is the fourth in a series detailing the costs associated with international suppliers. Read more:
Trade Financing Costs
Inventory
Product Quality
The US continues to be a stable and predictable environment for manufacturing. The US consistently ranks high among countries with the fewest political and security risks for businesses operating within their borders, for both the company and workers. The same can not be said for other countries that international suppliers are located in.
Political and security concerns risk disruption of normal business operations. Examples of political and security risks include war, terrorism, breach of contract and more. While the probability of these occurrences is low, it is an important consideration when determining if international outsourcing is right for your business and what extra measures need to be put in place to mitigate the risk of impact from these events.
War, Crime, and Disasters
Wars, crime rates, and disaster risk are all issues that should be evaluated when determining if you want to partner with an international or domestic supplier. The physical safety of the employees you are outsourcing your work to is an important consideration. Costs can rise as companies need to adopt extra security measures to protect products and personnel in countries with a higher crime rate and security risk.
The following map details security risks by country:
Source: Economist Intelligence Unit
In addition to crime and security concerns, another risk to evaluate is the risk of impact from a natural disaster. Natural disasters and epidemics are a concern for many businesses when working with an international supplier. The issue is not necessarily the probability of a natural disaster occurring but if the country your supplier is located in has the adequate resources to deal with the fallout from a natural disaster. If the preparedness and responsiveness of a country are inadequate, you could be looking at significant export delays or even loss of product after a disaster.
It is important to consider all costs and risks, including political and security risks, when selecting a supplier. Many times it makes much more sense to choose a domestic supplier over an international supplier from a safety perspective. Contact Custom Rubber Corp. to learn more about our services and capabilities that could fit your business needs and budget.