There is a recent trend with U.S. companies to increase outsourcing of core competencies. Manufacturers often cite intense foreign and domestic competition, along with pricing pressure from U.S. retailers as the primary drivers. With its available capacity and nominal wages, Asia is generally viewed as an ideal location for low cost manufacturing. This concern increases in categories where retailer private labels are growing.
Many suppliers source products from the same companies as their competitors.
Accordingly, there tends to be little or no product differentiation and suppliers are forced to match competitor pricing or lose business. Such commoditization can initiate a destructive cycle of pricing wars, leading to the virtual elimination of quality and innovation, and further reducing prices and margins. Due to the extended shipping period to get finished goods from the overseas plant to the retail floor, importing can significantly restrict a supplier's flexibility . Many perceive importing to require a lead time of only six weeks. However, closer analysis reveals that when the entire product cycle is taken into account, from concept and design to manufacturing and transport, the lead time may be closer to 3 months.