For Methuen, Mass.-based ZeeVee, cheap overseas manufacturing costs seemed like a perfect match for its growing HD video distribution product business. But the company soon learned the age-old lesson: All that glitters is not gold -- especially when it comes to offshoring jobs to places where labor costs are lower.
As ZeeVee prepared to ramp up distribution of its flagship product, it was worried its U.S. manufacturing partner couldn't keep pace with its business model. At the time, ZeeVee was embarking on transforming its consumer product into a commercial product -- a move that meant ramping up production of its ZeeVee HD video distribution hardware fast.
At the time, ZeeVee decided to partner with an undisclosed Chinese manufacturer that it said could easily handle its high-volume needs. ZeeVee explained that in China, large-batch product builds every month or two kept costs extremely low for the company and produced its hardware in quantities that could last for long periods of time. What could go wrong?
But Bob Michaels, CEO of ZeeVee, told CRN it didn't take long for unanticipated problems to pop up related to its new manufacturing partner. Michaels said long lead times between product batches made it difficult for ZeeVee to implement quality improvements and introduce product variations.
"The infrequent manufacturing operations also meant the company had to tie up huge amounts of cash each quarter before manufacturing even began, on products that would not be brought to market for months," said Vic Odryna, co-founder of ZeeVee.
Things got worse, according the company, when products damaged in transit from China to the U.S. irked customers. Ensuing replacement and insurance costs began to rise.
It was at that point, Michaels said, the company reassessed the effectiveness of manufacturing overseas. "We looked closer to home and realized the best type of manufacturing for our business was working with an American-based manufacturer," he said.
Early in 2012 it turned to Arizona-based manufacturing partner Suntron to do the same work at the company's Massachusetts-based facility. Since then, Suntron's manufacturing division, along with its 41,000-square-foot-facility in Massachusetts, was sold to Virginia-based EIT, a contract manufacturer.
"Quality went up and we were able to have product ship on the same day it was ordered," Michaels said. He said working with Chinese manufacturers didn't provide nearly the same level of collaboration, product flexibility, rapid prototyping, and designing for manufacturability.
ZeeVee directly attributes the company's success today and ability to rapidly expand into new markets to the benefits reaped by manufacturing stateside.
For EIT's Massachusetts manufacturing plant, it has meant the addition of 20 manufacturing jobs. The company also is doubling the size of its manufacturing facility, opening up a new plant in Salem, N.H., at the end of November.
For Michaels, perhaps the best part of the move back to U.S.-based manufacturing is that he does not have to hop on a plane for a 16-hour flight to China to have a prototyping discussion.
This report originally appeared on the CRN Tech News App for iOS and Windows 8.