Michael UngarCEO of the Industry 4.0 Club

Beyond Labor: True Cost of Evaluating Overseas Manufacturing Suppliers

25 Apr 2026 · 1 min

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1:20

In this segment, the presenter emphasizes that evaluating manufacturing suppliers—especially overseas versus local—requires a holistic view of total cost rather than focusing solely on labor. While labor costs are often highlighted as low in overseas options, the speaker points out that additional expenses such as transportation, fuel, and extended lead times can quickly erode any apparent savings. He also stresses the risk mitigation benefits of working with nearby suppliers, where direct visits and stronger relationships enable quicker problem resolution and collaborative solutions. The overall message to MEP (Mechanical, Electrical, Plumbing) clients is to factor in these trade‑offs—labor, logistics, risk, and relationship costs—when calculating the true cost of a supplier, ensuring that apparent low‑price offers truly deliver value after all hidden costs are accounted for.

Chapters

It may not be as direct as if you are only focusing on labor costs. Costs always come up in every conversation that we have with the manufacturers. The labor costs are certainly not the only cost, and that is part of that— the risk that has to be mitigated. If you have a local supplier that you can go visit and you get to know them, and so you know the problems that they're having, then you could maybe work together on a solution. So maybe there are other costs But you save money because you can work more closely with that particular vendor, or the transportation costs, the fuel costs, being able to find someone who's just a little further away versus overseas. And so those are all trade-offs that need to be factored into that, into that figure as far as that calculation, as far as, well, how much does it really cost? Are we only looking at labor? Are we taking into account— it's all very well and good to say that we can make it for this very, very low amount because the labor costs are so low. But if it's going to take you 20 days longer to get it here and the fuel costs are increasing, then have you really saved anything by the end of the day? And so that's a shift as well, helping— we're trying to help clients throughout the MEP. All of us were trying to help clients to understand that you have to start looking at that bigger picture, that it's, that it's not just one cost in isolation because it's going to be eaten up by your fuel costs or your transportation costs.