Is Overseas Manufacturing Really Cheaper? How to Calculate the True Landed Cost
For manufacturers, product developers, and purchasing teams, comparing domestic and overseas manufacturing often starts with one number: price per part.
An overseas supplier may quote a lower unit price than a U.S. manufacturer, making the decision seem straightforward. But the quoted piece price is only one part of the total manufacturing cost.
International freight, tariffs, customs fees, inventory requirements, longer lead times, and other supply-chain expenses can significantly change the economics of an overseas manufacturing program.
Before deciding where to manufacture a plastic product or component, it is important to compare the total landed cost, not simply the quoted price per part.
At A&M Plastics, we created a free Domestic vs. Overseas Manufacturing Cost Calculator to help companies make that comparison using their own quotes and cost assumptions.
What Is Landed Cost in Manufacturing?
Landed cost is the estimated total cost of getting a manufactured product or component where it needs to go.
For an overseas manufacturing program, that can include much more than the supplier's quoted unit price.
A basic comparison may look like:
Overseas landed cost = Manufacturing + International Freight + Tariffs & Duties + Customs & Brokerage + Inventory Carrying Costs + Other Import-Related Expenses
A domestic manufacturing comparison may include:
Domestic landed cost = Manufacturing + Domestic Freight + Other Associated Costs
The result can provide a more useful comparison between suppliers than looking at piece price alone.
Why the Lowest Price Per Part May Not Be the Lowest Cost
Imagine a company needs 250,000 injection-molded plastic components annually.
An overseas manufacturer quotes the component at $0.82 per part, while a U.S. manufacturer quotes $0.98.
At first glance, overseas manufacturing appears to save:
$0.16 × 250,000 = $40,000 per year
But that doesn't necessarily mean the overseas option costs $40,000 less.
The company may also need to account for international freight, tariffs and duties, customs or brokerage expenses, additional inventory, warehousing, inspection, and other costs associated with importing the product.
Once those expenses are considered, the difference between the two manufacturing options may become much smaller—or potentially reverse altogether.
Every project is different, which is exactly why companies should perform the calculation using their actual supplier quotes and their own cost assumptions.
1. Start With Your Actual Manufacturing Quotes
The first step is simple.
Take the quoted price per part from each manufacturer and multiply it by your expected annual production volume.
For example:
Annual Production Cost = Quoted Price Per Part × Annual Production Quantity
Make this calculation for both the domestic and overseas supplier.
This gives you a starting point—but not necessarily the final cost comparison.
2. Add International Freight Costs
Plastic components can take up significant shipping volume relative to their value, particularly larger molded products.
When sourcing internationally, transportation costs may include ocean freight, air freight, inland transportation, port-related expenses, and other logistics costs.
Rather than assuming a generic freight percentage, companies should use an estimate that reflects their particular product and supply chain.
For an existing program, historical freight expenses can provide an even better comparison.
3. Account for Tariffs and Duties
Depending on the product, material, classification, and country of origin, imported products may be subject to tariffs or duties.
These expenses can materially affect the landed cost of an overseas component.
They can also change over time.
That means a sourcing decision that looked attractive several years ago may deserve another evaluation under current conditions.
Companies evaluating overseas manufacturing should determine the appropriate tariff and duty assumptions for their specific products rather than relying on a general percentage.
4. Include Customs, Brokerage and Import Expenses
International manufacturing may introduce costs that aren't included in the supplier's original quote.
Depending on the arrangement, these might include customs brokerage, documentation, inspection, handling, port charges, or other import-related expenses.
Individually, these costs may seem relatively small.
Across hundreds of thousands or millions of components, however, they can become meaningful.
5. Consider the Cost of Carrying More Inventory
This is one of the manufacturing costs that can be easy to overlook.
Longer supply chains may require companies to maintain additional inventory to account for production schedules, transit times, customs clearance, demand fluctuations, and potential disruptions.
That inventory has value—and holding it can have a cost.
Companies may have capital tied up in parts sitting in warehouses or traveling through the supply chain.
Inventory carrying costs can include factors such as capital costs, storage, insurance, handling, shrinkage, and obsolescence.
For this reason, our manufacturing cost calculator allows users to enter both their average weeks of overseas inventory and their own annual inventory carrying rate.
6. Calculate the Estimated Landed Cost Per Part
Once the additional expenses have been added, divide the estimated annual landed cost by the annual production quantity.
This gives you another number worth comparing:
Estimated Landed Cost Per Part
Suppose an overseas supplier quotes a significantly lower piece price. After freight, tariffs, customs and inventory costs are included, the landed cost per part may tell a different story.
That's the number purchasing teams should understand before making a sourcing decision.
Domestic Manufacturing Has Benefits Beyond Piece Price
Cost matters, but manufacturing decisions aren't made on cost alone.
There are operational considerations that are difficult to capture in a simple calculator.
Working with a domestic manufacturer may provide advantages such as shorter supply chains, easier communication, faster response times, lower inventory requirements, greater production visibility, easier facility visits, and faster reaction to design or demand changes.
For companies manufacturing in the United States, proximity can be particularly valuable when a product requires secondary operations, assembly, ongoing engineering changes, or close collaboration with the manufacturer.
A calculator can't assign an exact dollar value to every one of these factors.
But they should still be part of the sourcing conversation.
When Does Reshoring Plastic Manufacturing Make Sense?
Moving an existing manufacturing program from an overseas supplier to a U.S. manufacturer is often referred to as reshoring.
Reshoring may be worth evaluating when a company is experiencing high international freight expenses, increasing tariffs, long lead times, excessive inventory requirements, inconsistent quality, communication challenges, supply-chain disruptions, or difficulty responding quickly to customer demand.
It can also make sense when an existing injection mold or tooling can be transferred to a domestic plastic manufacturer.
You don't necessarily have to start with a completely new product.
An experienced injection molding company can evaluate existing tooling, determine whether it can run in its equipment, identify potential maintenance or modifications, and develop a plan for transferring production.
How to Compare Domestic vs. Overseas Manufacturing Costs
We've made the first part of that evaluation easier.
Use the Free Domestic vs. Overseas Manufacturing Cost Calculator
A&M Plastics' Manufacturing Cost Calculator lets you enter your own:
Annual production quantity
Overseas quoted price per part
International freight
Tariffs and duties
Customs and brokerage fees
Average overseas inventory
Inventory carrying rate
Other overseas costs
Domestic quoted price per part
Domestic freight
Other domestic costs
The calculator then compares the estimated annual landed cost and estimated landed cost per part for each option.
Compare Your Manufacturing Costs →
The calculator is intended as an informational planning tool. It uses the numbers entered by the user and does not constitute a quote or pricing from A&M Plastics.
Looking to Move Plastic Manufacturing Back to the U.S.?
A&M Plastics is a custom plastic manufacturer in South Houston, Texas, serving companies that need plastic injection molding, extrusion, assembly, secondary operations, and manufacturing support.
Whether you're developing a new plastic product or evaluating the transfer of an existing manufacturing program, our team can help determine what it would take to manufacture your components domestically.
If you already have an overseas quote, production drawings, samples, or existing molds, that's a great place to start.
Contact A&M Plastics to discuss your project and request an actual manufacturing quote.