When it comes to manufacturing parts or products for your business, you have two basic options. The first is to do it all yourself, which is called in-house manufacturing. That can be a daunting challenge for small- and medium-sized businesses and startups, though, which is why many of them choose the other option to remain competitive and viable.
That second option is outsourcing manufacturing. This is the practice of hiring outside companies to manufacture and deliver parts and products or complete specific portions of parts. Some companies do this to gain time to develop their own manufacturing facilities or for manufacturing they can’t handle in-house, but others opt for outsourced manufacturing services for most or all of their manufacturing needs from the very start and never look back.
Benefits of Outsourcing Manufacturing
Companies that outsource manufacturing discover several benefits of outsourcing manufacturing that make it well worth it.
- Reduces Costs and Capital Expenditures– Outsourcing manufacturing is an instant money saver because you won’t be buying expensive machinery and other manufacturing equipment and materials; you also won’t have to hire and train people to operate that equipment. Plus, with fewer workers operating potentially dangerous machinery, you lower your exposure to injuries, medical bills, workman’s comp, and lawsuits. You might think that you’ll pay more for products when you outsource, but you’ll likely pay less than if you had manufactured them yourself. That’s because larger manufacturing companies acquire raw materials and other goods in greater quantities, which means that their suppliers can provide them at lower cost. Finally, you can allocate your capital in ways that will better help your company to grow.
- May Increase Capacity– When demand for a product goes up, suppliers either raise prices or increase production. If the latter occurs, outsourcing manufacturing is a way to expand your production capacity since those larger manufacturing companies are more likely to be able to handle the increased demand.
- Play to Strengths and Concentrate Focus– Being good at selling manufactured products does not mean one is skilled at manufacturing them. Trying to do in-house manufacturing when that isn’t your speciality means you may see lower efficiency and quality. Outsourcing production will let you focus on your areas of strength.
- Access to Specialty Processes– Even if you do have the capacity for in-house manufacturing, there may be times when you need access to certain processes or equipment you don’t have such as ceramic coating or sand casting. Since it probably won’t be feasible or practical to purchase and add the necessary equipment, outsourcing manufacturing can solve that problem for you.
- Diversify Risk– The health and safety of workers aren’t the only risk factors in manufacturing. If you do your own manufacturing or rely on just one outside manufacturer, you’re more vulnerable to supply-chain issues, bankruptcies, and other risks. By working with multiple outside manufacturers, you’ll be spreading your risk out more, protecting you from disruptions that could be crippling or fatal to your business.
When To Start Outsourcing Manufacturing
Knowing when to start outsourcing manufacturing depends on several factors, some of which include whether in-house manufacturing keeps you competitive and allows you to meet demand, the resources and capabilities available, your risk exposure, and how long it will take for you to recover the capital cost that you invested into manufacturing equipment, training, and management.
However, a good general rule of thumb is that if you’re not achieving at least 90% on-time performance, you should be outsourcing manufacturing.
How To Outsource Manufacturing
How to outsource manufacturing might be the next thing you wonder about. Google? That will get results for sure, but the less of an expert you are in the manufacturing services you need, the harder it’s going to be to find quality manufacturing services for your needs.
Here’s a better way: join Sustainment. As a member, you’ll have access to a powerful search tool that will connect you with vetted, reliable manufacturing companies that can meet your needs. It’ll save you time, trouble, and quite possibly money and let you focus more on the core functions and needs of your business.