There are numerous benefits when it comes to outsourcing manufacturing. It can be both a strategic and tactical decision that will help your business become more competitive in your market. The basic concept is to transfer your in-house manufacturing operations –whether partially or fully – to an external supplier to gain some benefit.
Outsource manufacturing can make sense when a company needs to focus on their core competencies and reduce operational costs. Companies that outsource manufacturing benefit from the economies of scale and access to specialized expertise and the latest technologies. Additionally, outsourcing can help companies respond quickly to changing market demands.
Outsource manufacturing is an excellent option whether you’re just starting as a startup or if you are well established company. Yet keep in mind some of its cons. Shipping will often add to your total cost. Poor communication as well as differences in quality and standards can often lead to catastrophic results. There’s also the possibility of becoming overdependent on the supplier.
Yet most of the time, especially with a reliable partner, many of those issues above can be mitigated. So let’s take a look at the positive side of outsourcing manufacturing below.
Outsourcing manufacturing can be an effective way to take advantage of specialized expertise and knowledge without having to invest in building it internally. Companies can benefit from the experience and knowledge of suppliers who have in-depth understanding of their particular industry, materials, and production processes available. By leveraging this expertise, companies can improve product quality and reduce operational costs.
Today, there are so many different technologies available, each fitted for different purposes. You may want to leverage different processes to reap maximum benefits. These technologies are often already available and ready for use in outsource manufacturing facilities. In such cases, it makes more sense to get your parts made elsewhere than to buy several different types of 3D printers (SLA, SLS, DMLS, etc.). This is especially true when it comes to the prototyping or product development stages.
Outsource manufacturing allows companies to benefit from economies of scale and cost savings associated with shifting production overseas. Production costs in some countries are significantly lower than in others due to differences in labor rates, materials prices, regulations, and other factors. This means that by outsourcing production to these countries, companies can get better value for their money than if they were producing domestically.
This goes primarily to the ability to scale up or scale down production as needed. This ability to grow is feasible without the need for significant investment, such as originally, you would have had to expand the current manufacturing capabilities. Instead, you can simply request more output and pay extra for the additional product produced, only when and as needed. This also allows you to respond quickly to changing market demands.
With manufacturing handled by relevant experts and getting to you in a timely fashion of good quality, your company can focus on core competencies such as product development, design and innovation. You can keep a lean operation in the target markets to help sell the products while the main production facilities are in low-cost locations.
One major issue regarding outsourcing is that the that there is typically a minimum buy order or quantity requirement in place – either minimum units produced in the thousands or minimum order values in the tens of thousands of dollars. This means businesses must purchase large quantities (than needed) of products in order to take advantage of cost savings that come with outsourcing, which can result in unnecessary spend and wastage. Play it smart by looking for a reliable supplier that specialize in offering low to no minimum order quantity (MOQ).
