When to Consider Outsource Manufacturing
While the benefits may vary from company to company, the total benefits of outsourcing or off-shore sourcing, is a familiar concept to many entrepreneurs. The benefits are so pervasive that outsourcing or off-shore sourcing has become a core business strategy for a great majority of global enterprises, many of them being business leaders in their field.
So what are the telltale signs that outsourcing manufacturing is the next step a company should take? There are three signs that outsourcing manufacturing is on the horizons for a company. Below, we will explain what they are and how outsourcing addresses those "pain points".
Are Your Current Manufacturing Costs Too High?
If you manufacture your products in-house and you don’t seem to be able to contain the ever-rising manufacturing cost, it is a good time to start considering outsourcing of manufacturing activities. Otherwise, the rising costs of in-house production will impact your products’ ability to stay competitive. Having full-time production employees in your factory can accrue financial implications such as wages, overtime, employee benefits, liability insurance, and property leasing, among many others.
Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business. Obtaining more financial freedom for your business will help growth. Besides the clear benefit of cost-saving and control, an offshore manufacturer’s cost structure and economy of scale can also give your company an important competitive advantage.
Are You Having Capacity Issues?
These issues arise when your production can’t keep up with your demand due to lack of manufacturing resources or capability issues. If you are unable to respond to demand increases and ramp up production in-house, that means you are working over your manufacturing capacity. In order to overcome this obstacle you may find yourself paying your employees over-time in order to meet demand, adding additional labor costs to the final product. This extra cost eats into your already slim profit margin, thus making it a very painful decision whether to respond to customers’ demand changes.
If you see yourself in this situation often, outsourcing may be the solution for you. By outsourcing your production, you are able to take advantage of factories that have greater production capabilities and access to better resources than your own, enabling you to ramp up production quicker and more efficiently. Consequently, your outsourcing partner’s cost structure and economy of scale can give your company an important competitive advantage.
Do You See Your New Product Launch Schedule Keeps Being Pushed Out?
A good outsourcing manufacturer typically has the proper resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need. If a project requires major capital investments, such as acquiring production and test equipment, the startup process can be even more costly and with greater difficulty.
You can find a quality off-shore manufacturer who not only saves you cost, but also offers several value-added services. They can help you with initial design review to ensure the product is easy to manufacturer, thus lowering production and material cost. If your core competency is in product development and not in manufacturing, by outsourcing you effectively leverage their expertise and capability in new product introductions and subsequent productions.
Do any of these problems look familiar to you? If so, it may be about time for you to start benefiting from outsourcing your manufacturing to take advantage of long-term benefits in cost savings, better resource allocation, and timely and successful launch of your new product.
Check out our other blogs for more information on how to choose the right manufacturer and essential traits to look for in a quality manufacturer.