August 13th, 2019
3 Reasons Why Outsourcing Manufacturing and Assembly Makes Good Business Sense
Outsourced manufacturing and assembly means going outside of your organization and hiring a separate entity to build and/or assemble your product or project. You design, someone else builds.This has become a bit of a taboo topic recently as most immediately think of outsourcing overseas. However, there are many manufacturing organizations within the United States that are experts in handling even the most challenging innovations, from manufacturability assessment to assembly of final product. Most choose to outsource manufacturing for one main reason: cost reduction. While cost reduction is a key component for why outsourcing manufacturing makes good business sense, still consider the others listed below: strategic optimization and supply chain management.
The largest and perhaps most obvious benefit on outsourcing manufacturing is an immediate reduction in cost. The equipment used for these processes is large and expensive; the overhead needed to house the equipment is expansive and expensive; and the talent needed to run this equipment is in high-demand and expensive. By outsourcing the manufacturing and assembly of your project, you reduce both fixed costs and labor costs. Overhead costs can run high when housing all fixed assets involved in a turnkey manufacturing process. Additionally, labor costs remain one of the largest costs to any company, especially in the manufacturing industry. There is both direct and indirect labor to consider. Direct labor encompasses those machinists running the day-to-day operations on the production floor. Indirect labor then includes management, quality assurance, technicians, shipping and receiving, etc. Keep your costs down by outsourcing where the investment has already been made.
Chances are, your company’s core competency, the thing you do best, is not manufacturing. By outsourcing this part of the project, you have more resources to focus on your key strategic goals. Resources can be both financial and human. As we mentioned earlier, you can see an evident reduction in both fixed and labor costs by outsourcing. Additionally, your time is better served elsewhere without getting muddled in the details of organizing a manufacturing process. Through outsourcing, you are served with a single purchase order and have the flexibility to utilize your attention on revenue-earning activities.
Supply Chain Management
Organizing a manufacturing process can become complicated very easily. In managing multiple suppliers for different capabilities, you might find yourself juggling too many details or failing to find trusted partnerships. Instead, you can hand off your project to a single manufacturer to complete all aspects of the process either in-house, or through their own trusted supply chain. The manufacturer has a better focus and understanding of the key capabilities within the manufacturing and contract assembly process. Entrust your project to the experts.
Outsourcing the manufacturing and assembly process may not make sense in every instance, but if you have the opportunity to complete the manufacturing or assembly part of your project faster or at a lower cost by outsourcing then it just makes good business sense.