Outsource manufacturing is often done two different ways: With one-off items, and with Contract manufacturing agreements. Outsourcing manufacturing for one-time items is ideal when the team that you normally have manufacture your products or goods simply can’t handle the workload for that specific item, or when it’s a new item and you cannot spare time or money to tool up for it. When you find a reliable company to whom you can outsource manufacturing, you’re only obligated to pay those workers for that specific item, saving your business the time and money it takes to hire additional staff or machinery. Contracted outsource manufacturing is the idea that a company will be working with you for an extensive amount of time on multiple orders or a large production run order. Apple has outsourced the iPhone production process since its inception several years ago.
In today’s tough economy, you need to cut corners and add to your bottom line whenever possible. Being able to outsource manufacturing gives your business the opportunity to put money back in the bank and add to your annual revenue, while avoiding the needs for additional staffing and/or tooling, be it long term or temporary. Outsourcing manufacturing is used by thousands of businesses today and continues to grow on a yearly basis.
When To Outsource Manufacturing
Like many businesses, factories often run into times when the workload becomes slightly to extremely overwhelming. Outsourcing manufacturing is the solution.
- Sometimes a factory needs parts that they never plan to make for themselves and they outsource manufacturing to qualified contract manufacturers.
- Sometimes plants are tooled up for certain aspects of production and lack space or materials or manpower or money to tool up for a new part of their product.
- A company might have a new product that has timeline constraints that don’t allow time to tool up at its factory, so it outsources until ready.
- Small companies and inventors just don’t have a facility in which to make their ideas come to fruition.
If either of these situations looks familiar, you should outsource manufacturing. Outsourcing manufacturing gives you the opportunity to pay another company or person to handle the work that is either too expensive or uses too much manpower for your team to do it. Outsourcing manufacturing can mean your stuff is made somewhere outside of your company, but is still done domestically, but usually outsourcing manufacturing leads one overseas because of the low cost and efficiency of plants in those countries.
Let’s say your company has a new design for cam and groove fittings. A camlock may be relatively simple to fabricate, but if you build it in house, you’ll have to charge a rather steep price to compensate for expenses. To help drive down the cost to make the remote, as well as to sell it, you would use outsource manufacturing, which could save you as much as 80% on the costs of building the same piece in-house. Outsourcing manufacturing would also allow you have nearly unlimited resources for another company. If your company can only make 1,000 remotes per day, you’re bound to find a resource that can provide you with 5,000 and again, at a fraction of the cost.