How to outsource manufacturing effectively

THERE ARE a number of reasons why you should consider outsourced manufacturing. Some of the most valuable include:

• Resource redistribution: By entrusting certain tasks to external partners, you can free up valuable time and allocate resources more effectively
• Design expertise: As a designer, collaborating with a manufacturing partner can bridge the gap between your creative vision and actual product realisation
• Specialised components: When faced with the challenge of producing intricate components beyond your capabilities, outsourcing becomes a viable option
• External factors: Certain circumstances may necessitate outsourcing, such as a scarcity of skilled workers in your area or other manufacturing obstacles.

What is outsource manufacturing?

Outsource manufacturing, also known as contract manufacturing, involves engaging a third party to produce goods or provide services on behalf of a business. This arrangement can be established either domestically or internationally, offering companies the advantages of saving time, reducing costs, and maintaining competitiveness by focusing on their core goals.

The cost of outsourcing manufacturing varies based on factors such as the chosen contract partner, the political landscape, the demand for manufacturing services, and transportation expenses.

How to outsource manufacturing

Monitor production

Supervise your outsourced manufacturing processes. The goal is to optimise the manufacturing cost of the entire product. Instead of focusing solely on cost reduction in isolated areas or subassemblies, consider the entire workflow. Strategic outsourcing can be more cost-effective when the complete workflow is taken into account.

Embrace imperfection 

Perfection in outsourcing efficiency may not be attainable. Avoid spending excessive time trying to achieve absolute perfection.

Balance in-house and outsourced production 

Consider retaining some production in-house while outsourcing specific tasks. Alternatively, outsource production but ensure you have personnel with the necessary expertise or invest in training. This safeguards your ability to continue production and fulfil orders in case of any issues. Avoid scaling down your business to the point of complete dependence on outsourced manufacturing. Maintaining critical skills internally is vital.

Focus on more than cost reduction 

While reducing costs can be objective when outsourcing manufacturing, it should not be the sole focus. Evaluate contractors based on their superior facilities that can enhance product quality.

Account for increased costs 

Be aware that outsourcing manufacturing may lead to longer lead times and additional costs such as transportation. Consider these factors when exploring this option.

Prioritise precision

Pay close attention to the initial stages of product production as they can significantly impact subsequent tasks and overall efficiency.

Avoid emulating others 

Recognise that cost-saving techniques employed by other outsourced manufacturers may not be applicable to your business. Develop a customised model that aligns with your unique needs.

Listen and learn 

Be receptive to advice from employees or fellow manufacturers in your market on cost reduction strategies. They possess valuable insights that can enhance your business performance, often surpassing the expertise of external consultants.

How do I choose the right manufacturer?

Selecting the wrong manufacturer can have consequences, so thorough research is crucial before initiating outsourcing manufacturing.

As a general guideline, remember to:

Visit the factory whenever possible: Assess the company's capabilities, evaluate employee skills, and verify equipment quality firsthand.

Check experience and certifications: Avoid partnering with inexperienced companies that lack a track record, as their errors could prove costly for your business.

Research the location: Outsourcing to different regions, such as China, can yield benefits based on industry tax rates. Tech companies may find it cheaper to outsource to the South, while manufacturing companies may find advantages in the North. Additionally, consider the regulations and tariffs of your home country that could impact your outsourcing decisions.

James Humphreys is a specialist at Katana ERP manufacturing

For more information: 

katanamrp.com