Outsourcing: Benefits

We have briefly discussed some of the benefits of outsourcing by using a contract manufacturer but let’s go a bit deeper here.

1) Lower overall costs in manufacturing from outsourcing

Contract manufacturers combine all sourcing requirements for many of their customers and use this economy of scale to volume purchase components.
Contract manufacturers will offer component value engineering in the form of lower cost equivalent or alternate components.
Components can be purchased globally at a lower cost
Reduced staffing at your startup is another way to lower your cost as you leverage off of the Contract Manufacturers internal personnel.
Reduced inventory
Lower overhead required

2) Reduced capital equipment expenditures

If you product is labor intensive and requires the use of expensive machinery, you can avoid the research, purchase, facility upgrades and maintenance for this machinery by utilizing the contract manufacturers equipment.

3) Very good quality

Contract manufacturers pride themselves in providing the highest quality available as they have the infrastructure to support the needs of the most stringent requirements as well as state-of-the-art equipment to measure, identify and correct the numerous variables during the production cycle.

4) Flexible work force personnel

Flex the CM workforce instead of your own. Utilize their personnel during your increases and decreases in production needs so your workforce remains stable.

5) Shorter time to market

CMs have the equipment, resources and infrastructure to be able to typically respond more rapidly than what you could do. This will help you reach your market more quickly or be able to make adaptations as market conditions dictate.

6) Increased efficiency

Efficiency is the name of the game for the top CMs as they have embraced concepts such as Lean Manufacturing and Six Sigma practices to eliminate waste and perform continuous process improvement.

7) Startup can focus more on core competencies

You focus on what you do best at your startup and allow the CM to manage what you don’t do so well. Keep in mind though that CM also means ‘constant management’ because I have never worked with a perfect CM and you must work very closely with them. Planning and communication are a continuous process when engaging with an outsource provider.