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Why do companies outsource manufacturing?

by Nov 5, 2019Contract Manufacturing

Estimated Reading Time: 4 minutes

Revenue increases. Time-saving techniques. Leaner manufacturing overall. Why do companies outsource manufacturing? Because sometimes your pain points and goals share commonalities.

Here are 10 benefits for looking at outsource manufacturing partners – which could also be existing in-house challenges:

Achieving operational efficiency

Partnering with a contract manufacturer does not entail ceding operational control that can negatively affect efficiency of operations. You still dictate quality standards. An accomplished contract manufacturer follows your operational procedures as specified, delivering top-quality products. With technical advancements occurring in multiple industries, not all solutions are simple and straightforward. A solid manufacturing partner has the flexibility for change and can even offer you custom solutions to existing or future pain points. It’s a best practice to work with someone who comprehends complex demands within the manufacturing industry.

No need to share zip. Here’s why.

Acquiring advanced equipment and technology

If your in-house production equipment is outdated or riddled with faults, look for a partner with a reputation for high quality and accuracy. The right contract manufacturing partner already utilizes a variety of advanced equipment and technologies, meeting the needs of original equipment manufacturers (OEM). Your suppliers must keep up with innovation and production as technology advancements demand. Ask a potential outsourcing partner about existing equipment and technology and plans to acquire more advanced models in the near future. Include what works well today and for the long term when determining the right fit.

Tapping into specialized skills and expertise

Training your team and purchasing expensive equipment for what may be a one-off job is scary – and potentially an expensive – roll of the dice. You’re better off leveraging an outsource partner with a significant investment into the research and development required to build and deliver consistent process control solutions for your industry. The beauty of this partnership means if an OEM only orders a component one time, you haven’t wasted money on machinery that sits dormant.

Meeting consumer demand

A skillful contract manufacturing partner manages time with an eye toward efficiency, which saves production hours and money. Lean manufacturing tactics change with technology. For example, a partner with a cross-trained team meets or exceeds consumer demand by employing those who can handle multiple tasks in a day’s time. When one task slows, they shift to the next, often exceeding deadlines, getting products to market ahead of schedule.

Lowering overhead costs

A solid contract manufacturer works closely with your team to document the required work procedures for a project, solidifying inventory requirements, packaging needs and more. There’s no time or material wasted. Ask a potential partner about existing vendor relationships, too. Working with an established manufacturer could save you money on raw materials, thanks to their solid working relationships.

Improving cost efficiency

The more experienced, better equipped and properly staffed a contract manufacturing partner is, the better they are able to minimize your overall costs. Ask what systems a potential partner already has in place to provide the highest-quality products in the timeliest and most cost-effective manner.

Increasing cash flow

Utilizing a partner’s team of experts, technology and advanced training, you quickly get a greater understanding of actual costs to produce components. Once you have an established partnership with a successful job behind you, look for other opportunities to team up and save money on existing or upcoming projects – freeing up money that can be utilized more effectively. Having a viable option for production that is typically less expensive and of equal or better quality than your current standards can increase cash flow on an ongoing basis.

Staying competitive in your industry

A longtime component manufacturer can take a look at your in-house operations and production to help you identify potential problem areas and spot potential risks during the process. Making repairs or consistent upgrades to continuing projects can be a time and money suck that slows your production, giving an edge to your competition. A benefit of working with experts in the field means less need for fixing problems. A contract partner will get it right the first time. Plus, a solid contract manufacturing partner has testing procedures in place to ensure that if a mistake does occur, it doesn’t happen twice.

Efficiently managing inventory

Keeping inventory of raw materials in-house that may not be used for months consumes both budget and precious space in production areas. Work with an outsource partner who can order and store only those materials necessary for the job.

Maintaining a consistent labor force

A strong, ongoing partnership with a contract manufacturer can lead to fast company growth. That doesn’t mean you have to hire a new team. Lean on your partner for help with increased orders. The partnership also means you can re-allocate your team to focus on higher-margin aspects of your business. Dedicate more time toward profitability by concentrating on customer relationships, engineering, sales and marketing efforts.

The team at Axenics has worked with companies like yours for more than 35 years – and we’ve seen every possible pain point scenario. Those experiences push us to become even leaner manufacturers. Time is money—and we’re ready to save you some.

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