More and more companies are outsourcing various areas of their business to other countries. There are a number of benefits to outsourcing, particularly in manufacturing. If you are considering outsourcing the manufacturing arm of your business, there are a few things that you should think about. Here are the main benefits of outsourcing your manufacturing.
In the western world, people that work in manufacturing can command a very high wage. Compared to other countries, like China for example, you will be paying out a lot more money in wages if you keep your manufacturing operation at home. However, you need to be careful that you are not exploiting workers by underpaying them, as this is a big problem is some developing countries. Before you decide to outsource, you need to look into the company that will be handling it, and make sure that working conditions are at an acceptable level.
As well as cheaper labor costs, the general overheads are a lot cheaper when manufacturing abroad. Renting a manufacturing space in the US is very expensive, but abroad you can cut these costs by more than half. That is why the cost of domestic vs injection moulding in China is so much lower than in the western world. It is also a lot cheaper to get insured, pay utility bills, and maintain the building itself. Having said that, you will have to factor in the cost of shipping the goods back to your home country, so make sure that the cut in labor and overhead costs is not counteracted by the cost of shipping.
Easy To Set Up
If you are dealing with the manufacturing on your own, in your home country, you will have to set everything up yourself, and get licenses to operate your new factory. One benefit of outsourcing, is that the company that you choose to run the manufacturing operation will handle all of this for you.
Focus on Other Areas
Manufacturing may not be your strong point, but if you are handling it locally, you will find that you spend a lot of time dealing with the day to day running of the operation. This will eat into the time that you could spend doing the things that you do best. If the manufacturing is handled offshore, then you can devote more time to things like marketing , and business development, helping your business to grow.
Access To Resources
Depending on what your product is, it might rely on certain resources that can only be found overseas. If you are going to be paying to ship these resources over and then manufacture locally, it might make more sense to move the manufacturing operation to the resources, rather than the other way around.
Businesses in the western world are subject to a lot of different business regulations, particularly in manufacturing. These can be quite expensive and troublesome to get around. However, other countries do not have quite as many regulations and so it can often be cheaper and more efficient to manufacture your products abroad.