WHY COMPANIES CHOOSE OUTSOURCED MANUFACTURING


When we think of the word outsource manufacturing, we often think of transferring production to another country or what is known in layman's term as offshore outsourcing. Manufacturing companies have a load of reasons to outsource their production, but the main force to decide to outsource is cost reduction.

One of the factors that drives a manufacturing company to outsource its production or operation is the cost of labor. Labor has the biggest chunk of any manufacturing company's expenses. The company's workforce has to be compensated with competitive remuneration and has to be provided with health and other forms of benefits. Outsourcing doesn't always mean moving your operations to another country. By the use of outsourcing, companies can subcontract their labor by hiring contractual employees or workers from a temporary agency. Outsourcing labor can be advantageous to a company by the ease of adding or removing manpower requirements as the need arises, a lower hourly wage of a contractual worker than a regular employee and lesser costs on employee benefits.

Another factor that Medical Manufacturing companies consider to outsource is to remove overhead cost associate with the manufacturing facility. These overhead expenses consist of utilities, such as electric and water, and maintenance needed to operate manufacturing equipment.

PCB Outsourcing manufacturing have enabled companies to achieve increased flexibility. Typically, manufacturing is outsourced to a company that produces goods under another company's label or brand. Since the contract manufacturer has more production volume than the outsourcing manufacturing company, it can respond to increased production demands quicker than outsourcing manufacturer. To meet the increasing demand of production, the outsourcing manufacturer do not need to add a new equipment costing them millions, instead it informs its partner contract manufacturer to produce the goods for them. Granting that there will be a change in the quoted costs for the additional or reduced volume of goods, this is still more advantageous to the outsourcing manufacturer than making a one-time equipment acquisition that will soon be idle if the spur of the demand moderates.

One of the reasons why some opt to outsource manufacturing is if they realize that if they focus their workforce on other aspects of the business like sales and marketing, they will be making more profit. Some companies have experienced the realization that their main strength is not the production of its product, they often shift to outsourcing the manufacturing of their goods. With the manufacturing outsourced, the company can now concentrate workforce and financial resources on the aspects of their business that increase profit.