How you benefit from outsourcing to an EMS provider?
If you want to have a good business, do the things right; but if you want to be exceptional, then do things differently. Doing in-house manufacturing is good, but it may not always get you where you want. You can get several advantages against your competitors if you outsource your in-house manufacturing to an EMS provider. Outsourcing can make you faster, more efficient and reactive to market dynamics. In this article, we discuss a few of those advantages.
Focus on
what makes you competitive
While focusing on several things simultaneously may sound a great advantage over your competitors, it may not
necessarily give you competitive advantage in the market.
You should focus on things that will help you thrive, and outsource the rest. For instance, instead of allocating your resources (i.e. human, time) on manufacturing of electronic components, you can outsource that part of the business to an EMS provider that has more experience in manufacturing. Instead, you can focus on core operations of your business, which will give you more competitive advantage.
For example, you can design new products that will disrupt the industry or have high demand in the market, or improve your marketing practices, which will help you increase your sales, gain more customers and retain existing customers, and perhaps increase your share in your target market.
Very often, in-house manufacturing affects the creativity of R&D team, as they design products based on the capacity of the manufacturing facility. If you outsource, you will have the ‘freedom’ of designing and producing any products you like.
Avoid hidden costs
Usually, companies do not realise the real costs associated with in-house manufacturing, as these costs may not directly appear on their financial statements, but instead can affect the overall financial and production performance. These hidden costs can appear in all layers of in-house manufacturing, making the manufacturing process more expensive and slow. This can be certainly avoided with an EMS provider. We are discussing some of hidden costs below.
A. Machinery and equipment
For in-house manufacturing, you certainly want to buy the best machinery as a guaranty for quality production. The machinery, however, requires maintenance. Very often, you will have to hire consultants to train your staff, or hire new staff to take care of the maintenance and operations. If your staff leaves for some reason, you again have to invest in trainings and preparation of new employees.
Besides, machinery depreciates, which means its value goes down over time, and it will need to be replaced by new machinery after depreciation. You should also note that machinery can break, which will incur new costs.
B. Management
In-house manufacturing requires management team that is in charge of materials procurement and supply chain management.
When implementing in-house manufacturing, you should have the right team that is well experienced in the industry. In case a team member leaves, the company has to recruit and/or train a new team member, which assumes additional costs.
Also, your core management team may have to be involved in overseeing the operations of the manufacturing machinery, and that will detach them from their core roles.
C. Regulations and standards
Nowadays, OEMs have to comply with several regulations and standards, which ensure high quality, safe and environmentally friendly products with less impact on the environment and public health.
These regulations may vary by country and region, and the manufacturer should meet all requirements. Companies that have complex supply chains involving more than one country will have to spend more resources (financial, labour and time) on meeting these requirements, and that leads to additional costs.
Share the risk
While you can be an ambitious company and know your business well, walking the path alone is always challenging – you face all the risk.
Usually, when the OEM does in-house manufacturing, their capacity and resources are limited to specific volume orders. It means that the OEM, depending on the case, will have to refuse the orders, or may provide late deliveries, which will affect the company financially, and will impact their reputation.
Supply chain has become more complex involving suppliers in different geographies, and you have to manage all supply chain yourself. Instead, you can outsource your manufacturing operations to an EMS provider that has the right production capacity, flexibility, and is well experienced in the industry, and has the right network of suppliers.