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| The Main Benefits and Issues with Outsourcing… | ||
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Cost Savings. This is often the major reason to outsource. Savings can come from reducing manufacturing scope and output time, improving quality, re-pricing products, and lower labor costs. | |
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Core Business Focus. Efficiency often improves when a company focuses manufacturing areas that best match its capabilities and long-term goals, while outsourcing processes that, while necessary, are outside of the core business focus. | |
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Quality Assurance. You can't compromise on quality. But can you trust the quality of an outsource provider? Sometimes you can, and sometimes you can't. By yourself, it can be almost impossible — or prohibitively expensive — to get reliable data on the quality history of an overseas provider. Only a firm that specializes in outsourcing, that has an extensive network of overseas contacts maintained over several decades can reliably assure you of a provider's quality before the fact, and then set up QA systems and monitor quality cost-effectively for you throughout your association with a provider. | |
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Expertise. Operational expertise usually comes with focus and specialization. An outsource partner can often provide expertise in areas ancillary to your main focus that are beyond the level you could cost-effectively maintain in-house. | |
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Improved Quality. Companies often worry — with good reason — that outsourcing could compromise quality. However, shifting your parts manufacturing to an outsource partner with appropriate capabilities and verified reliability can actually result — because of their specialized expertise — in a higher quality than you might achieve in-house or stateside at comparable cost. | |
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Capacity Management & Scalability. Especially in an unstable economy, you need to maintain a high capacity in case business turns sharply upwards, but if that capacity goes unused, it is a wasted expense. Appropriate arrangements with an outsource partner can shift the risk of excess capacity to them, giving you the volume flexibility you need without the cost. | |
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Reduce Time to Market. Time to market for new products is often critical to obtaining market share and a good return on the R&D investment. Well-chosen outsource suppliers can provide capability for rapid ramp-up that would be impossible to achieve in-house, potentially making the difference between profit and loss when your new products hit the market. | |
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Cost Restructuring. Outsourcing can improve a company's cost structure by moving non core processes from fixed to variable cost as well as making variable costs themselves more predictable. | |
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