Many startups and small businesses outsource their production to increase or boost the levels of their sales. Once their sales have risen, they need to consider weighing the benefits of in-house manufacturing. While it may seem like an effective way to cut costs and increase revenue, it is not always the best choice. Many factors need to be considered before taking this huge step.
Your decision can make or break your company. Either process can be the difference between a failing business and a successful one. Evaluation of all the advantages of in-house manufacturing is an important part of the expansion process. You need to learn more about it before jumping to any conclusions.
Here are some of the pros of in-house manufacturing that you need to consider:
The Prototype Stage
The prototype stage is the most important of all. You need to execute changes and perform constant testing for your product to be a success. Making alterations during the production process can be tricky. In-house manufacturing lets you do that easily. But with outsourcing that can be a difficult task. The whole process of performing tests, double checking, and making constant changes can use up major expenses on your part if there is another company involved. Sometimes the results of the outsourced product don’t meet your expectations. Asking changes to be made can result in companies putting more costs onto recall. In addition, if you need to stop the manufacturing process completely, you might have to pay a bulk of money for breaking a production contract. With in-house manufacturing, you always have employees on board to make the necessary alterations.
In-House Quality Control can be Implemented
With in-house manufacturing, you have more control over the manufacturing process. In the case of outsourcing, you cannot constantly supervise quality control. You are not aware of the fact if necessary policies and regulations for the production process of your goods are being implemented or not. You only get to see the final product, and you need to turn a blind eye towards the whole process. With in-housing, you can keep an eye on all the members of the workforce involved in the process. You get to perform regular tests and you can constantly carry out a quality-check to ensure that your final product doesn’t have any flaws.
Product Cost is Reduced
In-house manufacturing can help you reduce the cost per product. It reduces one step in the supply chain and eliminates other multiple costs. Those costs include shipping costs, delivery costs, and sometimes custom costs. While in-housing you purchase materials directly from manufacturers, and the credit fees of the supplier is also eliminated. This gives companies a chance to reduce the cost of their product. A reduced price would ensure higher sales, which would result in increased profits. Some local and state governments also offer credits for companies that create new jobs, which you’ll be doing if you opt for in-house manufacturing. In addition, some states do not ask for any inventory tax, which can make your location cost-effective.
Decreased Logistic Issues
With in-house manufacturing, you can manufacture, warehouse and ship in-house. It results in benefits like streamlining your management operations, shipping products to customers in a timely manner, and reducing your logistic expenses. You need to hire suppliers who offer warehousing and distribution so that you won’t have to pay the added cost of shipping products to a warehouse and then to a customer. With outsourcing, you cannot always route all manufactured products to your company for a final inspection. In addition, they need to go through customs. If the company you have outsourced to, didn’t follow specific regulations and policies then it can add up greatly to your expenses.
Problem Solving Becomes More Efficient
Usually, problems require quick analysis and solutions. You can solve a problem effectively if you get to the root of it and diminish it completely. The easiest way to do so is by inspecting the problem at an early stage and getting rid of it immediately. The most essential part of creating a successful product is communication. With outsourcing, there is a huge barrier between you and the manufacturing process. You cannot constantly contact the other company to make appropriate alterations, as that would only result in frustration and waste of time. Usually, that is never the issue with in-housing. You can interact with other members of your team, scrutinize the issue, and join hands at solving it.
With in-housing, you don’t need to invest more money than necessary. Sometimes with outsourcing, other companies tend to have a minimum order limit. If you want lesser products manufactured than the limit they offer, the added amount to reach their limit would be a complete waste of resources and cost. With in-housing that is not the case. You can set your budget and work accordingly. You get to use the resources and the material you have to the fullest without exceeding your budget. In addition, by solving problems in a quick manner, eliminating risks, decreasing logistic issues, and constantly overlooking quality control the costs would automatically reduce.
Lower Risk Factor
It is a very difficult task to find a trustworthy company for outsourcing. Your company can be subject to security breaches and frauds. Sometimes the Internet Protocol of your business can be its backbone. The more people you include and the more companies you involve, the risk of a security breach becomes higher. Your product and its Internet Protocol can be stolen. Some laws protect you from this risk but those laws are not the same for every country. To save your business from potential danger, you might want to consider in-housing. That way you can ensure that you did everything you could to lower the risk factor for your business.
The choice of conducting activities and operations within your company or relying on outsourcing is completely up to you. Take all the benefits and risk factors of in-housing into consideration before making any business-changing decisions.
published gloucestercitynews.net | May 17, 2019