A closer look at the benefits and potential risks
Should I manufacture in-house or outsource? It’s a question faced by most OEMs and technology innovators at some point. When considering if outsourcing is the right strategy to pursue, you need to understand the key benefits and risks. Below we consider the top 4 benefits of outsourcing electronics manufacturing and how to ensure you are not tripped up by the top 4 risks.
Benefits
FINANCIAL GAINS
- Offers you with flexibility to meet changing market dynamics.
- Provides manufacturing locations where you need them with minimized balance sheet impact.
- Allows greater investment in your core profit generators rather than footprint, capital equipment and labour, avoiding long term balance sheet liabilities.
- Positive impact on sales, pricing and margins.
SCALABILITY / AGILITY
- Delivers shorter lead time to production.
- Seamlessly scale to meet increasing demand in new and existing markets more quickly.
- Avoids the need to divert resources into hiring, setting up IT systems and factories.
- Access to established supply chain for components/key materials - delivering resilience.
FOCUS ON CORE TECH
- Allows you to focus your financial and human resources on core IP innovation, developing markets, customers relationships and delivering differentiated technology to maximize market share.
- Access to development expertise (Design for Excellence, test solutions, Design for Environment and product lifecycle assessment to reduce carbon footprint) as well as cost reductions by optimising supply chain and improving manufacturing yield.
EXTEND PRODUCT LIFE
- Option to extend the life of products through repair and refurbishment, keeping products in the field longer and generating greater profits.
Potential Risks
LACK OF CONTROL
- Particularly when working in different countries.
- Overcome this by:
- Selecting a partner that you trust with a proven track record in your market.
- Opting for an ethical partner with facilities in stable countries.
- Choosing a partner that operates as an extension of your team, helping to maintain your team’s core knowledge.
COMMUNICATION
- Language and cultural barriers can create miscommunication.
- Overcome this by:
- Establishing clear parameters for frequency and level of communication.
- Identifying points of contact and escalation contacts.
- Building strong relationships at multiple levels across both organisations.
QUALITY ISSUES
- Quality issues could result in reputational damage, bad PR or drive financial loses.
- Overcome this by: Selecting a partner with strong cultural focus on quality and the right processes to avoid defects and product recalls.
IMPACT ON CULTURE
- Won’t always have a negative impact but you need to make sure you consider this carefully before making decisions.
- Cultural alignment is key to a successful partnership.
- Overcome this by: Selecting a partner that shares your strategic vision, long term priorities and provides a healthy, safe and fulfilling work experience for all team members.
If you would like to discuss if outsourcing is the right approach for you,
contact our team.