Potential Areas of Cost Savings When Outsourcing Manufacturing

Potential Areas of Cost Savings When Outsourcing Manufacturing

Outsourcing manufacturing of machine parts and mechanical components has been widespread for decades, and in today’s increasingly globalised world this way of doing things seems set to stay. With the possibility to manufacture parts in the different places around the globe that have the best expertise, it is becoming possible for companies to choose from a huge range of manufacturers.

Manufacturing needs are drastically varied, with many contract manufacturers serving industries as diverse as the aeronautical industry and the defence sector, with techniques ranging from cylindrical grinding to F1 machining. With governmental bodies as well as private companies reaping the rewards of hiring a professional manufacturing agent, this seems to be a practice that has many cost advantages.

One of the first ways that companies save is by outsourcing their machining or cylindrical grinding is the fact that they do not need to pay for premises on which to carry out these manufacturing activities themselves. This can often mean a reduction in the size of business facilities, which in turn means that utility costs are a great deal lower as well.

This can lead to significant savings, as the manufacturers that these companies hire incorporate the expense of running their own workshops within the charges that they pass on to their clients. This means that companies are not paying for running their own manufacturing facilities 24/7, but are instead only paying for manufacturing as and when they need it.

Another way that major cost savings are made is through the employment of fewer staff, especially staff that is trained in some of the more complex operations such as CNC milling, turning and cylindrical grinding as mentioned above.

Potential Areas of Cost Savings When Outsourcing Manufacturing

There are many techniques which are required during any manufacturing process, and employing skilled and experienced staff can be extremely costly. Instead, many companies will look to contract manufacturers who instead have a full team of experienced and skilled employees working for them.

Although having skilled staff on site at the original company is of course beneficial, if the staff are not working throughout extended periods of the year this can mean that money is lost as salaries are paid and training in provided but there is nothing being produced. Again, paying a contract manufacturer means paying for these skilled workers only when they are really needed.

Training is anther point that should be explored in depth, as this is no negligible part of ensuring that quality parts are produced, regardless of the industry or purpose they are being produced for. As technology is advancing all the time, the constant updating of technical skills is necessary in order to remain competitive.

Training, however, is also very expensive, and constantly paying to update the skills of staff members can mean that a huge chunk of money can be taken out of any manufacturing budget. Furthermore, health and safety legislation means that sometimes costly procedures and maintenance needs to be made on machinery that is used in production.

Again, all of these costs are absorbed by a contract manufacturer if one is hired. This means that the company hiring the manufacturer will not incur these costs directly, saving the company money. Money saved can therefore be funnelled into more high value endeavours, such as paying a high quality contract manufacturer, pushing to reach sales targets or in high quality marketing.

These are just a few of the savings that contract manufacturers can make for a client company. Indeed, outsourcing production seems to very much be one of the most ideal ways to conduct business nowadays, and due to the financial advantages of such a scenario, it does not look very likely to change in the near or even far distant future.