If you are a growing creative business earning money from making physical products, at some point you are going to have to make a big choice — do you scale things up in-house or do you outsource the manufacturing to a third-party? There are certainly some benefits to going it alone, but there are also some distinct disadvantages. Let’s take a look at everything you need to know.
When you keep everything in-house, you can maintain your required levels of quality control. You can supervise every last step of the process, keep an eye on everything from waste through to productivity, and will ultimately have 100 percent responsibility.
Outsource to a third-party, however, and things are a little different. Other than an interview, and a few check-ins to the manufacturing plant, you have no control over what happens. For example, will the manufacturer make all the final checks that you would? Are they following your usual procedures?
Moving products around the country in vast quantity is a tricky business as it is. But when you use a third-party manufacturer, it is just another major kink in your supply chain. Bringing everything in-house means you can avoid everything from customs and import issues through to reducing the cost of arranging additional deliveries.
Better price per unit
Ultimately, the goal of any product creator is to reduce the costs of making that product. The lower the expense, the lower you can afford to charge customers, and the more products you will sell. Now, creating products in-house certainly has some significant costs involved when you are starting out. However, in the long-term you’ll find these will reduce, giving you more options when it comes to competitive market pricing.
Make no mistake about it, if you want to manufacture in-house, you have to make sales. The costs are enormous, and many small companies who have made products in-house have died on their feet as a result of having too many resources and too little demand. There are employees to pay, taxes, rent, and rates — and then there is the massive amount of money you will spend on utilities and new equipment. If you don’t have a steady stream of sales yet, the chances are your business will fail.
When you’re a manufacturer, you have a lot of legal responsibilities to cover — particularly when it comes to waste management. As Oil Water Separator Technologies suggest, water contamination is a critical issue, and you also need to think about the disposal of hazardous waste materials. The big manufacturers will already have systems, processes and the right equipment to deal with these issues. You, on the other hand, will have to face them all from scratch.
As a final point, it’s worth stating the reason why so many American manufacturers outsource to foreign countries: they have lower labour costs. For a home-based manufacturing worker, you might have to pay them $10-15 per hour. But a factory out in China could be paying their workers less than the equivalent of $2. Given that labour will be your primary expense, it’s often worth looking further afield.
There are no right answers when it comes to making the manufacturing decision, and every company will have different needs. Hopefully, some of the ideas above will help you make the right choice.