Finding your niche and making a successful business from it is great, but many businesses struggle when they try to move from simple one-off productions or batch runs every few weeks to a constant production schedule. Few new businesses make their own products these days because the cost of setting up a factory that handles everything is a bug financial risk. Instead, most businesses choose to outsource some or all of the production process. Even businesses that do most of their own production and quality control choose to outsource their packaging or other parts of the business that require expensive tooling that may not be economical to own.http://www.eliteprom.co.uk/
Is Outsourcing Actually Cheaper?
Consider the cost of ordering your materials, changing tooling for each of your product lines and again for each of your product varieties and then consider the benefits of handing the product over to a UK Based Contract Packaging company that handles that side of business for many more production companies. The packaging company would usually have more buying power because they often take large shipments of materials the necessary packaging products that the manufacturer might not necessarily need regularly. That puts the packaging company ahead in terms of efficiency and that’s before you consider the overheads that come with running your own operation.
While packaging is the process used in this example, you can just as easily relate the same benefit to any stage of the manufacturing. Big businesses like Revlon used bottling companies for their shampoos and sent their Max Factor range of makeups to the same bottling companies for packaging and distribution because the factories were better equipped to handle that stage of their production process than their own manufacturing units.
Bargaining Power
It’s clear to see that packaging is an obvious way to save money when your chosen supplier is able to buy materials cheaper than you could directly, but there are more benefits to outsourcing production. To begin with, many bids for your business will often result in a better deal and more profits. If one business is prepared to bend over backwards to win your order, you could have a drastically reduced price that would be unachievable for any growing business without similar connections or established working practices. Putting your order out to tender is a great way of playing one supplier off against another. Often, inviting offers is the best way to know if you are paying over the odds for tooling or other products or services with which your business is inexperienced.
Zero Capital Investment
Capital investment is an unnecessary burden for enterprises in today’s outsourcing centric business environments because depreciation and maintenance are instant expenses that are simply dead money. It also requires investment that is tied up for many years and sometimes never returned. Most businesses prefer to remain liquid rather than purchase assets. Most businesses that decide to buy their own equipment will use finance to do so and that is an additional cost that is completely unnecessary especially when there are many businesses crying out for your manufacturing or packaging order.
A Leap of Faith
For some businesses, it is the leap of faith required that holds back their ability to utilise outsourcing to drive their enterprise forward. It is the uneasiness of senior management to accept that someone else can perform a duty better and that’s when they have had so much input in the process prior to the acceptance of help from another source. To ease the worry, most manufacturing and outsourcing businesses will allow potential customers to inspect their premises before any work is agreed.
Chris Hoole is a production enthusiast who spent many years improving the processes in his pellet filling and packaging company. He has retired now, but loves to blog about his knowledge of the industry.Cheap A-line Wedding Dresses