In-house production or outsourcing? It is the most significant dilemma companies face after their product planning stage is completed. Outsourcing seems like the more accessible and cheaper solution, but there are many other aspects you should consider before deciding. Manufacturing your own product can also turn out to become a great option for your organization.
As seen from the experiences of many businesses, it has been noticed that there are more benefits with in-house production and this too can be efficient and cheap. If you think that investing in your factory doesn’t sound good, then take a look at the number of companies listed on the B2B manufacturers directory successfully running their own factories. Also, here are five solid reasons might convince you to invest in your manufacturing factory.
Cost of Management
Outsourcing manufacturing adds management expenses which can be easily avoided if you create your own factory. You will need to send out managers to keep check and balance. The added cost of these managers is pointless, as they would require living expenses. These managers would be expensive as they would need to speak a foreign language. In-house production can be overlooked without the added layer of bilingual managers, automatically reducing production costs.
Shipping closer can also avoid extra expenses. Additionally, shipping from other countries can cause delays in the delivery of products to customers. Outsourcing can add custom check costs. All these added expenses will be included in your production that could reduce your profits if you decide to keep the prices low or it would reduce customers if you keep the prices too high. Both ways your competitors can get the upper hand with your troubled decisions.
Last-minute changes to products are bound to happen. What do you if you find out that detail needs to be changed which your foreign manager noticed. If it was an in-house production, halting the show and making a change would be much easier. The product would be right in front of your eyes. Deciding this would be less risky. Sampling and negotiations would be harder to communicate at a faster pace. In-house manufacturing allows more rapid changes, fewer hurdles to cross, and it’s time-saving.
Production Control and Rights
By manufacturing your own product, you can have full control over the production quantity and quality. For example, if demands are increasing, you can quickly increase machinery, workforce and production rate. However, if another country is manufacturing your product, it’ll be harder to increase or decrease production according to customer needs because a fixed order is given, which is hard to negotiate if outsourced.
Another control that a company can have with their own factory is product rights. You can save yourself from idea theft or counterfeiting. Understanding another country’s protection law and manufacturing rights is an added expense as again, there will be a language barrier. Hence, keeping your product in a shorter loop is a better idea. Avoiding foreign law and huge risks is always a big save.
A producer living in a different country means increased chances of nasty surprises. Communication mishaps are common, miscommunication about raw material is inevitable, and quality can be different from expectation.
Advantages of Having Your Own Factory:
- Better quality criteria
- Direct selection of procedures and raw material
- Frequent factory visits to ensure proper functioning and maintenance
- Bridging the communication gap
Customers, nowadays, buy products that require less hassle while claiming for faults or issues. They will stay away from companies that use outsourcing manufacturing options. Sale of products can be negatively affected if there’s bad press. This can lead to lower profits.
Giving contracts o another country can also cause issues with your government at times. For example, if you ever come across a dissatisfied customer, they might complain to government officials. This can cause an inquiry to be formed against your company, and the government can have problems with you outsourcing to specific countries; especially if they are rival countries. Having your own factory can reduce risks of predicaments with furious customers, the media or the government.
Having your own factory isn’t just militant, it could be locally friendly as you could hire locals and keep closer circles. The plea for indigenous manufacturers is increasing as the time of necessities returns. These are only suggestions; the final decision lies upon the producer. On the other hand, out-house manufacturing can seem eye-catching, but it has challenges tagged along.