Outsourcing Your Production: The Pros And Cons

 
Outsourcing your production, especially when you’ve just started out, can have a range of advantages, as long as there’s suppliers out there qualified to manufacture products to your standards and specifications. However, there are various drawbacks that it can also present, especially when you’re relying on several different suppliers. If you’re on the fence about outsourcing production, here are some of the key pros and cons you need to consider when making a decision.
The Pros
Financial Stability – By outsourcing production, you’ll make it easy to tidy up your balance sheet by eliminating various assets. This will make your cash flow much easier to manage, and in turn, more stable.
Strategic Optimisation – There may be certain operations you’re keeping in-house, that aren’t all that essential to your business’s overarching goals. By passing these onto a third party, you’ll free up time that will allow you to focus on the more pressing tasks.
Market Discipline – Once you’ve developed a close working relationship with your outsourcing partner or partners, you’ll find it much easier to align the cost of your products with market conditions, and make sure your business stays in-step with its industry.
Access to Technology – This isn’t a guaranteed benefit, and some businesses may not even hold it as important criteria. However, outsourcing to the right business can give you access to the latest innovative technology in the industry, and all the benefits this carries with it.
Capital Flexibility – When you enter the right outsourcing deal, you’ll free up a lot of time, money and manpower through dropping processes you’d been handling yourself. These resources can then be redirected towards your business’s core tasks.
The Cons
Losing Expertise – Although a certain company might have execs that know the industry like the back of their hand, no one knows your business like you do. Countless professional negligence claims in the past have been rooted in businesses sacrificing the skills and expertise through outsourcing, which turned out to be mission-critical.
Risk of Dependence – Having outsourced certain aspects of your production for a long time, if you brought it back to your business, it could take you years to regain the level of performance that you used to have. However, if the supplier’s service goes downhill, or their prices rise, you may want to bring it back in-house. It’s both difficult and often essential to avoid dependence on a supplier.
Losing Control of Costs – When you outsource all or some of your production to a third party, it means you lose all the control over the cost of production that you used to have. In many cases, investing in your production facilities can generate better gains than outsourcing, especially if these are incremental and don’t cause too much of a strain on the business. Chew over the possibility of internal solutions before you settle on outsourcing production.
We hope these pros and cons have made it easier to decide whether or not to outsource your production. Remember, what works for one business might be a burden to another.