Although not without its challenges, outsourced manufacturing can help startup ventures bring their products from the drawing board to the market and scale their operations without incurring the massive capital expenditures and risks associated with in-house manufacturing.
In today’s marketplace, manufacturing is often too capital-intensive an operation to do in-house for many smaller companies. Newer enterprises outsource the manufacture of their products to scale down on operational costs and get started on the production of their items. Outsourcing manufacturing can be a beneficial thing for startup ventures in that it cuts back significantly on the cost of production, allowing them to enter the market and directly compete without having to worry about capital expenditures
Manufacturing outsourcing, however, is not without its challenges, and this goes double for companies with exacting needs due to the nature of their product. Part of the challenge of new product development is finding the right manufacturing firm to assemble the product to the specifications they desire.
At the very least, the companies in an entrepreneur’s shortlist of manufacturers should be willing to work with much smaller companies.
Starting With Specifics
At a fundamental level, entrepreneurs and other business leaders need first to establish the specifics of the product they want and how they prefer it to be made. They would need to know the essential components of its products, the desired end-user product quality, and specific features that make it stand out in the market when faced with competitors. Materials are a crucial consideration: a business must narrow down their selection of manufacturers based on their proficiency on how their product is made.
They must also know the expected price of the items and the overall expected costs of materials compared to its expected price. In addition, they should also consider how well their partner companies can meet regulatory demands for safety. By outlining the specifics of the product’s components and how they want it created, the company can then have a clear idea of the type of manufacturing partners they would need to bring their product to life.
Distributing the Production
A single manufacturing company often makes simple consumer goods like clothes with little need for distribution. Others, meanwhile, require multiple companies working in concert to produce a finished product.
The reason for this varies; on the one hand, some manufacturers may simply work cheaper by doing one segment of production rather than all of it. These often mark the production chains of complex items such as electronics. Frequently, companies have complex arrangements of manufacturers building one set of parts for a finished product.
In other times, distributing production stems from intellectual property concerns. Proprietary information is protected from competitors by providing an incomplete map toward the finished product. Although this system protects trade secrets and associated information, it can also lead to an increase in business’ expenses due to the larger number of people and contracts involved in the production chain.
A Matter of Location
A company that doesn’t mind waiting several weeks between its shipments may be open to taking their production chain offshore. A manufacturing company in a different nation such as China can often provide the same work quality and output for significantly less, due to differences in production and labour costs.
Working with a foreign partner presents unique challenges for companies, however. Language barriers and the challenges of intercultural communication represent important hurdles to bridge before going offshore. To this end, it is often better for companies to have a partner that would assist them in finding the right manufacturers for their ventures.