What is Outsourcing Manufacturing?
Outsource manufacturing consists of hiring people outside of the company to assemble parts of, or build an entire product. The main reason why companies choose to do this is to cut costs. Labor is often among any company’s largest costs.
Outsourcing parts of the production line to a third party leads to a significant decrease in production costs. It is more affordable to outsource production processes to companies that have a comparative advantage in that area than to produce them internally.
Many times, one of the greatest advantages of outsourcing is to utilize assets already in place without having to make an investment in fixed costs.
Benefits of Outsourcing Manufacturing
Outsourcing also means you would not have to invest heavily in developing your own infrastructure. Your market research and your business plan should give you a basic idea of your potential sales volume and selling price, from which you could calculate a break-even point in terms of recouping your initial investment when you switch to outsourcing.
Lower Labor Costs
Lower labor costs are one of the top benefits of outsourcing manufacturing. While there may be broader humanitarian and compliance implications at play, outsourcing under the right circumstances can be a viable option. Labor can be performed at a fraction of the cost for some manufacturers with the right partnership. Most organizations find that they can achieve real savings and focus more on their core business when they consider outsourcing.
Many United State companies have outsourced their manufacturing to eliminate the overhead cost associated with operating a manufacturing facility stateside. These overhead costs include: utilities, and maintenance required to operate production equipment.
Other overhead costs include indirect labor such as: quality assurance personnel, equipment technicians, material handlers, shipping and receiving personnel.
A company that realizes its core competency, the thing it does best, is the sales and marketing of its product and not the production of its product may often choose to outsource its non-core activity, or the manufacturing of its goods.
Companies may experience a sudden surge in orders for a particular product and may require additional resources to keep up with demand. A lack of resources available to devote to production could affect an organization’s ability to meet fulfillment obligations. An outsourcing company can supplement existing in-house manufacturing efforts and make it easier to meet those new demands.
FORTRESS Nutrition is your full-service food and nutritional contract manufacturing partner. From research and developmentto manufacturing and packaging, we partner with small to large clients to provide them with all their contract manufacturing and logistics needs. We provide unrivaled expertise in formulation development, blending, packaging, quality control and fulfillment services.