Consider these key points when looking for items to outsource...

What are your company's core competencies?
      
If your product is primarily made of metal, you probably form that metal in house.  Chances are that metal forming is one of your company's core competencies.  It is unlikely that you would send that product out to a  contract manufacturing company.  If your product uses a few wire harnesses, chances are there are lower cost alternatives to building them in house.

Look at your space and personnel.

Often, subassemblies are a small area in the plant staffed with a few people who build them.  Additionally, these people have probably been moved from other areas of production.  If they are not experts in this particular area it is possible they can be better utilized in other areas of the plant.

The equipment you don't need?

Even simple assemblies can require expensive equipment.  It is common to think that since the equipment is already there, it is paid for or depreciated.  Check closely as you may still be leasing some tooling!  Even if it is paid for it is possible that it could be sold and those profits used elsewhere.

A raw material inventory bubble.

Raw materials for assemblies often come in standard quantities.  A PCB assembly may require resistors which come on 5000 reels, capacitors that come in 4000 piece reels, and ICs that come in 25 piece tubes.  This does not add up to nice standard inventory levels.  As a result raw material inventory is often greater than needed.  Utilizing a contract manufacturing company which has other customers for those parts can reduce or eliminate this waste.

You can get the greatest benefit of using a contract manufacturing company when you select the right parts to outsource.  Outsource your weaknesses to their strengths and you will both profit form the experience.

Next > Identifying Your True Cost

Articles are the opinion of the writers and are not necessarily an endorsement or criticism of any particular supplier or service.