Manufacturer Outsource or In-House

SHARE ON

In-house or Outsourcing: What are the Plusses & Minuses?

There are  a number of reasons for a CNC shop to consider outsourcing certain processes, including a lack of in-house capabilities and reluctance to acquire additional technology. Most often, outsourcing is attractive because it may appear to be more cost-effective – at least in the short term. Like most business decisions, there are upsides and downsides to outsourcing. Here are a few factors to consider. 

  • Long-term impact. If your shop doesn’t have the expertise or equipment to perform certain specialized operations, it may make sense to send the parts to people who have those capabilities. The question is “If, instead of outsourcing, I add this additional skill set, will it be cost-effective in the long run?” Your answer turns on whether this is a unique part for a single customer, or if acquiring the capability could open the door to more job orders from existing and new customers. If the latter, investing in people and equipment could be the better strategy. 

  • Control. Any time you rely on another company to perform work on your customer’s parts, you lose control over delivery and your internal production flow. If the outsource provider drops the ball, how will it affect your ability to meet your customer’s expectations? How will it impact your production schedules, work-in-process inventory and other costs? 

  • Quality. When you’ve machined a part to a certain point and sent it out for additional operations you likely have a good deal of cost already in the part. When the part returns, if the surface finish, part dimensions or appearance doesn’t meet your quality standards, you may be looking at scrap or rework. Not only is this costly in terms of labor and material, it also impacts delivery to your customer. 

  • Overhead. Outsourcing can reduce internal labor costs including wages, benefits, payroll taxes and training. It can also eliminate the capital expense of new equipment and the amount of floor space and utilities used. These are all factors that you can calculate and weigh against the cost of paying another company to work on your parts.

 

To outsource or not comes down to an analysis of the risks and rewards. Your local LNS representative can help your decision-making by determining if adding or upgrading your CNC machine peripherals will optimize the productivity of your internal manufacturing processes. To learn more call 513-528-5674 or email .