"Outsourcing Manufacturing: Visibility and collaboration are the keys to a successful partnership"
Focused on reducing manufacturing and labor costs, cutting overhead and gaining production flexibility, manufacturers are increasingly outsourcing production to outside firms that can competently and reliably manage some or all of the process. Used both domestically and with foreign entities, outsourcing has proven itself to be a viable business strategy for companies that want to focus on their core competencies rather than trying to “do it all.”
Outsourcing helps companies achieve economies of scale that they might not be able to attain on their own. In many cases, for example, labor and overhead costs are a driving factor in the decision to outsource and represent a large portion of a manufacturer’s direct costs. When these costs can be reduced through outsourcing, it is a win-win scenario for both the outsourcer and for the third party.
In terms of other benefits, companies that outsource non-core activities are able to focus on what they do best. So rather than tying up resources in processes that a contract manufacturer can handle just as well or better, a company can zero in on the other activities that drive its bottom line, such as sales and marketing or product development. Put simply, both human and financial resources can be freed up and funneled into growing revenues and profits.