Why outsourcing is a strategic decision

"Wouldn't the strategic decision be to invest in an internal manufacturing infrastructure? Keep all of our manufacturing capabilities and staff in-house so that you have more visibility and control over what is happening and where? ...I already have trusted suppliers that I want to use - if I move operations to a third-party, I could damage those relationships."

These tend to be the shared reservations among most manufacturing leaders before they approach the decision to outsource. 

But outsourcing parts or all of the production line to an Electronics Manufacturing Services (EMS) provider can be exactly the right strategy due to decreased costs, improved efficiencies and extra agility it offers.

Outsourcing usually involves a third party assembling specific parts, or building an entire product, and the picture will look slightly different from company to company depending on a number of factors.

Let's look at those benefits a little closer.

Reduce overheads

If we start with the most obvious, you can dramatically reduce your overhead costs by outsourcing your manufacturing. Operating a manufacturing facility is extremely costly. Factory space, investment in equipment, maintenance of equipment, staff wages, training, insurance, electricity - to name a few. And the more your production lines grow, the more those overheads will grow.

The decision to invest in an EMS partnership eliminates the need for additional fixed costs for a manufacturing infrastructure. It enables your business model to take advantage of experienced professionals who already have the facilities, staff and space to carry out the necessary work for you.

4 things to do before you speak to an EMS provider

Prepare to scale 

The secret to success is growth - there simply cannot be one without the other.  And no doubt every decision you make is being watched by expectant stakeholders, CEOs or even employees. You're all working towards that same growth trajectory, but what happens when you don't have the facilities to support that extra growth? You might find the need for labour, machinery and floor space expands too. But when you’re outsourcing, those kind of logistical issues are no longer yours to worry about.

A great EMS provider will be on your side. They will be willing to adapt and invest in their facilities in order to support your growth and ambitions. If new machinery or technology can do a job better for example, it's in their interests to invest in that machinery in order to satisfy your needs (as the customer) and support your growth. It's their job to maintain that relationship, and they'll often go to great lengths to ensure your expectations are met.

Greater focus

The more your workload grows, the more you can potentially lose focus on your core competencies. Your time is better spent doing what you're good at - whether that's product design, marketing or sales - not putting out fires or dealing with disgruntled customers. 

Plus, without mental head-space or time to invest in innovation, your company’s growth could become stunted. 

With all of that extra work offloaded to an EMS provider, a new level of focus can help you develop and nurture those core competencies. 

Unexpected demand

If 2020 has taught us anything, it's to expect the unexpected. We can't always foresee demand. When the pandemic was well underway, PPE and sanitation companies were hit with an unprecedented surge in demand and many simply couldn't keep up with the volume and scale of orders. With external outsourcing capabilities you have peace of mind that the onus is elsewhere to deal with the increased pressure of that demand. An outsourcing company is designed to meet those extra demands and will be able to supplement existing manufacturing efforts to increase volume and speed to market, protecting your company’s reputation. 

Outsourcing is a big strategic decision and one that comes with many reservations and questions. Perhaps one of the biggest responsibilities of a leader is to be seen to be recouping the initial investment. An outsourcing company in itself is a cost, but when you take into account reduced overheads, labour cost and the increased capacity to get products to market, you could expect to see a dramatic return on that investment, as your outsourcing company supports your growth trajectory.

An executive guide to outsourcing your electronics manufacturing

Written by Neil Sharp

Neil has over 25 years’ experience in Electronics Manufacturing Services and Component Distribution. During his career, Neil has held a range of leadership positions in sales, marketing, and customer service. Neil is currently part of the ESCATEC Senior Management Team and is responsible for setting and delivering the overall Group Marketing strategy. Neil heads up the marketing department and is responsible for both the strategy and the implementation of innovative marketing campaigns designed to deliver high quality content to those seeking outsourcing solutions.