You’ve learned the basics of product manufacturing, successfully crowdfunded your project, and developed a Bill of Materials. Now it’s time to start thinking about who will manufacture your product.
Outsourcing manufacturing to a third party is so widely accepted in business nowadays, that many companies almost do so instinctively. However, there are also plenty of benefits with keeping the manufacturing process in-house too.
Here, we look at some of the reasons in-house manufacturing could be the right choice for your business.
Keeping manufacturing in-house makes communication faster and easier thanks to issues like language barriers and time-zone differences being eliminated. According to figures collated by Deloitte, miscommunication is fairly common when utilizing the services of external suppliers in any capacity, with 30% of companies outsourcing their work citing communication breakdowns as a key problem.
Ultimately, real-time conversations provide less opportunities for misunderstandings and result in a clearer brief regarding specifics of your product.
A core tenet of the world’s most successful businesses is agility and the ability to pivot quickly to suit changing market conditions. In-house manufacturing allows you to more easily shift direction or make changes in response to innovative ideas, or even problems with the product.
Instead of having to contact businesses on the other side of the world to change something, add something or contribute an idea, keeping production in-house means you make decisions on the fly with a single meeting.
Despite perceived wisdom that outsourcing is always cheaper, a study at Karlsruhe University of Applied Sciences found that extensive outsourcing of manufacturing activities has a strong negative impact on a company’s profit and productivity.
In-house manufacturing is often a more cost-effective avenue, especially for businesses that manufacture highly customized products or low product volumes. This is because there are simply less links in the manufacturing chain between your wallet and the end product.
Many external manufacturers also stipulate minimum batch sizes, which is not only more expensive but also exposes you to more risk if something goes wrong with your product. Conversely, manufacturing small batch sizes allows you to scale at your own pace and helps you keep inventory holding costs as low as possible.
Testing and developing prototypes using a third-party manufacturer often means having to ship prototypes around the world and waiting for new iterations to arrive – leading to inevitable delays.
With in-house manufacturing, you can develop an efficient workflow for testing prototype products, discussing issues with engineering and design departments, and implementing changes. This radically speeds up the whole process and cuts down what could otherwise be weeks or months between prototype creation and testing.
The ability to customize greatly benefits smaller companies, especially those with a bespoke product value proposition. If a customer wants a customized product, in-house manufacturing enables faster fulfillment of the request compared to outsourcing, where customizations have to filter through a range of channels and processes.
Introducing more parties to your product’s supply chain opens you up to greater risk of intellectual or physical property theft, especially if your manufacturer is in another country where laws and agreements may differ from your local country. Developing and producing in-house helps ensure your intellectual and physical property stays yours and yours alone.
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