How to Choose the Right Outsourcing Partner
In today’s fast-paced business environment, outsourcing plays a critical role in helping manufacturers strategically manage materials, improve operational flexibility, and build robust products quickly and cost-effectively.
Despite the volatility of the COVID-19 pandemic and the current reshoring efforts to move production in-house, outsourcing is here to stay.
Technological advances have leveled the playing field making outsourcing accessible to small, midmarket, and large companies alike. Going forward, it’ll continue to mitigate risk and negate disruption within the industry.
However, reaping the benefits of successful outsourcing projects starts with choosing the right partner. But how do you do it? What should you look for?
They Have an Established Reputation
Traditionally, outsourcing models focused on capacity management strategies and cost reduction. It has since matured into a process and people-driven approach.
The right outsourcing partner will boast extensive proficiency in building components. They will also have significant knowledge about the inner workings of supply chains to identify opportunities for optimization.
A potential partner’s industry reputation reflects its manufacturing prowess and their in-depth knowledge about specific processes. This makes it crucial to do your homework and choose an outsourcing manufacturer wisely.
Their Price Isn’t the Only Differentiator
Making decisions based on the lowest quoted price isn’t the best idea. For example, if a potential outsourcing partner isn’t up to par, a per-unit quote price that’s two points lower could quickly end up costing five points more (because of less visible internal and external costs).
When you find an experienced manufacturing components provider, their extensive knowledge and understanding will help keep costs down while maintaining quality.
There’s also a myth that larger component manufacturers will build your product for lower Value-Added Margin (VAM). While this is true in some instances, it doesn’t transcend across all use cases.
The most significant cost contributor to VAMs is labor costs. This includes direct labor, indirect labor, and facilities costs. In this scenario, local labor across continents isn’t impacted by volume discounts inherent in raw material purchases.
They Encourage Extensive Visibility
Successful partnerships depend on broad visibility. Whether you’re a brand owner or an Original Equipment Manufacturer (OEM), enhanced visibility enables sharing forecasts, inventory, and orders across the supply chain.
The primary benefit of this visibility is that it makes it easy to solve problems, resolve disruptions, and ensure continuity collectively. This approach also allows access to expanded revenue opportunities.
When there’s transparency, it’ll also shed light on the quality of support on offer. With improved visibility, companies can reduce inventory liability risk and identify new opportunities to enhance operational efficiencies and cut costs.
Not all outsourcing providers are created equal. This is especially true when it comes to highly engineered complex components because you’ll need an established partner with the right skills, experience, breadth, and depth to innovate and scale together with you.
Over the last 25 years, Michigan Manufacturing International has helped American OEMs build robust products with our custom parts. To learn more, download our brochure, visit our website or schedule a commitment-free consultation.