When Does In-house Manufacturing Make Sense?

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Most products nowadays are built using outsourced manufacturing. Outsourcing can be cheaper and easier than having to set up your own factory and purchase your own machinery. Even manufacturers themselves can find it beneficial to outsource niche parts from other manufacturers rather than acquiring extra machinery. For example, you may want to outsource a specific softgel manufacturer if you don’t have the resources yourself to do so. Many pharmaceutical, supplement, or even cosmetics industries tend to opt to deliver products in the form of softgel capsules due to the improved bioavailability, precise dosing, and extended shelf-life. Outsourcing this process is often a far more streamlined and cost-effective way of doing so.

Of course, there are times when outsourcing manufacturing isn’t necessary. Below are just some of the instances where it may actually be better to manufacture a component or product in-house.

You understand the manufacturing process

If you have the knowledge of how to manufacture a product or part, it could make sense to handle manufacturing yourself. This could be particularly the case if you already have experience manufacturing this component. You could regret outsourcing, as you may feel you could have done it better yourself. If you decide to do it yourself, you need to make sure you not only have the right equipment but also good management software such as ERP (Enterprise Resource Planning) installed. To avoid major errors however the system needs to be perfect, and an ERP implementation needs to be fail-proof. To avoid self-implementation failure you’ll need an ERP consulting group with a core competency in manufacturing in distribution. Don’t let small mistakes cause big problems for your manufacturing process. 

Outsourcing is better suited to manufacturing tasks outside of your realm of expertise. For example, if you’re clueless when it comes to electronics or metalwork, don’t try to take on these processes yourself.

You have the equipment

If you already have the equipment to make a product or part, you may as well make full use of that equipment. Similarly, if you can comfortably afford the equipment and you have the factory space, it could make sense to manufacture in-house to save costs in the long run. Owning a cnc plasma cutting machine, for example, allows you to do all cutting jobs in-house, meaning you won’t have to wait for other companies to complete your cutting for you.

If you don’t have the equipment and it’s too expensive or complex to learn, you’re better off outsourcing it. For example, you may want to outsource tasks like precision metal stamping and wafer fabrication rather than spending huge amounts of money on the required machinery. 

You want to make fast or frequent changes to your product

Outsourcing manufacturing is best suited to mass produced batches where there is little or no variation between each product. When it comes to bespoke products or products that you want to keep tweaking, outsourcing isn’t as convenient as it requires constant time-consuming communication with a third-party manufacturing – something that could be eliminated by simply doing it yourself.

In-house manufacturing gives you control to make each product unique or to keep making small changes without having to communicate your ideas to someone else. 

You want to prioritise speed of service

Manufacturing on-site could be important if you need to quickly fulfil orders. Instead of having to place the order with another company, you can start making it straight away. When it comes to food, in-house manufacturing can also be a way of ensuring freshness – if you own a farm, you could make it your USP to sell products made with products harvested that week!

If customers are happy to wait, then it may be fine to outsource. Some companies may also find outsourcing less stressful, as you can stick to a queue system rather than having to prioritise customers by individual needs. 

You want to closely monitor the manufacturing process

In-house manufacturing is also recommended if you feel that you need to keep a close eye on every step of the process. This could be important for making sure that every part of the process is safe and ethical, or for ensuring constant top quality.

Not everyone will feel they need to inspect the manufacturing process closely. If this is the case, you’re better off outsourcing it.

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