Should I outsource my electronic production?
Considering Contract Manufacturing
For decades, a highly competitive, international market has driven companies to seek out alternatives in terms of successful and efficient organisational forms. A trend favoured by globalisation and increasing specialisation is outsourcing. That said, the outsourcing of business areas is often viewed sceptically. And rightfully so?
Poor reputation of outsourcing
Due to the number of headlines in the past years regarding the outsourcing of large companies, the term “outsourcing” is associated with the loss of jobs. Instinctively, mainly negative changes are anticipated for the company’s outsourced areas of activity. But it is not always merely the desire to benefit from cheap production abroad which drives such a corporate restructuring. To the contrary, it is more the array of opportunities that may arise from outsourcing. This may range from synergy effects via efficient collaboration to a lack of space at the company’s premises. Outsourcing is not always associated with lost jobs. Sometimes this important step helps to secure precisely these jobs. Companies can gain access to a broad variety of services and production facilities at home and abroad by means of outsourcing.
Increasing demand for services from external providers
For years, outsourced electronic production has been very popular. High-tech products require sophisticated manufacturing processes and qualified personnel, and are subject to many regulations. To remain competitive on the international market, companies must constantly continue to develop. For some companies, this means giving up a range of tasks that are dispensable to them. For example, companies hand over production to external service providers if the resulting costs prove cheaper than in-house production or the company’s options in terms of further development have already been exhausted. Those who want more than a mere assembly service seek out a reliable EMS service provider. They offer not only production, but also an extensive service, from development to after-sales. This service is also exhibiting strong growth at national level. Consequently, businesses are not necessarily reliant on external production in third countries, but can also make use of the services of regional providers. A negative attitude towards outsourcing is therefore not always justified. Its convincing benefits effectively supplant any concerns.
But what arguments encourage companies to relinquish such concerns as the disclosure of company information, high logistics and communication costs, and dependency?
You can benefit from the following advantages by outsourcing electronic production:
Focus on core business
By handing over dispensable business areas to external specialists, your company has the opportunity to concentrate fully on its core competence. This increases productivity in the company’s main field of activity, as all corporate measures are employed primarily to meet the targets of the core business and less relevant processes can be neglected.
Save space
Production machines and testing or measuring systems require a large area to meet the high-quality and complex manufacturing process requirements. The outsourcing of electronic production also results in more space in the warehouse.
Benefits of expert knowledge
Providers of external service or production are usually highly specialised and qualified. These companies use this expertise to offer optimal production or service. Through outsourcing, this know-how and the years of experience can be applied to one’s own product. For example, many EMS service providers also offer support through competent personnel in the areas of development, purchasing, or logistics.
Reduce risk
Through the outsourcing of electronic component production, the company’s risk is likewise transferred to the selected external company. Responsibility for capacity utilisation and personnel, as well as the financial risk posed by necessary procurement and operating costs for the outsourced business unit lies with the external service provider. The risk associated with prototype production can also be transferred to EMS service providers.
Buffer function & flexibility
By transferring electronic production, the company’s in-house production machines can be used optimally to produce core products. In the case of increasing demand or unexpected performance peaks, a company with the option of last-minute, external production has an ace up its sleeve. By extending its workbench, the company creates buffers, utilises capacities efficiently, and ensures space for flexible production.
Cost savings
Rapid, technological progress demands the continuous improvement of working and production processes. This is often associated with high investment costs for state-of-the-art technological systems. In order to remain competitive, companies feel compelled to keep astride with technological change or to expand. Through outsourcing, responsibility for these measures lies with the external service provider. High procurement, personnel, material, and maintenance costs are saved, such as expenses for rent, training, or servicing.
Time saved
Providers of external production services generally have optimised their work processes down to the smallest detail through years of experience and handle orders quickly and efficiently. These partners also draw on this expertise in the implementation of product modifications. If such specialists or optimised processes are lacking in your own company, the manufacturing process involves a needless loss of time.
Quality improvements
While your company can concentrate on the quality of its own core area, the external service provider focuses on top-notch electronic production. In both cases, this results in increased, reliable quality. Companies benefit from measures such as the elaborate testing procedures and certifications of the external electronic manufacturer in order to maximise product quality.
Synergy effects through interdisciplinary collaboration
Long-term cooperation between external service providers and their clients is a win-win situation. This business relationship helps the corporate network of both companies to grow and enables security and synergy effects. Such synergy is primarily the fruit of mutual support and the exchange of experience. Well-implemented outsourcing reduces the complexity within the company, as working and production processes can be omitted. The regional proximity of companies is advantageous for close and flexible collaboration. Companies can attain useful information and experience from the existing network of their providers. Reliable cooperation combines the strengths of both companies and, ideally, has a positive impact on each of their developments.
Should I outsource my electronic production to an external EMS service provider?
According to all these optimistic arguments, the answer to this question would clearly seem to be “yes”. Unfortunately, things are not quite that simple. For each company, an individual assessment of the specific advantages and disadvantages needs to be carried out in order to come to a reasonable decision. Depending on the industry in question or the potential within your company, some advantages of external production may already not be pertinent. The risks to your company should also be thoroughly considered. Comparing all positive and negative aspects should prove helpful in taking a decision.
In general, outsourcing the production of electronic components is an excellent opportunity for many companies to advance their development particularly in Germany, due to high-quality standards, strong specialist competence, and regional proximity. Companies looking into outsourcing should first conduct extensive research and selection processes in which they thoroughly evaluate their future business partners’ communication channels, traceability, transparency, and quality, before subsequently minimising risks such as dependence.
picture: ©ra2studio by adobe stock
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Contract Manufacturing at InnoSenT
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Competent EMS providers such as InnoSenT GmbH offer a wide range of reliable services in the field of electronic production which may prove useful to your company. Through our certifications and qualifications, clients can rely on the quality of services provided. More information on electronic production at InnoSenT can be found on our website.