Manufacturing - In house or outsource? 1

[SeanDotson]

This mainly applies to companies whose product is machinery (with machined and sheetmetal parts). I have worked for companies who either

a) outsource all manufactured parts to a stable of vendors
b) have in-house machine shops and do all work themselves

I know many pros and cons to each method (and prefer one over the other) but would like to know your thoughts and experiences.

Sean Dotson, PE
Autodesk Inventor Certified Expert

http://www.sdotson.com

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[pmkPE]

The basic reason for outsourcing, subcontracting, is to reduce costs. Costs due to times of non-productivity (slow work/sales) and also due to higher overhead in managing an additional department and other related issues. The cons are loss of control over quality, assumming that your standards were higher than that of your subcontractors.

The reasons for hiring an individual are the same as for hiring a firm or another company - they can can bring value to your final product at lower costs; why - because you cannot due it yourself due to time limits, or as well or for any other valid reason

 

[GregLocock]

A rather more important reason is expertise. If I outsource manufacture of plastic parts to patprimmer, say, I'll expect to be buying a component that is thoroughly engineered and produced using world's best practice manufacturing.

We could buy an injection machine, and learn to design plastic parts for manufacture, and figure out how to make the things, but really, isn't our time and money better spent at what we are good and unique at, rather than replicating somebody else's expertise?

Surely the correct solution is often a compromise, size your in-house machineshop for the base-load requirement, and then outsource either that base load or the specials when a surge comes in. That assumes you have the capital and the workload to justify an in-house facility.




Cheers

Greg Locock

 

[SeanDotson]

Well this isn't generating as much feedback as I had thought. Let me give my take and see what happens.

I have worked for companies at both extremes. One had a full machine shop (break, shear, lathes, mills) and did everything except welding in house. It was very nice to be able to have a part fixed or remade (or simply made if you forgot it) in just a matter of mins or hours. When we got slow they made standard parts for stock.

I also have worked for a company that outsources EVERYTHING. They only had one run down mill and a lathe in house for minor modifications. The problem here was that we were at our vendors' mercy. If they promised 2 weeks but delivered in 3 we lost a week in assembly. If you made a mistake and needed a part remade, even for a fee, you would be looking at a week.

In my opinion I think a balance is the key. Have your standard machines (mill, lathe, shear, break) in house and send out the complex milling jobs. Maybe even farm out welding and esp paint and coatings. If you have a guy who can multiple machines it helps a lot too. The ability to react quickly is IMO priceless.

Sean Dotson, PE
Autodesk Inventor Certified Expert

http://www.sdotson.com

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[ProEpro]

In the 90s it was very popular for outsourcing companies to come along and buy the factory from someone and take over manufacturing. It looked good to the guys that were discarding a factory without the cost of closing it but there were many problems. Mostly with the performance of the contract manufacturer. I know of examples where they would invoice higher prices that they paid for parts and many other practices that were fraudulent. The OEM was stuck using them because of the contract they had to sign to get rid of the factory. This kind of outsourcing doesn’t work.


ProEpro

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[Harold53]

SeanDotson
Maybe you should first think about what to outsource. In my opinion, you could not outsource the part of your bussiness where you add your own value, or where really is your know-how, or where is based part of your development/strategic plans. Moreover, in this parts you should think in go up in the production chain : If you injects plastic, maybe you should think on size and mix your own raw material for some specific parts .