How much does outsourcing manufacturing cost?

How much does outsourcing manufacturing cost?

Outsourcing manufacturing can save companies not only time, but also money when it comes to partnering with a service provider that can see their product successfully being created after design sign off. However, it is this savings component that usually determines who a business selects as a manufacturing partner, and why that they would prefer to work with when compared to another team.

In today’s blog, we will be looking at how much outsourcing manufacturing would typically cost, which factors would impact this, why outsourcing manufacturing is still a cost-effective consideration for any business and how do you calculate outsourcing costs.

First, let’s take a look at the factors that impact how much outsourcing would cost a business.

Size, scope, scale and timings: which factors impact manufacturing costs?

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First and foremost, when it comes to outsourcing manufacturing, size, scale and scope all play a big part in your manufacturing costs. You might have a limited run manufacturing timeline planned, or a longer sequence that will stretch further than weeks or even months.

So, considering the volume of items you will need to be manufactured will help you get a better idea of the costs you could be responsible for.

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Your timeframe is also another big factor in how manufacturing costs could be impacted. Extended timelines translate into higher labour costs, more materials likely used and higher energy costs. This doesn’t mean per se that you need to slim down your manufacturing timeline in favour of savings, but rather that you need to consider whether your outsourcing manufacturing partner will be able to combine both efficiency and quality to ensure your products get manufactured timely, but without compromising on the quality of end results.

Ad hoc, contractual and “hidden costs” – remember to consider them!

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Ad hoc and “hidden” costs need to be taken into account when it comes to outsourcing costs. Not only do you need to consider your on-site costs, but also ad hoc expenses such as putting a contract in place with your outsourced manufacturing partner, any pre-technical consultations and any other legal documents that need to be drawn up before manufacturing commences.

Also, if any costs were involved in finding an outsourced manufacturing partner, such as needing to visit candidates on site and paying transport fees, these will add to your total outsourcing costs.

Why outsourcing manufacturing is still a cost-effective solution

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Looking at the above, one might be quick to question whether doing manufacturing via an external party would truly be ideal. However, consider the following:

  • Working with an outsourced manufacturing partner will save you on in-house overheads and training costs. You will not need to purchase or develop product-specific resources or hire employees in-house that are only selected for one project. Rather, you will have an outsourced partner that already has the necessary resources, staff and site for your planned project.
  • If you have a product that needs to be manufactured at scale, having an outsourced manufacturing partner means that you can handle large volumes without needing to carry additional costs to get the number of products that will align with market demand and your proposed distribution.
  • Your timeframe will furthermore not impact the daily workings of your regular office hours, as all manufacturing will be done off-site and will not disrupt any business processes.
  • Hiring an external industrial design team to precede manufacturing also allows you to save on costs, as you will be working with a team that can produce early prototypes via rapid prototyping to ensure that the final design that goes into manufacturing aligns with the goals that you had for a specific product outcome.

How do you calculate outsourcing costs?

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So, how do you work out outsourcing costs when it comes to manufacturing? The answer truly is not a one size fits all, as every project is different and each will have a different scope and desired output.

As a rule of thumb, do not just start your cost calculations as soon as the production line comes to life. Keep all factors in mind, including:

  • Any pre-planning, such as advertising and interviewing potential outsourcing partners that could include costing related to your overall manufacturing budget.
  • All consultation sessions preceding, during and after the manufacturing process.
  • All costs related to contractual fees, certificates or other important considerations.
  • Costs of materials, labour, transport, energy bills and any overtime costs should the need for it arises.
  • Factory overheads related to manufacturing your products.
  • Any shipping and handling from the manufacturing site as well as costs to distribute final products to distribution points.
  • Insurance costs that you will be liable for.

Be flexible when it comes to planning for initial costs

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These are some of the most common considerations when you consider outsourcing manufacturing, but it is important that you work out the full scope of your project beforehand so that all avenues are covered. Be as thorough as possible, draw up all variables and remain flexible in your approach, as your outsourcing partner might identify additional areas that need to be considered as part of the manufacturing process.

Ideally, involve your industrial design team in your initial meetings too, as they will have front row knowledge of your products’ designs and will be able to advise on how the manufacturing process will have a favourable outcome for all parties involved in the process.

If you are a potential client and you are ready to experience an exceptional journey of design for your next project with amazing results, contact us today. We would love to hear from you and to provide the personal touch that we have become known and respected for as one of Melbourne’s leading industrial design teams!