| Vertical integration has been out of trend for | | | | contract manufacturers. Today, even Japanese |
| some time now. Outsourcing in manufacturing, on | | | | companies are outsourcing their products as well. |
| the other hand, is in. But the main question is, | | | | Automakers are also considering this as an option |
| should you join the bandwagon? | | | | to cut down on expenses. Outsourcing has |
| Original design manufacturing has been known to | | | | reduced costs and capital spending. |
| outsource human resource for some time now. | | | | Speaking of costs, outsourcing in manufacturing |
| While it has helped provide employment to many | | | | has helped manufacturers save on material and |
| developing countries, it also has its own setbacks | | | | labor costs. It also gives attractive financial ratios |
| to the employment of its country of origin. | | | | so investors are lured into the business. Truth be |
| Manufacturers have become leaner. Plants and | | | | told, cost is the main advantage in using |
| equipment have been eliminated and contract | | | | outsource manufacture. |
| manufacturers have become their new production | | | | Since outsourcing has lower cost structure than |
| partners. Many original equipment manufacturers | | | | original equipment manufacturers, they can reduce |
| also have chosen to outsource since it helps them | | | | the cost per product. This means they can go to |
| deal with the pressures brought on by price and | | | | variable cost from fixed cost. This way they are |
| profit increase. | | | | only paying for what they have sold. The contract |
| The changing market requirements have also | | | | manufacturer, on the other hand, can collect |
| been a challenge for these manufacturers that | | | | demand from original equipment manufacturers. |
| they opt to deal with contract manufacturing | | | | They use the competition to get better prices |
| outsourcing. In fact, there are many companies | | | | and stable supplies from the original equipment |
| that do not own a single factory. They rely on | | | | manufacturers. Economically, it is a win-win |
| contract manufacturing to create their products | | | | situation. |
| or run their operations. | | | | The advantages do not stop in cost alone. |
| Contract manufacturing services have become | | | | Time-to-market is another driving demand for |
| the booming business that is driving significant | | | | contract manufacturing. Time-to-market affects |
| growth. As a matter of fact, the global market | | | | an electronic products life cycle. The faster it is |
| for outsource it services is projected to increase | | | | launched in a big market, the better. |
| a significant amount according to an International | | | | However, there is a downside for outsourcing in |
| Data Corporation. based in Massachusetts. | | | | manufacturing. Since the control is given up the |
| In North America, contract electronics | | | | moment an original equipment manufacturer deals |
| manufacturers generated billions of sales in 2001 | | | | with an outsourcing company, extensive |
| and are expected to grow its profit each year. | | | | engineering changes are more difficult to execute. |
| Contract manufacturers have also expanded their | | | | Also, many companies are not prepared for the |
| services from one field to another. In addition to | | | | arduous task of transferring an internal |
| assembly and manufacturing, they now have | | | | manufacturing model to the contract assembly |
| services catering logistics and global distribution. | | | | manufacturing. Finally, contract manufacturers are |
| The industry has grown successfully that it is not | | | | not good for companies with fluctuating product |
| showing any sign of slowing down until today. | | | | demands or those with complicated equipment. |
| European and American electronic manufacturers | | | | Every little helps. Click the link below to learn how |
| used to be the main patrons of electronic | | | | to outsource on a budget. |