As time goes by, more and more companies
are outsourcing their products because
it is recognised that there is significant
organisational and cost benefits.
Unfortunately many of the benefits are hard
to measure so a summary of all the
considerations is given below:
Manufacturing savings:
Less space required for manufacturing
Lesser requirement for tools and calibration
Manufacturing staff can be deployed on high level assemblies
Less training required
Fewer operating procedures needed
No hidden scrap costs
Purchasing savings:
Fewer purchase orders to place and progress
Reduced carriage costs
Reduced MOQ requirements
Reduced number of suppliers to manage
Reduced stock holding
Increase in stock ‘turns’
Finance department savings:
Fewer invoices and GRNs to match
Fewer payments to make
More working capital as stock turns faster
Stores savings:
Few shipments to handle and GRNs to raise
Less kits to raise
Reduced effects of stock ‘shrinkage’
Reduced level of stock checks
Quality cost savings:
Only one supplier to audit
Higher level assemblies received so less time required on incoming inspection
Reduced need for calibration logs
Together these add up to a big overall cost saving even if it is difficult to quantify the individual
costs. The reduction in administration alone is significant.
