Understanding the Risks of Outsourced Manufacturing

Are you aware that around 20% of small businesses fail within a year?

Your company must stay afloat, even with a suboptimal budget. It’s tempting to jump to outsourced manufacturing because of convenience and quality. However, it doesn’t come without its risks.

So, what are the things you must be aware of?

First, you must know that it’s not a fool-proof solution. Read the rest of our guide to understand it better.

Supplier Risk

Direct arrangements with suppliers from every industry always come with risks. However, the risk can be greater when you’re sourcing from an international supplier. If you plan to outsource, you must carry out a thorough investigation.

You must know the possible source markets and suppliers. After that, you must make an in-depth risk assessment. Check the provider’s possible suppliers to know potential issues that may arise.

Your investigation must include all aspects of the supplier. It includes operations, quality, leadership, and labor. See whether their track record holds up to their promise.

This way, you’ll avoid operation disruptions because your supplier lacks a follow-through. You may also ask other helpful companies who used your potential supplier before. You’ll gain insight into working with them once you made the decision.

Quality Assurance

The results of quality failure are worse when it comes from international sources. Compared to domestic sources, the lead times for transporting products are longer. When this happens, you’ll likely suffer from serious business disruptions.

It can get so bad that it takes several months to correct the problems. To mitigate this risk, you must prepare detailed product specifications for your sources. Tell them that you’ll do some independent quality control inspections from time to time.

Take note, a decline in product quality can damage your reputation. Avoid this and spend a few weeks observing the process of manufacturing. This is cheaper and ensures quality, which is better than discovering you need a recall.

Intellectual Property Protection

Be careful of sharing information with your outsourced manufacturers. Check their origin country and their intellectual property rights first. Otherwise, someone might leak your propriety information.

It often happens when the manufacturer’s country has more relaxed IP laws. Depending on the product, you might find it better not to outsource anything. However, if your product undergoes regular upgrades, this might not be an issue.

If you think you can develop better items faster with better product quality, you may neglect patent protection. This happens when you pump out new products faster than the market’s capabilities.

Brand Reputation Risks

If you’ve been in the business for a long while, you know it takes lots of time to build a brand. Overnight success doesn’t exist because it takes years or decades. Your brand reputation matters, whether your company is local or global.

To minimize the risk to your reputation, you must consider some factors. Here are some:

Transportation and Delivery

Outsourcing to foreign services may also be troublesome if you don’t go through with the contracting process step by step. It may lead to delayed deliveries if not cleared up well enough.

The process of ordering and delivery must have a consistent time frame. Think about whether your outsourced manufacturer can keep a consistent timeframe. If it increases, you must find ways to adjust your customers’ expectations.

You may also look for alternatives to get the time frame back to its proper place. If you can’t, you’ll risk ruining all your hard work. Customers hate waiting for more than they need to, so consider this factor as your priority.

Cultural Differences

It can impact your brand identity between countries. Lots of international brands understand this concept. It allows them to thrive and penetrate markets regardless of the country.

So, ensure that your brand will adjust to various cultures. It must follow expectations, standards, and traditions. It will allow your company to promote a seamless integration.

Sourcing Labor

This conversation isn’t as prevalent. Whenever it surfaces, it can harm your brand. It would be best to get a manufacturer that uses humane standards to make and fulfill your products.

Your manufacturer’s guidelines must be similar to your country’s. It’s especially when it’s labor laws and other related guidelines for employee safety. If your country is a member of ILO, both you and your outsourced help must adhere to its guidelines.

Weather

It seems obscure, but your manufacturer’s weather can affect your brand reputation. Bad weather can result in various delays. It puts your brand in a negative spotlight because you have to reveal your labor force.

The way your provider handles some weather-related situations can bite your supply chain as well. Regardless of their faults, your brand reputation will suffer. It’s why you must put it above everything else.

Is an Outsourced Manufacturing Right for You?

Before outsourcing a manufacturer, you must think about your company’s readiness. You must weigh the advantages of this decision to your company. It matters not what industry you’re in since its benefits and drawbacks remain the same.

Benefits of Outsourcing Manufacturers

The primary reason to do this is to cut your spending. At the same time, it will boost your business’s productivity. Many companies are willing to produce popular demands.

You’ll also avoid every bureaucratic aspect of manufacturing. It’s what bogs companies down, especially for countries with stringent laws.

Drawbacks of Outsourcing Manufacturers

The laborers under your outsourced manufacturer don’t work under you. You have no direct means to boost these people’s mood or morale. If they boycott work because of difficult conditions, your company will suffer.

Invest in Outsourced Manufacturing Today

Despite the risks, an outsourced manufacturing partner can help boost your business productivity. It’s all about finding a reputable manufacturer to work with. Use this information to find the best one around.

Are you looking to work with an international manufacturer? If so, contact us today and let’s talk about boosting your company’s sales.