Smart sustainable manufacturing: benefits of outsourcing
It’s no secret that business...
Adrian Burton, Co-owner and Sales Director at Harrison Castings, discusses the benefits of outsourcing in manufacturing.
It’s no secret that businesses are always looking for new, improved ways to reduce costs and better meet increasingly high customer expectations. Competitor pressure, reduced cycle times and increasing demand have meant that many companies are turning to outsourcing to keep up. And it’s clear to see why - the logic is that we should focus on our own skills, and seek others with complementary skills to complete projects we cannot.
It’s no longer enough to simply be successful, instead, businesses are now looking to streamline processes and create a sustainable business model that works long-term. For businesses that don’t have the capacity or skills to handle certain processes internally, outsourcing is ideal. So what are the benefits?
Improved productivity and efficiency
A lack of available resources can hinder an organisation’s ability to meet demand, but outsourcing can help to make this process much more efficient. By working with a company that specialises in specific processes or services, and leveraging these particular skill sets, you’ll end up with a more productive, efficient service, often of much greater quality than if you attempted the same in-house. As your business won’t necessarily be equipped with the latest and most innovative tools or processes, you’ll also benefit from access to capabilities otherwise inaccessible or too costly.
When outsourcing is involved, businesses are able to focus their resources on core services or projects, meaning they have a higher capacity for production and concentrate on what they do well. Alternatively, manufacturing businesses can outsource skilled work by temporarily hiring experts to work with them on a fixed-term basis.
In order for any business to grow, they need to remain flexible, offering new products or services before their competition. However, finding the time to invest in this innovation can be costly - both financially and when it comes to time. Outsourcing work offers businesses the ability to access skills, abilities and technologies, without a lengthy hiring process or the cost of new machinery, which is invaluable.
Similarly, the flexibility and potential to scale up or down in line with demand is yet another positive. This is because companies usually have a larger capacity for work, so can respond quickly to demand. For example, if a sudden increase in production is required, or businesses receive a contract for a large, one-off project, they don’t need to panic about suddenly increasing productivity because they can simply outsource what they can’t offer in-house.
By taking a flexible and scalable approach, businesses can be sure that they’re able to adjust to the ever-changing demands and conditions, whether that's downscaling or extending operations, enabling them to quickly and easily respond to changing priorities and requirements.
It goes without saying that the main priority for any business is reducing overheads, and outsourcing can go a long way towards helping businesses to keep costs down. Not only does it mean they don’t need to invest in developing infrastructure or expensive machinery, but it also removes the need to spend money on complex training or skilled hires, as the work is completed by those who are already experts in their field.
Furthermore, if companies are outsourcing labour only, it not only reduces the number of employees on the company payroll but also allows for the flexibility of increasing or decreasing staffing needs as required.
Improvements in the area of innovation is an additional advantage of outsourcing, as new processes, products or services can be brought to life much quicker due to an increase in resources and capabilities. On the other hand, much in the same way that businesses are now expected to achieve more, so are the suppliers they are outsourcing to. Where, before, businesses would use outsourcing as a way to free up internal time, they are now working alongside their suppliers to drive innovation.
This collaboration means that businesses can take advantage of specific expertise and skills, along with the latest technology, techniques and production processes, leading to a greater competitive advantage within their industry.
What are some risk factors?
While outsourcing comes with a huge range of benefits, it is not without risk. And there are a few things businesses should consider before jumping in:
Quality control - When specific processes or services are outsourced, even though expectations, limits and tolerances are discussed, things can still easily go wrong. Similarly, if working with international business, quality becomes a much bigger issue, due to long lead times and the possibility of disruptions or extra costs. To help minimise the risk, it’s important to agree on detailed product specifications or even an independent quality inspection, and businesses should make sure they have a clear process in place to ensure staff can easily communicate with the outsourced supplier.
Reputational risk - We all know that, when it comes to business, reputation is everything. When outsourcing, especially internationally, it’s important to make sure operations are being handled in a way that meets your businesses standards and values to avoid any negative repercussions. For example; what are their working conditions like? Do they employ underage workers? Will cultural differences complicate communication? It’s a good idea to contact foreign chambers of commerce and trade associations to find out what laws and regulations are in place before you decide to work with a supplier to help identify and minimise any risks or possible problems.
It’s not difficult to see how outsourcing can be hugely beneficial to a wide range of industries, from engineering to manufacturing, but it’s important that businesses look for respected, credible suppliers who offer the quality of service you need. Not only does outsourcing allow businesses to be better, faster and more efficient, it also allows them to focus their energy on the core offerings, meaning they are able to become much more efficient and productive which, in the long run, is a more sustainable business plan.
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- Read the latest issue of Manufacturing Global here
For more information on manufacturing topics - please take a look at the latest edition of Manufacturing Global
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.