{"id":8920,"date":"2019-12-10T08:07:41","date_gmt":"2019-12-10T08:07:41","guid":{"rendered":"https:\/\/staginggembah.wpengine.com\/blog\/why-smart-companies-outsource-product-manufacturing\/"},"modified":"2024-11-04T12:22:56","modified_gmt":"2024-11-04T18:22:56","slug":"why-smart-companies-outsource-product-manufacturing","status":"publish","type":"post","link":"https:\/\/gembah.com\/blog\/why-smart-companies-outsource-product-manufacturing\/","title":{"rendered":"Why Smart Companies Outsource Product Manufacturing"},"content":{"rendered":"

When\u00a0<\/span>new businesses fail<\/span><\/a>, most of the time, it’s due to running out of cash. Poor cash flow management is the nemesis of the more than 80% of new ventures that fail in year one.<\/span><\/p>\n

It takes much capital to get started, no matter what vertical or industry you’re trying to enter. One of the highest costs of any new business is equipment: Fundera estimates that entrepreneurs should\u00a0<\/span>budget $10,000-$125,000<\/span><\/a>\u00a0for their first year’s equipment costs alone.\u00a0<\/span><\/p>\n

If you’re manufacturing a product, that range can skyrocket, which is why savvy entrepreneurs\u00a0<\/span>outsource their supply chain<\/span>\u00a0to manufacturing companies overseas.\u00a0<\/span><\/p>\n

Here are some great reasons outsourcing product manufacturing can help your business survive its first year and grow profitably.\u00a0<\/span><\/p>\n

Better budget management<\/span><\/h2>\n

“Reducing costs is the number one reason why companies outsource. 59% of companies surveyed cited cost reduction as their motivation for putting this into practice,” writes\u00a0<\/span>Entrepreneur<\/span><\/a>.\u00a0<\/span><\/p>\n

Outsourcing to a manufacturing company leads to cost-savings across the board \u2013 not just in equipment expenses. As one\u00a0<\/span>expert outlines<\/span><\/a>, “savings can be realized in reducing labor costs, overhead maintenance costs, and distraction and redundancy costs.” Many regions around the world offer lower labor costs and use their facilities to serve more than one company. These decreased labor costs mean you benefit from lower maintenance and utility costs in addition to wages and salary expenses.\u00a0<\/span><\/p>\n

But, cost-savings are just part of the equation. Outsourcing also gives you the power to manage your budget and prevent overspending. Many manufacturing companies offer a\u00a0<\/span>pay-as-you-go model<\/span><\/a>.\u00a0<\/span><\/p>\n

This model allows your business to grow at your own pace. You can test the market, hone in on your target audience, and check business assumptions to make sure the demand is there.\u00a0<\/span><\/p>\n

As a result, your startup can be proactive in managing supply to meet demand, lowering your deadstock, and inventory management costs.\u00a0<\/span><\/p>\n

Gain expertise\u00a0<\/span><\/h2>\n

It’s unlikely as a startup, one of your first hires is someone with deep quality control and manufacturing expertise. Few new ventures have an in-house engineer or technician who can take a prototype from initial design to fruition. Even fewer new ventures have the resources to\u00a0<\/span>visit the factory<\/span>, conduct quality control, and make sure all is moving according to plan.\u00a0<\/span><\/p>\n

The\u00a0<\/span>right manufacturing company<\/span><\/a>\u00a0will bring expertise to the table to help you develop your product the way you had envisioned. These partners have more experience than your average entrepreneur in product quality, cost savings, and supply chain management.\u00a0<\/span><\/p>\n

Some partners help throughout the\u00a0<\/span>production process<\/span>\u00a0by:<\/span><\/p>\n