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March 25,2019,Philippines—Outsourcing is a business practice in which a company hires another company as a third-party provider of one or multiple services. However, outsourcing global manufacturing services only started after Solectron, now called Flex, was established as the first outsource EMS provider in the world in the late 1970s. Before its existence, manufacturing was mostly done by companies in-house.

Like in any kind of business investment, there are always advantages and disadvantages, and outsourcing an EMS provider is no different. Contemplating on whether you want to outsource manufacturing or do it in-house? Weight your decisions by reading the advantages and disadvantages of outsourcing an EMS provider.

Advantages

Created with the goal of providing help and better manufacturing service to various industries, outsource manufacturing has plenty of benefits including:

Access to more capabilities

Manufacturing in-house is very much possible but it can be limiting, not only on the number of employees and quality of equipment but also in terms of skill. By hiring a third-party manufacturer, not only will you have experts do the job for you, but you may also have wider access to more capabilities even for other markets like automotive and aerospace.

Increased efficiency

Hiring a third-party company that specializes in the process or service you need for your project can give you the benefit of increased work efficiency, faster completion of production, and better product quality. Additionally, by outsourcing a global manufacturing company to do the job for you, you are also allowing your company and staff to focus on your own strengths and concentrate on your main tasks.

Lower costs

One of the most common reasons why companies would want to outsource manufacturing is because of lower costs. By entrusting the project to an already established manufacturing company, it removes you the need to establish your own facility from scratch, along with the costs of labor, equipment, maintenance, and many more. Having a third-party EMS provider can also give you flexibility if you choose to manufacture bigger projects or expand your business in the future.

Greater competitive advantage

Especially with the growingly fierce competition in global manufacturing, the biggest benefit of outsourcing an EMS provider is having a greater competitive advantage against your competitors. Services like product and laboratory tests as well as new product introduction can ensure that your products are made of quality and can meet commercial success, which can then help your company be ahead of the competition.

Disadvantages

No matter how great the advantages of outsourcing manufacturing are, there are still disadvantages to entrusting the job to third-party companies.

Lack of control

It is obvious that you would lose most of the control over your project once you leave it onto the hands of a third-party service provider. Although that is not necessarily a big disadvantage, some companies may be unable to trust outsource manufacturing partners.

Confidentiality and security

The fact that you will be working with an entity not related to your company already raises the concerns and risks for information leak and intellectual property theft. Especially in the highly competitive global manufacturing industry, potential problems with confidentiality and security are powerful enough to sway or scare many companies.

Communication issues

It is very unlikely that you experience communication issues with your outsource manufacturing partner unless your project manager is highly unresponsive or difficult to talk to. In such cases, it might be better to meet and talk to them in person, but doing it frequently could be very inconvenient as well.  

Instability

One of the biggest fears any company may have is their third-party EMS provider going out of business without any prior notice. This could lead to unfinished projects which just essentially wastes plenty of time, money, and effort. Moreover, it would put them back again on the dilemma of finding another EMS provider.

Those are some of the fears companies have when hiring outsource manufacturing partners. However, it is easy to see that all of them can be avoided given that you make a thorough selection and choose a great manufacturing partner.

Whether you outsource an EMS provider or not is entirely up to you. Just remember that in a time of rapid technological advancements and fast-growing global manufacturing industry, having a third-party EMS partner is already an advantage by itself.