If you’re trying to choose between manufacturing in-house or outsourcing the task, there are a handful of factors to consider. Each option has pros and cons, and will impact your budget, quality control, and scalability differently. In this article, we’ll explore the key factors you need to evaluate to make the right decision.
Understand the differences
First things first. You need to understand the core differences between in-house manufacturing and outsourcing. The most obvious is that with in-house manufacturing, you’ll need to buy or rent equipment, rent a facility, and pay for labor. When you outsource, a third-party handles production for you. You can also use a hybrid model where you manufacture some things in-house and outsource the rest.
With these differences in mind, define what manufacturing means for your business. Is it assembly, raw production, packaging, or everything end-to-end? The answer will help you choose the right model. For example, if you can’t or don’t want to do any of the work, you’ll need to outsource it. But if you’re willing to handle the packaging or other parts of the process, you can use a hybrid model. For example, you might have your raw materials – like powder – milled by a professional company, while you manufacture the end product.
Evaluate your control needs
How much control do you need over the manufacturing process? In-house production gives you full control over quality and production speed, and you can make changes at any time. On the other hand, outsourcing forces you to give up control in exchange for convenience.
If you’re not currently prototyping and don’t make many product updates, then outsourcing manufacturing is a good option. However, if you need to make frequent adjustments or want full control over the process, keep things in-house.
Assess your ongoing costs
Cost is a major factor in how you manufacture your goods. Keeping your production in-house will require a big upfront investment in equipment, staff, training, utilities, and space. Outsourcing offers a lower startup cost, but usually comes with minimum order quantities, fees, and shipping costs.
Long-term, in-house manufacturing will require that you perform regular inspections and preventive maintenance on your equipment and make all necessary repairs. When you outsource, all of those responsibilities fall on your outsourcing partner.
Before deciding, run the numbers for your startup costs and long-term costs. Depending on what you need to produce, it might be more cost-effective to buy the equipment yourself.
Consider quality control
Quality control plays a crucial role in ensuring your products are safe and high quality. When you keep manufacturing in-house, it’s easier to monitor and enforce quality control standards. When you outsource, you’ll need strong contracts, testing protocols, and regular audits to ensure quality. If a single defect has the power to ruin your reputation, it might be better to keep things in-house.
Consider lead times and scalability
When you’ve got customers or clients waiting, you can’t afford long lead times. If you don’t deliver on time, you can lose contracts. Worse, if your contracts contain delivery guarantees, you could get sued for breach of contract.
Manufacturing in-house produces results quickly and is sometimes more reliable, but it’s harder to scale fast. With outsourcing, you get more scalability, but lead times are longer and less predictable. And when you factor in seasonal demand, demand spikes, and shipping delays, it can take a while to receive your deliveries. If you outsource, make sure you only contract with a reliable company with a reputation for meeting timelines.
Think about intellectual property
If you’re manufacturing proprietary designs or using trade secrets, you can’t guarantee your outsourcing partner won’t steal your intellectual property or make it accessible to someone else who will. You have zero control. Keeping things in-house is the safer option when you’re working with valuable IP.
Consider strategy vs. convenience
Manufacturing in-house might be worth it for things you can do well or that need to maintain a certain level of quality to protect your brand, but when it comes to high-precision work outside your area of expertise, outsourcing is smarter.
Since outsourcing supports growth, it’s ideal for volume, standardized parts, and tasks outside your expertise. In-house manufacturing is great for maintaining a competitive advantage.
Choose the model that matches your needs
There’s no one-size-fits-all answer, but there is an ideal choice for your business. Whether you keep everything in-house, outsource, or find a hybrid solution, it’s crucial to make your decision based on strategy. Think long-term and weigh the real costs. Choosing the right model will support consistent growth and products that people love.
