As a supplier of retail fixtures and shopper marketing programs to some of the world’s leading brands and retailers there is a question which we are always asked. “Do you have your own factory?” It is an important question that should be asked but it is not the question itself, but it is the answer that is looked for, that continues to puzzle. When we reply and inform the client that no we do not have our own factories, this is immediately assessed as a weakness in our offering.
BUT is this really the case?
“Outsourcing is a very powerful strategy that enables a company to leverage market innovation, new technologies, specialist talent, sourcing flexibility, cost efficiencies and risk management.”
In today’s global marketplace, it is critical that companies are able to respond in a timely fashion, to any challenge or opportunity that presents itself. This is as important to how the company goes to market as it is to how it operates and Procurement have a leading role in ensuring that the company is agile enough to respond quickly and sufficiently to improve operational performance.
“The measure of intelligence is the ability to change.” Albert Einstein
So here are 8 reasons why outsourcing provides significant advantages over in-house manufacturing:
Innovation is a consequence of the scale and depth of ideas that are put forward. By limiting innovation to one company, the level of innovation that can be achieved will be significantly curtailed.
Companies that have in-house manufacturing will design to their own production capabilities and expertise. This will not necessarily deliver the right solution for the client. In a market where creativity and differentiation are essential to ensure shopper engagement, it is imperative that the focus for design is on desired outcomes rather than on what can be manufactured.
Retail investment programs can be highly complex and can include a variety of different substrates and production techniques. No one supplier can manufacture all the requirements in one factory, so there will always be elements that will be outsourced. When you don’t have outsourcing expertise the overall outcome can be significantly compromised.
New techniques, tools and innovations are always coming to market. By outsourcing, you can always ensure that you have access to the required talent and engineering skill without relying on investment and in-house training to take place.
5.Capacity demand management
The level of requirement will always fluctuate and by restricting yourself to just one source of manufacture can limit your ability to scale up or down as required.
6.Flexibility of supply
The world is constantly in flux. Substrate prices change, currency exchange rates move, shipping rates fluctuate. Nothing stays still. This is why flexibility on supply is essential. A client must be able to source the right solution at any given moment and not be restricted or constrained to one source of supply for a given period.
When you have in-house manufacturing you have an ongoing overhead that you need to cater for. In many cases when you have spare capacity, the costs of this have to be made up in future production. When outsourcing, you can seek out the most efficient factories. In addition you can consider other locations and countries where substrate prices, labour rates, land costs and conversion rates are lower.
Managing risk is becoming increasingly important. The real value in adopting an outsourcing approach is that you switch your focus from supplier management to supply chain management. With the right partner you can model the supply chain to be able to respond to any event or circumstance. In addition, you will receive increased transparency over the entire supply chain, leading to improved CSR management of all suppliers involved in the supply chain.
So when that same question is asked in the next meeting, please take a moment to reflect on what an outsourcing specialist can provide. They can help transform the management of a very challenging and complex spend area through insights, innovation, transparency, flexibility and overall supply chain modelling.
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” Lee Kuan Yew
If you would like more information on how LeanPie can transform your shopper experience supply chain, please feel free to contact David at firstname.lastname@example.org