01 Feb How Outsourcing Wire and Cable Harnesses Can Provide Greater Benefits than You Think
There are many potential benefits to outsourcing various aspects of your manufacturing process. When it comes to custom wire or cable harnesses, these benefits can be amplified. While the decision to outsource manufacturing will depend on a variety of factors, these potential benefits should be considered when it comes time to decide how to handle your manufacturing needs.
Lower Labor Costs
By outsourcing your wire harness manufacturing, you avoid having to hire staff to create your products. Staffing costs are not limited to wages, but also include benefits, taxes, and insurance expenses. Each of these additional expenses needs to be considered when calculating the staff expense involved in the manufacturing process. Additionally, you do not need to worry about maintaining appropriate staff levels throughout the year. Since you are not directly employing the staff to create the product, the staffing expense and scheduling are all outsourced to the manufacturer, which reduces your fixed overhead costs. Many custom interconnect manufacturers maintain manufacturing facilities in low-cost regions, often providing labor cost savings.
When companies specialize in making a certain product, they gain expert-level specialization and knowledge. This degree of hyper-specialization can lead to innovations like improved manufacturing techniques, improved efficiency, reduced waste, and engineering breakthroughs. Purchasing interconnect products from an expert in this field allows you to focus on research and development for your main products while buying quality interconnects at a reasonable price. When outsourcing, you should research the reputation of the company that you are purchasing from to see if they hold patents in their field or have developed lean manufacturing techniques.
Read Here about an example of how a mining company who produced interconnect and box build products internally, ended up outsourcing to an interconnect expert and achieved many benefits as a result.
Support Increased Demand Quickly
Internal manufacturing requires significant lead time to support increased demand. Whether you need to hire additional staff, create new factories, or find new sources for materials, manufacturing often takes time to scale up. Outsourcing the manufacturing of cables assemblies and harnesses allows you to work with other companies if your current supplier is unable to support your increased demand. If you work with other manufacturing companies, you want to make sure that they are all maintaining the same quality level and producing identical products to protect your brand’s reputation.
Another consideration is your back-up plan. What do you do if a key supplier suddenly shuts down for an unforeseen reason? Such has been the case during the Covid-19 pandemic. A shut-down will provide significant disruption to your ability to use assemblies in the manufacture of the final product for YOUR customer. Therefore, choose a manufacturer that has both a global footprint and can duplicate part production operation in weeks, not years.
Companies that specialize in designing and manufacturing interconnect products have a vested interest in developing efficient processes for those products. Additionally, their manufacturing equipment is properly set up to create large quantities of their product. If you try to produce multiple products or parts of your equipment in house, you’ll need to reconfigure your equipment each time you switch products, which reduces the efficiency of your factories.
Lower Fixed Costs
Manufacturing equipment is expensive to purchase and maintain. Additionally, fixed asset purchases often need to be depreciated over several years. In many jurisdictions, you need to pay taxes on your assets each year, increasing the cost of ownership. Because manufacturing equipment is large, you may have to finance your purchase and pay interest on the loan. For each of these reasons, any manufacturing equipment will increase your fixed costs, despite the potential for changing demand. Outsourced cable harnesses avoid this problem by using a third party’s equipment to manufacture your products. Once you have purchased large equipment, you will need to dedicate factory floor space to that equipment, plus additional space to store finished goods.
Increased Operating Capital
Manufacturing equipment requires a large capital investment and creates numerous ongoing parts and maintenance expenses. By outsourcing cable harness manufacturing, you avoid those capital outflows and free up capital to be used for other priority investments. Increased operating or working capital helps your business weather changes in revenue or temporary increases in expenses.
Once you have invested significant funds into manufacturing equipment, you have essentially locked yourself into a certain manufacturing process and potentially a specific material. Outsourcing allows you to remain flexible in your product designs and materials. Outsourcing frees you from being tied to expensive and quickly outmoded manufacturing equipment. While it’s important to create strong relationships with your manufacturer, outsourcing gives you the option of working with other companies that may be able to produce a higher quality product or produce your product at a lower price point.
Large manufacturing companies have the ability to negotiate better rates on raw materials. Because of their bulk discounts on raw materials, they are able to pass the savings on to you as the customer. If the manufacturer has a global sourcing network, all the better, as they have more resources from which to draw. In times of material shortages, large manufacturers can leverage their relationships with suppliers to ensure continuous supplies of materials, whereas smaller manufacturers are more likely to be left empty-handed.
Because of their work with specific types of products or materials, manufacturers are able to improve their processes and create higher quality products. Outsourced cable harnesses are noteworthy for their strength, consistencies, and high standards.
Outsourcing Manufacturing Has Numerous Benefits
There are many reasons that it makes sense to outsource your cable assembly and harness needs. You will benefit from lower expenses and receive a high-quality product in return. Prior to entering into an agreement with a manufacturer, you should make sure that the manufacturer can provide samples of their product to ensure the workmanship and quality are in line with your expectations. Better yet, take the steps to obtain a “First Article” to make sure the actual production sample for your particular assembly design is accurate and tested to meet all physical and performance specifications. Once you have identified an appropriate manufacturer, you’ll benefit from access to an expert workforce and an efficient manufacturing process that will benefit your company and your customers. You will also find that you have the flexibility to meet fluctuating or increased demand in an efficient and cost-effective manner.
Outsourced manufacturing can improve your product quality while improving your bottom line. Cable assemblies and harnesses are the perfect product to outsource because they can easily be tested to ensure quality, strength, and performance. Your returns will be immediate.