Outsourcing Manufacturing and Competing on Price
One way to solve the problem of manufacturing is to outsource it to another company, whereby they manufacture the product on your behalf.
This can help provide more complex or larger scale production without you needing to pay for equipment or premises costs, but will normally result in a larger cost per unit than if you produced the same goods yourself. There is also a risk of quality issues if the outsourcing company is unknown or new to your type of product.
Outsourcing is much more common in larger businesses, but should be considered (as well as the use of asset finance and factoring) if you need large scale production but cannot afford the equipment or premises costs.
Some smaller businesses use homeworkers to produce goods in their own homes, and send them on to the company; this can be suitable where the product is simple to put together, but otherwise the process of training is usually too difficult to make it cost effective.
Can You Compete on Price?
Once you have an idea of the cost of your product, you need to look at whether it can compete with existing products on price and value for money.
If your product is one of a kind, price is likely to be much less of an issue than if you already have several competing products. When other similar products exist, you may have to sell with a smaller profit margin to keep your products competitive.
Article Index
- Introduction to Running a Successful Manufacturing Business
- Startup Finance for Manufacturing Businesses
- Further Startup Finance for Manufacturing Businesses
- Grants and Subsidies for Manufacturing Businesses
- Creating a Business Plan for Your Manufacturing Business
- Product Manufacturing, Research and Development, and Product Costs and Profit
- Outsourcing
- Unique Selling Points of Your Product
- Patents and Intellectual Property for Manufacturing Business
- Product Admin Distribution Stock Control in Manufacturing Business
- Finding Premises for a Manufacturing Business
- Trade Shows and Product Selling Methods for Manufacturing Businesses
- Exporting and Product Liability for Manufacturing Businesses
- Pricing, Marketing and Branding for a Manufacturing Business
- Useful Links on Running a Manufacturing Business
- Related Articles
