5 Reasons Manufacturers Outsource Assembly Work

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Hi Adam Ring with Innovative IDM. Now it’s a growing trend in industry for regional equipment manufactures to outsource all or part of their assembly work. Now there’s five primary reasons why a company might look at doing that.
The first one is the idea of variable versus fixed overhead. If you hire a bunch workers and have a large building you have quite a bit of fixed overhead because you got to pay for that rent every month, you got to pay the salaries of those employees, you got to pay for the benefits. So whether you have a lot of work to do or a little bit of work to do you still have to pay that fixed overhead.
Well if you outsource that assembly work then you are only paying for the work when you need it and as much as you need it. And so if you get a lot of work come in the door one day you can outsource that and another company basically like Innovative IDM could provide that assembly work for you. And if things slow down hey you don’t have to lay them off you don’t have to fire them you don’t have to pay unemployment you just simply don’t place more orders and when things get busy again you can place more orders with them.
Another point of why manufacturers outsource assembly work is you don’t have to go through the whole cycle of hiring, of training, and then firing, and then basically doing that over and over and over again in order to maintain a good staff of assembly techs. Also another really, really good reason why a lot of companies outsource their assembly work is they are just not in the business of doing certain things. Take this control panel for example. If you’re not in the business of building control panels, then why build it yourself? Why not outsource it to a company that is in the business, that’s experts at doing work just like this.
Now from an ownership perspective, it enables you by outsourcing all of the assembly work or a portion of it, in order to ship way more machines, so you’re not limited in the resources and space you have available. You can basically distribute that work out, and get more done in the same amount of time. And that in turn leads us to our last point, which improves cash flow so you basically get assemblies in, you don’t have to pay for them for typically 30 days after you get them in, and by that time you can get them installed in your machine, shipped that machine, and get that clock ticking to get paid by your customer. You also reduce the amount of inventory you have to carry so you don’t have that money tied up on the shelf in the form of parts. You can use it in the bank, where its working for you, and by outsourcing assembly work, you can utilize the just in time techniques, that enable you to get parts exactly when you need it so that it can literally be married to the machine when its ready for it and get it out the door as quick as possible.
So once again the 5 most common reasons companies outsource assembly work, the variable verses fixed overhead, not having to hire and train and fire assembly techs, just simply not in the business of doing certain kinds of work, you’re enabled to ship more machines in a given amount of time, and finally you get improved cash flow, reduced inventory, and able to get parts when you need them at the exact time when you need them. So if you’d like to learn more about outsourced assembly work, contact us innovativeidm.com we’re the home of the legendary customer experience.

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