What Are the Benefits of Outsourcing Product Assembly?
The Covid-19 pandemic and other global economic issues have placed a significant burden on the automotive industry. According to experts, just the semiconductor chip shortage alone will cost automakers more than $200 billion.
With diminishing production capacity, vehicle manufacturers are naturally looking to increase profit margins. One place to look is the assembly line. Manufacturers are finding benefits in outsourcing assembly for specific components and subcomponents.
Read on to learn the value of product assembly outsourcing. Explore product assembly tips that demonstrate the benefits of this business best practice.
Product Assembly Explained
Vehicle manufacturers are responsible for putting the finishing touches on an end product. They bring in various components, subcomponents, and parts to complete one of their vehicles. This means that major brand names like BMW and Chrysler rely on suppliers for several steps in the manufacturing process.
One specific area that manufacturers like to outsource is component assembly. Here, suppliers produce critical components such as instrument panels. The finished parts are then shipped to the vehicle manufacturer.
There are various benefits to outsourcing out assembly. Vehicle manufacturers are looking for positive outcomes on cost, schedule, and performance when deciding to outsource. Continue reading for a brief explainer on each benefit of outsourcing:
Cost is a primary reason why end item manufacturers outsource assembly. There are a number of cost savings realized from outsourcing.
For starters, manufacturers are benefitting from the assembly company’s learning curve. As laborers gain assembly experience, they grow more efficiently. They complete the assembly in a shorter period of time which reduces direct labor costs.
Manufacturers also get to reap the benefits of competition. They put out an assembly job to bidders and award the contract to the company providing the best value.
These companies have processes in place to control costs. For instance, the best assembly companies have mechanisms in place to save on warehouse and carrying costs.
Outsourcing affords the vehicle manufacturing company flexibility on resources. This applies to both human resources and special tooling.
When a company decides to perform assembly internally, they need to invest in equipment and special tooling to complete the job. Deciding to outsource means that the company no longer needs to invest in this equipment or find industrial space for it.
Also, outsourcing allows a vehicle manufacturer to stay lean from an employee standpoint. They can now maintain a smaller workforce instead of investing in long-term employees.
Schedule and Quality
Outsourcing often results in schedule improvements. Assemblers are further down the learning curve and complete tasks more expeditiously.
Vehicle manufacturers also rely on the assembly company’s technical expertise. Years of experience producing parts lead to high-quality components that make the vehicle a better product.
Summarizing Product Assembly Outsourcing Benefits
There is a clear case in favor of outsourcing your assembly needs. Outsourcing provides the vehicle manufacturer with cost and schedule improvements. This decision also leads to high-quality components that satisfy the customer.
So, if you are interested in product assembly outsourcing, contact us today to learn more.