In-House or Contract: Which Manufacturing Model Is Best For New Businesses?

Deciding how you are going to manufacture your products is one of the first steps when starting a new business. You have two main options here; you can manage manufacturing yourself in-house, or you can outsource it to a third-party company.

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Some people prefer the idea of in-house manufacturing because it gives them more control. On the other hand, you’re taking on a lot of extra work and expenses, so it might not be the best choice. Ultimately, you have to decide what is right for your business and your goals. However, this list of pros and cons can help you decide what is right for you.

Pros of In-House Manufacturing

Potential for lower costs

Many people prefer to outsource because they feel like it is cheaper, but this might not always be the case. As long as you are hiring experienced contractors and purchasing materials directly, it might be cheaper to keep the manufacturing in-house. You’ll also have fewer expenses when it comes to transportation etc. However, if you outsource to a large company with existing connections and resources, this cost-saving will likely be minimal.

More control over the manufacturing process

In-house manufacturing gives you complete control over the production process. You have direct access to your factory and can ensure that everything is being done correctly. If anything goes wrong, you’ll know right away, so you can fix the issue. In addition, having complete control means that you don’t have to rely on contractors’ schedules and it might allow you to do things more quickly.

Cons of In-House Manufacturing

Quality control issues

When you outsource, you can put all of your faith in the third-party company. A contract manufacturing company will have a wealth of experience and knowledge, and they will guarantee that the quality of the products is always up to scratch. But if you are handling things yourself and you don’t really know what you are doing, the quality may suffer.

Massive set-up costs

Getting the necessary equipment and hiring the right people to manufacture products in-house takes a lot of money. Often, people will outsource because they simply don’t have the capital required to go about things properly internally. However, these costs may be recouped if you sell enough units to make it worth your while.

Extra work

Manufacturing your own products is a lot of work. You have to do everything from finding the suppliers to keeping track of all the orders and deliveries. In addition, you’ll need to handle shipping, quality control and more. Outsourcing can save you a lot of headaches because someone else is taking care of all these things for you. When you are trying to set up a new business and you already have a long list of things to do, adding manufacturing to your plate can quickly make things overwhelming.

In most cases, contract manufacturing is the best option for new businesses because you can avoid the extensive setup costs and the extra work, while also making sure that your products meet the right quality standards.

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