Outsourcing

WHY OUTSOURCING WORKS FOR MEDIUM SIZED ENGINEERING COMPANIES.

Outsourcing has been recognized for many years as an important part in the strategy that large corporations have developed to ensure that they are able to compete globally. Now it’s becoming a serious consideration for small & medium enterprises. Many SME’s see their traditional business going off shore and consequently need to be able to develop their own success strategies, often demanding significant reductions in component costs. 

Outsourcing is frequently presented as a labour cost benefit, but that’s far from the full story. The erosion of manufacturing infrastructure within Europe over the last two decades has undermined the responsiveness and competitive ability of many established manufacturing companies.

Anyone who’s had the opportunity to visit the established Asian manufacturing centres of China, India, Korea or Taiwan will have a lasting impression of the myriad of micro businesses, with the family living over the shop. These businesses provide a vast array of specialist service, built on a mix of skill and selective capital investment. They frequently demonstrate the virtues of flexibility, low costs and high asset utilization, and ensure that the larger specialist exporting companies are surrounded by a responsive skilled customer focused infrastructure.

Frequently Asian exporting companies employ as few as 20 to 100 people, outsourcing many of their non core needs. By benefiting from the leverage that the network of mom & pop operations provides they eliminate a large part of the traditional European style overhead and are often capable of trading at a level well above their apparent size. 

It’s the often ignored structural factors combined with lower labour cost that provides the basis for ‘Genuine Cost Savings’ from outsourcing.