Manufacturing is an industry that requires a high degree of human competence and a large amount of working capital and capital expenditure. To help manage resources effectively, the leaders of these businesses often strategically decide to outsource functions and subcontract discrete units of work in the fight for increased profitability and risk management.
This is especially true as projects grow in complexity and scale because the demand for specialised skills and advanced technology rises.
This article discusses the benefits of subcontracting and how it can help manufacturing businesses manage risk, human resources and financial capital.
Cost Efficiency
The cost of human resources for a manufacturing business is high. Initially, it costs to advertise positions or use the services of a recruitment agency. Following the successful issuance of an employment contract, there are ongoing costs of salary, benefits, training, associated operational costs and equipment costs. Many of these can be mitigated through subcontracting, where costs and payment terms can be negotiated according to project requirements.
Subcontracting allows businesses to pay only for specific services when needed, eliminating the expenses associated with full-time employees and specialised equipment. For example, CMM inspection services can facilitate the accurate measuring of components using a specialist coordinate measuring machine that may not otherwise be available.
Purchasing specialist equipment and hiring labour for occasional specialist tasks is an unnecessary expense. Further, by outsourcing non-core activities, businesses can focus their internal resources on areas that directly contribute to their strategic goals, leading to improved productivity and better project outcomes.
Overall, this increase in cost efficiency is one of the benefits of subcontracting. It helps to reduce labour costs and provides flexibility in scaling the workforce according to project demands. Care should be taken when subcontracting to ensure that employment and tax laws do not determine an unwanted status that incurs an employee’s liability.
Access to Specialists
Subcontracting provides businesses with access to expertise that is not available in-house. This enables them to leverage niche skills and technology. In fields like engineering, manufacturing, and metrology, subcontractors bring deep, focused knowledge and experience, ensuring that complex projects and tasks outside the internal skillset are executed successfully.
This is particularly valuable in industries requiring exacting standards, where subcontractors can enhance the quality of work. Consider measuring within the aerospace sector. There may be times when non-standard measuring is needed. This could be during fault diagnostics or for complex geometries.
Many subcontractors invest in the technology that excels them in their field. By using these personnel in projects, manufacturing businesses benefit from the latest tools and techniques without significant capital investment. This improves project outcomes and keeps business at the forefront of technological advancements.
Specialised subcontractors also help foster innovation. Their expertise enables them to offer unique insights and solutions. Through collaboration, the manufacturer can learn and overcome challenges and improve processes. This increases their capability in the longer term and provides a more fluent working environment for subcontractors.
Subcontractors are a great asset when entering a new market sector. They facilitate work completion without committing to hiring new staff. Their experience can help a business define the human resource requirements and adapt to the new market.
Flexibility
As manufacturers progress in business, they will eventually need to adapt to changing customer requirements. This could be a change in the scope of operation or the volume of goods produced. One of the primary benefits of subcontracting is flexibility.
Businesses can engage subcontractors for specific tasks or projects without the commitment of hiring full-time staff. This flexibility is especially valuable in industries with fluctuating workloads, such as construction or engineering. It ensures a business can respond quickly to new opportunities or urgent requirements without overcommitting internal resources.
Project requirements can fall outside the scope of a preferred subcontractor. In this case, another contractor could be hired to complete the work. This responsibility could be the responsibility of the business, or the obligation could fall on the original subcontractor – depending on the terms of the contract. Again, this will mitigate the need to train people or lease specialised equipment.
Through this flexibility, businesses can focus on their core competencies and provide good customer service when high or different demands are placed upon them. This ensures agility and quality in a competitive trading environment.
Conclusion
Overall, subcontracting presents a strategic advantage for businesses seeking a competitive edge. Through cost efficiency and allocation, specialised expertise, and operational flexibility, companies can access expertise and equipment that helps them succeed in an ever-changing environment.
By harnessing the benefits of subcontractors, businesses can provide an agile service that offers customers a high degree of quality and satisfaction.