Outsourcing is being used more and more widely in many industries. For years, companies from the automotive sector have also been manufacturing with the help of external entities – it is worth learning about the advantages and key features of this model.
Manufacturing accounts for a large proportion of the operating costs of companies in the automotive sector. Maintaining and developing your own infrastructure can be unprofitable for many reasons. Outsourced manufacturing comes to the rescue, as it makes it possible to significantly reduce expenses while maintaining an adequate level of quality.
What is outsourced manufacturing?
Outsourced manufacturing involves contracting certain production processes to an outside provider. In this model, the entire responsibility for the creation, delivery and certification of a component is taken over by an external company. Ultimately, it is an entity with extensive experience and ready-made infrastructure, which translates into a high quality of manufactured products. Many companies from the automotive industry choose this approach. In this sector, outsourcing has a very rich tradition, and the first steps in this direction can be seen at the very beginning of the development of the automotive industry.
Outsourcing has been with the automotive market for a long time
Henry Ford, who revolutionised the approach to car manufacturing and is one of the icons of the automotive market, stated the following almost a century ago: "If there is a thing that we cannot do more efficiently, cheaper or better than a competition, there is no point in doing it further – we should hire the one who does it better than we do." Although this thought was formulated quite long ago, when automotive was still a fledgling industry, it is still fully relevant. It is also a perfect description of the essence of outsourcing – the appropriate assignment of processes to the entities that will deal with them best.
The added value of this approach is, above all, a reduction in production costs. However, this is not the only benefit. It is worth taking into account that outsourcing is mostly done by brands which invest not only in optimising processes, but also in innovation. Therefore, it is an important element of competition for brands that are able to achieve minimum production costs, but do not have access to appropriate knowledge in certain areas.
How do you outsource manufacturing? What should you look for in a contractor?
What we should expect from a potential business partner to whom we want to outsource is, above all, extensive know-how in the area of production. After all, this entity will be responsible for the entire process leading to the delivery of finished components. Therefore, current work and production capabilities, i.e. infrastructure and personnel, are of key importance. Experience is also important, as well as knowledge of the legal standards in the given market area, which will make it easier to meet certification and approval requirements.
When choosing a contractor to handle manufacturing, it is also worth paying attention to the solutions used. The latest technologies, such as Industry 4.0 and 3D scanning, as well as innovations in the logistics sector, are becoming increasingly important. The use of new methods makes it possible to optimise production to an even greater extent. Work culture and consideration for the environment are also important. In order to achieve social responsibility objectives, it is worth directing your manufacturing to companies that respect employees’ rights and genuinely protect their interests, as well as focusing on environmentally friendly technological processes.
How much does outsourcing manufacturing cost?
The costs of manufacturing outsourcing services are highly variable. Many factors are relevant here, including:
- the country in which the counterparty has its infrastructure
- the cost of delivering finished products from the production line to the outsourcing company's warehouse
- types of services
- technologies used
These are just a few of the many variables that can affect the final cost. Calculating the profitability of such a solution usually takes place on the basis of negotiations: the contracting company presents its expectations, and the counterparty prepares a cost estimate.
When does outsourcing bring benefits?
Outsourcing gives more added value than just reducing costs. Among other things, it can also be an opportunity to create a more flexible supply chain. When the demand for a component changes, production capacities need to be adapted to market needs. Outsourcing significantly facilitates the management of this issue, thus allowing a quick response to the requirements of the current situation.
One of the most common forms of this model of cooperation is short-term outsourcing, which constitutes 30-40%. The least popular variant is cyclical outsourcing. It is worth remembering that even in the case of the first option, which by definition concerns short-term activities, it is possible to create relations based on trust. The use of modern technologies and the support of entities with a good work culture makes it possible to secure the resources of a dependable company to execute given solutions, which translates into better production results.
The experience of the manufacturing entity can also be an additional added value. Outsourcing companies have many years of extensive, comprehensive knowledge, built up through cooperation with many brands in the market. The emphasis on innovation and employing staff trained to meet the current needs of the automotive sector, in turn, means that they can be even more successful in offering new solutions.
Outsourcing with Knauf Automotive – why you should choose us
As Knauf Automotive, we have extensive experience cooperating in the automotive sector. We have been fulfilling orders from the largest players in the automotive market for years. Our production facilities are located in eight countries, enabling us to offer flexible and effective support at every stage of developing cutting-edge solutions for the automotive industry – from project development to manufacturing and implementation. We support the development of the European market by optimising product costs and increasing product value at the same time. In the production process we use automation and the latest solutions, such as 3D printing and scanning. We specialise in producing parts from EPS and EPP materials, as well as injection-moulded components. The high quality of our solutions is not only the result of extensive know-how and a well-developed infrastructure, but also of the right approach to cooperation. We support our partners in implementing the principles of socially responsible business. Honesty and loyalty are important to us. Thanks to this, we provide reliable and effective support at many stages of component production.