Before you make an outsourcing decision, it’s important to understand the risk involved. This isn’t a fool-proof solution to labor costs or otherwise. This is a complex business decision that could make you a lot of money, reduce overall costs, and help you make your impact on the world. Here are the four risks you need to mitigate if you’re going to outsource manufacturing and/or fabrication:
Risk #1 – Supplier Negligence
It can be tough to trust someone halfway around the world to take care of your manufacturing, fabrication, or fulfillment needs, but that’s why it’s such a great business move—if you can pull it off. You must do your due diligence in investigating the supplier from all angles, including operations, labor, quality, leadership, and more. You want to spend the time to ensure that the supplier is everything they promise to be and more. Nothing is more satisfying than discovering you’ve made a poor business decision, and it’s someone else’s lack of follow-through that’s causing the disruption in your operations. You can mitigate this risk yourself by communicating multiple times, visiting the factory, and attempting to contact others who’ve used or are using the current factory you’re interested in hiring.
Risk #2 – Quality Assurance
Yes, you can save money outsourcing manufacturing and fabrication, but can you deliver the same quality compared to keeping everything in-house? As mentioned in the first risk, you need to do your due diligence. Not only can a decrease in quality ruin a brand, but it can disrupt operations, taking months to resolve. This is a real risk that you need to mitigate, if not remove entirely, from your business standards. When you decide to investigate, you can spend a few days to a few weeks observing the manufacturing process to ensure quality. This is much less expensive than discovering an entire production haul must be recalled due to quality assurance issues.
Risk #3 – Protect Intellectual Property
It’s true that information can be leaked, especially in countries around the world that have less stringent IP laws. However, you can mitigate when you research reputation, clients the potential outsourcing company has worked with, and other professionals who vouch for them. It’s all about minimizing risk and maximize benefits when it comes down to it.
Risk #4 – Brand Reputation Risk
It takes time to build a brand. The “overnight” success of brands usually take eight, 10, or 25-plus years. Your brand is no different, and your reputation, globally and locally, matter. When it comes to mitigating reputation risk, here are some ideas to consider:
- Transportation/Delivery – The time from order to delivery needs to be consistent. Does your outsource supplier keep within this timeframe or does it increase? Know this so you can work on adjusting customer expectations or find a way to get times back in the proper expectation window.
- Cultural Differences – Between countries, cultural differences can have an impact on brand identity. Some of the biggest brands in the world understand this, and they thrive no matter which country they enter into. Make sure your brand adjusts to the culture and heeds tradition, expectation, and standards while integrating.
- Sourcing Labor – It’s a rare conversation, but when it surfaces, where you outsource your work can be detrimental to brand. You need to make sure who you hire to manufacture, fabricate, or fulfill your products is up to humane standards and follows closely, if not exactly, the guidelines of your home country for labor laws and the like.
- Weather – This can be a factor in all of the above when it comes to reputation. The weather can delay orders, put your brand in a negative light due to how you handle certain situations or reveal the labor force you’re using isn’t as great as you thought.