The Make or Buy Decisions of the Manufacturing Industry - Spearhead Training

OXFORDSHIRE, ENGLAND, January 07, 2011

An increasing number of large companies are reflecting on their original abilities and strengths: instead of making everything themselves, they are concentrating on the focal point of their manufacturing and are buying in the other products according to Spearhead Training who are specialists in management training for the industry.

The reduction of companies' manufacturing depth inevitably increases the proportion of products brought in from outside. Which areas offer these opportunities and what qualifications do suppliers need to have?

A study of 50 large companies yielded the following reasons for outside purchasing (the companies asked were allowed to give several reasons):

Reason Raw materials Components Finished Product
Lower costs 68% 69% 64%
Swift availability 28% 9% 19%
Better quality 18% 6% 14%

The main argument for outside purchasing is still the fact that it costs less than in-house manufacturing. Swift availability plays an important role, particularly with raw materials. Better quality is also a consideration when it comes to buying in raw materials and finished products. For the purchase of component parts, a cheaper price is the only decisive factor.

Over the past ten years every industrialised nation has endeavoured to automize work-intensive manufacturing processes. Some manufacturing processes are more suited to automation than others, however.

The possibilities for automation in the clothing industry, for example, are relatively limited. 80% of the cost of a piece of clothing still goes on paying salaries, since automation has only successfully replaced a few manufacturing stages. The result is an increasing shift to low-wage countries.

Another cause of the labour-intensity of manufacturing processes is the short life-cycle of certain products. It is not worth investing in automating manufacturing processes with expensive special machinery since these machines would not pay for themselves because of the product's short life cycle.

These are processes which large industrial companies are increasingly farming out to external suppliers.

The following characteristics and skills are expected of a large industrial supplier:

Flexibility and a willingness to supply just-in-time.

Certified quality safeguard system.

Financial solidity and professional management.

A willingness to put oneself in the client's shoes and develop appropriate specialist knowledge.

The ability and willingness to offer a very good long-term price-performance ratio.

The ability to participate in the development of new products.

The creation of a quality check system in accordance with branch standards.

The ability and willingness to react to fluctuations in demand and other unforeseeable events.

Therefore, be wary of your clients' labour-intensive manufacturing processes, which cannot be automated because of the lack of technical possibilities and/or manufacturing processes which are not worth automating because the product's life cycle is too short.

Spearhead Training will provide top quality effective training designed to meet your objectives. We take pride in the fact that since setting up in 1981 we have aimed for constant quality improvements in everything that we undertake. We guarantee the quality of our work. Poor training is expensive whatever the price.