When your business first starts out, all of your manufacturing will be outsourced to an outside company. There’s no sense in building a manufacturing operation of your own when you can’t afford it and you don’t even know whether there is a market for your products. But once you start making some sales and seeing steady growth, it might be time to reconsider. If you’ve got the capital available and your sales volume is high enough to warrant it, building your own manufacturing operation instead of outsourcing has a lot of benefits.
First off, you can usually do it cheaper than outsourcing because you’re just paying the base costs for materials and labor without having to pay an extra fee to the manufacturer on top. Beyond that, you have full control over the operation which means that you can always be finding ways to make it more efficient and reduce your costs.
That level of control also allows you to create a better product. When you’re outsourcing to a manufacturing company, you’re just one of their many clients. Although they will work to create a good quality product, they’re not that invested in your company. But when you’re handling it yourself, you can build a close relationship with your manufacturing staff and work with them to find ways to improve your products and make them the best that they can be.
Those are all good reasons to consider building your own manufacturing operation, but be aware that it’s a big task to take on, especially if you don’t have that much manufacturing experience. However, it can be done if you plan properly and remember these important things.
Investment
If you’re looking to expand and build your own manufacturing operation, you’re going to need money. Some of that will come from the business but it’s unlikely that you’ll have enough money to cover it all, which means that you’ll need to approach investors. The cost of a new manufacturing facility is going to be high, so investors need to be sure that it will actually benefit the business and they’ll see good returns on their investment. That’s why you need to make sure that you create the perfect business pitch to convince them that it’s a worthwhile way to spend their money. Do a cost analysis so you can show the estimated amount of money that you’ll save by handling your own manufacturing. You should also include details of how you will use that extra money to push business growth in future. They will also want to know whether this new manufacturing operation will allow you to increase your output and whether you have enough customers to buy those products, so always include your sales projections for the next few years as well. If you walk into a pitch unprepared and you get tripped up by any difficult questions, you’re not likely to get the money that you need. So, always do your research beforehand and prepare for every eventuality.
Location
Once you’ve got the money that you need, the first step is to choose a location for your new manufacturing facility. Price is obviously a big factor and you’ll have a budget for what you can afford, but that’s not the only thing that you need to think about. You’ll need to consider how you’re going to distribute products once they’ve been manufactured. If you build a factory in the middle of nowhere and there aren’t good transport links, you’ll spend a lot more money on distribution and that will eat into the savings that you’ve made in manufacturing. However, the cost of buying the property is likely to be higher if you’re right in the centre of a city. It’s about finding a balance between the cost of the property and the ideal location.
You also need to be aware of any environmental issues in the area. You might be restricted in terms of what materials you can use and what emissions you can put out in certain areas, so always check with local authorities first.
Lastly, you have to make sure that you’re close enough to residential areas so that workers can get to your factory easily. If it’s at least an hour commute for anybody to get there, you’ll struggle to hire the best workers for your factory.
Construction
Now that you’ve found the ideal location, it’s time to start building, and that means finding the right contractors. People often underestimate just how many different people are required to set up a manufacturing facility. You’ll need general contractors to either put up the warehouse or repair an existing one so it’s fit to work in. Then you’re going to need a polished concrete contractor to maintain the floors and ensure that they’re safe for work. Once all of the main construction work is done, you’ll need to find plumbers and electricians as well. The quality of contractor that you pick is going to have a direct effect on the quality of your end product, so it’s vital that you choose well.
If you have any other contacts in the manufacturing industry, it’s worth asking them which contractors they used. Always ask to see examples of their previous work as well so you can check the quality. While construction is going on, maintain a close relationship with your contractor so you’re aware of any potential problems.
Equipment
Your equipment is the most important part of your manufacturing operation. Without good quality equipment, you can’t manufacture good quality products. You also need to consider the safety features on your machines so you can reduce the chance of any accidents. The biggest problem is that manufacturing equipment can be incredibly expensive. In some cases, you can save money by purchasing second hand machines but you’ve got be sure that they’re in good condition otherwise the quality of your product will suffer and your employees won’t be safe in the workplace.
Building your own manufacturing facility is very difficult and it requires a lot of investment, but if you can get it right, it’ll save you money and facilitate a lot of business growth.
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