Ask Aberdeen Group
Why have manufacturers turned to outsourcing?
By Staff -- Manufacturing Business Technology, 4/1/2005 12:00:00 AM
The need to reduce operating costs; improve return-on-investment (ROI); and more quickly enter and exit markets has made manufacturing outsourcing a strategic staple in electronics, automotive, and durables industries.
AberdeenGroup's Outsourced Manufacturing Strategies Benchmark Report indicates companies need to learn to be good at outsourcing. For example, a company with more than two years of experience in outsourcing is seven times as likely to be a best-in-class performer when it comes to working with contract manufacturers.
As to why companies outsource, the answer is clear: financial pressures continue to be the engine that drives manufacturing outsourcing (see graphic). Wall Street is squeezing manufacturers on one side by demanding better financial performance, and on the other, customers and competitors are driving product prices lower.
While it's perhaps surprising to find both best-in-class and more laggard competitors almost equally focused on cost reduction, Aberdeen indicates that best-in-class performers take a more strategic view as to the need for supply chain collaboration.
In that vein, the study found that simply integrating material planning and order fulfillment didn't have overarching strategic impact. However, 15 percent of the respondents integrated sales, product design, and supply chain as a means to true strategic relationships, resulting in less shopping for vendors and more emphasis on product innovation.
