Manufacturers Turn To ‘outsourcing’ To Combat Economic Uncertainty
- Published: Tuesday, 21 January 2020 13:58
An increasing number of manufacturers are looking to mitigate their risk by choosing to use strategic outsourcing according to one industry boss.
Tony Hauge, CEO of PP Control & Automation, believes recent uncertainty, Brexit and global trade wars are making firms reassess how they balance short-term term pain with the medium and longer-term picture and how they can best manage capacity and inventory whilst protecting their cash.
He warns that if companies react to the uncertainty by cutting too deep, too soon it can remove their ability to respond when things start to pick up, leaving them unable to meet existing or new customer demand.
“Placing this risk with a strategic outsourcing partner is a viable way of avoiding ‘Russian roulette’ when it comes to the future of your business,” explained Tony Hague.
“We currently work with over 25 world class companies on this basis, spanning over 12 different markets. Together, we have developed relationships that allow our clients to focus on their core competencies, leaving us us to take care of non-core manufacturing processes.”
He continued: “The customer benefits from reduced operating costs, the elimination of unnecessary stock and reduction in work in progress and, importantly, improved manufacturing lead times.
“This is massively important at the moment. Quite often in these volatile times, sales order lead time can be the difference between an order being won or lost for a machine builder.
“They also gain immediate ‘agility’ with the ability to reduce and increase volumes at the press of a button - ideal in this current economic climate.”
PP Control & Automation has seen demand for its strategic manufacturing outsourcing solutions rise significantly, with the West Midlands-based firm increasing annual sales to £26m in 2019 - a record year.
The company, which employs more than 220 people at its 5,500 sq metre facility, delivers added value design, engineering and complex assembly to clients involved in aerospace, food processing, machine tools, packaging, printing and advanced technologies.
With renewed financial backing from the Canadian-based investor, PP C&A has added £3m of turnover over the last twelve months and is now exploring the possibility of future acquisitions and a joint venture to establish a manufacturing footprint in North America.
“In our world, there are few costs for the customer to pick up when establishing a strategic outsourcing partnership. In fact, once an agreement is in place, we will take on the majority of the up-front costs, investing time and money into production engineering, setting-up test jigs/rigs and taking on supply-chain management,” added Tony.
“Now, imagine if they didn’t pursue an outsourcing partner? If sales increased rapidly they would have to invest in new machines/buildings or costly sub-contract labour to cope with the peaks. When times are tough and volumes drop, this could well turn into redundancies and capital equipment lying idle.”
He concluded: “Whilst strategic outsourcing is a great way of mitigating risk, it shouldn’t be viewed as a negative measure. In fact, it is actually the opposite.
“By managing your costs, production capability and retaining the skills you need, you will create a platform that allows you to immediately take advantage of increased sales and market share once confidence and demand returns.”