Metal fabrication process involves the production of metal tools and structures by machining, shaping and assembling steps. Companies often seek unassembled metal parts for their applications. They have a limited amount of working capital such as machines, robots, furnaces, etc. to produce goods and keep their business running. In the case of new projects or business opportunities emerged, additional workload and workforce might be needed. Producer may not respond this demand and lose potential income when the workload exceeds the limits of existing labour and capital. This is where the idea of outsourcing comes into play. In this blog post, different aspects of outsourcing regarding the metal fabrication business will be discussed.
What is outsourcing?
Outsourcing is the act of hiring an outside company to create goods and services. In lieu of company’s own workforce, an outside party does all the necessary duties regarding the creation of these goods and services and get paid. This business practice became popular due to its unique advantages for companies. Besides these advantages, this strategy brought noteworthy amount of controversy in many countries around the world. Both of these issues will be discussed later in this post. As we go back and look at the origins, history of outsourcing does not depend on long time ago: It was first seen in 1989 and usage of this strategy had been progressively increased in 1990s (1).
Why to outsource?
Outsourcing offers huge benefits for companies who have limited resources and possibilities. It enables them not to worry about the fabrication process and quality management of materials while focusing on other areas. A company outsourcing materials needs neither to invest heavily on equipment nor to maintain the workforce. Also, outsourcing companies usually specialize on one thing. Infrastructure of those are suitable for obtaining the best efficiency numbers possible in production. It enables them to create goods and services for much lower expenses. Therefore, the cost of production decrease significantly. As a result, it can be said that outsourcing is a brilliant cost-cutting business strategy.
There has been some controversy about the negative effects of outsourcing. One of these is the decrease in domestic employment. However, people who supports outsourcing argue that it creates incentives for companies to effectively allocate the resources and helps to preserve the natural characteristics of free market economy (1).
Outsourcing in metal fabrication
Metal fabrication business requires expertise and investment. First of all, company needs to obtain raw materials, and in that case, owning mines and smelters is costly. Even if the company buys raw material directly from manufacturer, processing these raw materials requires investment in capital. Also there is a need for workforce to operate machinery and an engineering team to design the product and process. When all of these issues add up, feasibility of in-house fabrication begins to fade away (2). This is the main reason for preferring outsourcing strategy in metal fabrication. One other reason is that when a company hires an outsourcing company specialized in metal fabrication, they take advantage from their years of experience and the quality of fabricated parts is ensured. In this way, the company having no worries about the quality of parts can focus better on the other aspects of their business. Time, money and resources are saved. The most crucial point here is that how to choose the right outsourcing company. There are lots of providers with different pros and cons in the market. A healthy and efficient business relationship is inevitable as long as the company makes considerations thoroughly.
How to choose the right metal fabrication company?
Choosing the right option might be tricky, because there are many variables when it comes to depend on another party. While cost is the most prominent one among them all; quality, experience and reputability of the manufacturer are some of the non-negligible factors in this regard. Following questions and statements can be pointed out in order to choose the right company for outsourcing metal fabrication (3).
What are your expectations? Some companies produce metal parts in large volumes for lower costs whereas some of them keep the amount low and focus on customizing the products according to the desire of customer. To clarify this with an example, let’s say that your company builds motorhomes. You have decided to outsource the aluminium window frames for your product. As long as you do not need to put a window frame with special customizable design, there exists no significant drawback in choosing a company producing aluminium frames in large amounts. In other case, when your ordered metal part is designed peculiarly, it would be better to consider the companies offering wide range of customization options.
What are they capable of? It is important to know the production capacity and technological possibilities of the outsourcing company. Lack of technological infrastructure may affect the quality of end product. Also they may not be able to supply enough product to fulfil your needs. Furthermore, parties should come to an agreement on the minimum amount of orders. This is an important issue for the sake of both companies. Therefore, a proper investigation must be done on possible business partners before negotiating.
Which company for which material? Beside their capability and capacity, it is crucial to know which company is specialized in which material. For example, some companies are best known for their experience in steel parts fabrication while some others are specialized in aluminium parts.
Designing the product. Some metal fabrication companies are able to give designing services with production. It can be considered as a benefit if you need it because it means one less thing to worry about. No matter the company presents this service or not, important thing is that you are on the same page with them through the whole process.
History and experience. An inquisition must be done on possible business partners about their history. A costly mistake is the last thing your company wants. It would be beneficial to ask questions to outsourcing metal fabricator about their past projects, customers, mistakes or errors and how they have dealt with them.