Choice of Industrial Strategy: Make or Buy for Manufacturing

How do you choose your industrial strategy?

Industrial innovation is an essential pillar for business growth. In this article, we explore the “Make or Buy” strategy in the manufacturing process, highlighting the benefits and challenges of this crucial decision for industrial innovation projects.

The importance of industrial innovation in today’s economic landscape

In an economic environment marked by rapid change and heightened consumer demands, industrial innovation is an essential necessity for any company seeking to maintain or even improve its market position. This innovation, which encompasses both the development of new products and the improvement of existing production processes, is a crucial vector of competitiveness and differentiation.

To remain competitive, companies must constantly invest in research and development (RD). This investment enables them not only to respond to changing customer needs with innovative solutions, but also to anticipate future trends. For example, integrating advanced technologies such as artificial intelligence, robotics, or the Internet of Things (IoT) into production lines can greatly improve operational efficiency and reduce costs, while increasing the quality of finished products.

What’s more, innovation enables companies to make their way in saturated, highly competitive markets by offering them the means to distinguish themselves through unique attributes. Whether by offering customized products or adopting greener production practices, industrial innovation helps companies attract and retain customers who are increasingly aware of environmental and technological issues.

Finally, the ability to innovate continuously and effectively is also crucial to attracting and retaining talent. Skilled professionals are generally attracted to companies that don’t just follow trends, but seek to stay ahead of them, offering a stimulating and dynamic environment.

So, in an industrial sector where competition is fierce and the pace of innovation is accelerating, companies that take a proactive, strategic approach to industrial innovation tend to perform better and stay relevant, securing sustainable growth and consolidating their reputation in the marketplace.

The advantages of the “Make or Buy” strategy for industrial manufacturing

The Make or Buy strategy is a critical decision for any company involved in industrial manufacturing. It directly affects the operational structure of production, significantly influencing several essential aspects of the business, namely profitability, flexibility and product quality. Deciding whether to produce in-house or outsource requires a detailed analysis of these multiple factors.

The “Buy” strategy,

or outsourcing, enables companies to take advantage of the specialized expertise and capabilities of subcontractors. This is particularly advantageous when the production processes required fall outside the company’s core area of competence, or when the investment in the necessary equipment and technology would be prohibitive. Outsourcing can lead to a considerable reduction in production costs, thanks to the economies of scale achieved by specialized suppliers. What’s more, it enables companies to remain agile, giving them the ability to adapt quickly to changing markets without the hindrance of heavy fixed production facilities.

The make-or-buy decision must therefore be taken after a scrupulous assessment of in-house competence, the cost of setting up in-house production versus outsourcing costs, quality requirements, as well as the strategic risks associated with outsourcing key components. The assessment should also take into account supply chain security, risk management, and sustainability of production practices among other criteria.

Make or Buy: what criteria should you take into account?

The decision to produce in-house or outsource, known as the “Make or Buy” strategy, is crucial for companies, especially in the context of industrial innovation. To reach a conclusion that supports the company’s long-term objectives, it is imperative to consider a series of varied and complex criteria. Here’s a look at each of these aspects:

• Internal capacity: First and foremost, the company needs to assess its current production capacity. This includes an analysis of the facilities, equipment, human resources and technical skills available. If the company already has the resources to develop and manufacture the new product cost-effectively, it would make sense to prioritize in-house production. This allows complete control over the production process and the quality of the final product.
• Costs: One of the most influential factors in the “Make or Buy” decision is the comparative cost of in-house production versus outsourcing. This includes not only direct manufacturing costs, but also indirect costs such as warehousing, logistics, equipment maintenance, and capital investment. A rigorous cost analysis will determine whether outsourcing offers a significant reduction in expenditure, without compromising quality or delivery times.
• Technical skills required: Some innovations require technical skills or technologies that the company does not possess in-house. In such cases, partnering with an external supplier who already has the expertise and infrastructure in place can be much faster and more cost-effective than developing these capabilities from scratch.
• Production lead times: The speed with which a product can be brought to market can be a determining factor, especially in highly competitive industries. Producing in-house could mean a slower start-up if new production lines have to be set up. Outsourcing can speed up this process, particularly if the supplier already has the capacity to respond quickly to demand.
• Availability of external suppliers: The reliability and availability of external suppliers is also crucial. It is necessary to ensure that potential suppliers can not only meet qualitative and quantitative requirements, but also that they do so in compliance with the company’s ethical and environmental standards.

In summary, to make an informed decision on “Make or Buy”, companies need to conduct a multi-dimensional analysis that goes beyond immediate costs and considers the long-term capabilities, risks, and strategic implications of each option. Each choice must be aligned with the company’s long-term vision and its ability to innovate and respond effectively to market demands.

How to optimize industrial manufacturing through strategic partnerships?

Strategic partnerships are the backbone of modern industrial manufacturing optimization. By collaborating with suppliers, subcontractors, and other key industry players with specific and complementary skills, companies can not only improve but also accelerate their production processes and product innovation. Here’s how these strategic collaborations can transform the face of manufacturing in industrial companies:

• Faster product development: Specialized partners bring with them knowledge and technologies that can significantly reduce the time needed to develop new products. Their expertise enables complex technical challenges to be overcome more quickly, avoiding the costly mistakes and lengthy delays that a company working alone might encounter.
• Lower production costs: partnerships enable companies to benefit from economies of scale and the division of specialized labor. Subcontractors and suppliers, thanks to their specialization, can often produce components or manage certain production phases at lower costs, resulting from their operational efficiency and ability to amortize costs over a larger volume.
• Quality enhancement: By partnering with experts in specific fields, companies ensure that every aspect of the product is handled by expert hands, thus improving the overall quality of the finished product. What’s more, these partners often possess certifications and quality standards that add an extra layer of credibility and quality assurance to production processes.
• Access to cutting-edge technologies and additional resources: Many suppliers are continually investing in the latest technologies to remain competitive in their field. By forming strategic partnerships, companies can access these technologies without having to make heavy investments themselves. This includes not only advanced production equipment and tools, but also innovative software and management systems.
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• Expand into new markets: Partners can also open doors to new geographic and demographic markets. With their local knowledge and established presence, they can help companies navigate foreign markets more easily, reducing barriers to entry such as regulations, culture and language differences.

By cultivating solid, mutually beneficial relationships with strategic partners, a company not only improves its day-to-day operations, but also builds a robust ecosystem capable of stimulating continuous innovation, growth and long-term sustainability of its industrial activities. These strategic alliances, if well managed, can become a significant competitive advantage in an increasingly competitive industrial landscape.

In conclusion, industrial innovation combined with a judiciously chosen Make or Buy strategy is crucial to improving competitiveness and stimulating business growth. The adoption of strategic partnerships also strengthens innovation capabilities and optimizes production. Together, these elements enable companies to adapt effectively to a dynamic market and guarantee sustainable success in a globalized industrial environment.

Altyor: Technological, Industrial and Quality Expertise at the Service of Your Innovation Projects

At Altyor, our technological expertise is the cornerstone of our approach to innovative product development. With nearly 30 years’ experience in electronics and mechanics, we have acquired unrivalled know-how in implementing the latest technological advances. Our teams are not only capable of fully understanding your projects, but also of analyzing their feasibility and determining the resources needed to bring them to fruition. What’s more, our commitment to cybersecurity, with a unit dedicated to monitoring and applying current standards, guarantees the security of your connected solutions.

As far as our industrial skills are concerned, we make a point of ensuring total control of the production process. This process comprises three key iterations before the product goes into series production:

01: ER (Engineering Run): During this phase, products are manufactured with production tooling and assembled according to assembly routines by engineers.

02: PR (Pilot Run): Products are assembled by operators on the assembly line, under the supervision of NPI (New Product Introduction) engineers.

03: SR (Serial Run): This stage marks the launch of production on a small quantity to test and validate the process before the product is put into series production. This iterative process guarantees the project’s maturity and ensures the quality and reliability of the final products.

DFMEA and PFMEA analyses are carried out to identify and control risks, while effective communication tools ensure smooth collaboration with our customers. Our pragmatic approach, backed by decades of experience and ISO 9001-certified processes, testifies to our commitment to quality and rigor.