October 29, 2019
Outsourcing is no longer reserved for major manufacturers that contract for millions of pieces a year. Today, 84% of companies report outsourcing their manufacturing tasks to some extent — when a seller or company is considering how to reduce supply chain costs, it’s usually one of the first solutions they evaluate. However, there are instances where outsourcing can cost more in the long run — not to mention the added quality concerns.
This type of manufacturing tends to occur in overseas factories where you may not have as much control and where mistakes result in costly errors that surpass the savings from outsourcing. It’s tempting to focus almost solely on the price per piece when choosing manufacturing partners, but the cost you should focus on is the total cost of the supply chain; price per piece is only a small part of that. Overlooking soft costs — like losses from wasted materials and man hours — in favor of unit price results in reduced quality and higher overall expenses. When an overseas manufacturer knows a partner is only focused on price per piece, they’re going to do whatever they can to reduce that number. That usually involves cutting out crucial steps like training, inspections, and error resolution.
Ultimately, this is a mistake, because through inspections, training, and accountability, you can reduce your supply chain costs while simultaneously improving quality with careful supply chain structuring.
Quality in manufacturing breeds cost savings — simply because managers don’t waste valuable time and resources correcting issues. However, having this much control over the manufacturing process requires leverage. This can be particularly challenging for small resellers or even brands that are entering a new market niche for the first time.
But when the total cost of the supply chain is considered, you can focus on processes that cut overall costs by improving quality. These include:
Workers can’t meet a standard if they’re not trained for it. It will be crucial to provide detailed instructions on the method for creating items, the standards, and the inspection process. Training should never be rushed, as a heavy focus on it at the creation of a supply chain will prevent time-consuming errors later. In addition, part of that training can include empowering the factory to take on some design responsibilities for items that are less consequential — like pins, socks, keychains, and other smaller accessories — while giving the final say on design to the creator.
The result? Major savings in the time and effort needed to create relatively low price point items are eliminated.
Ideally, 100% of the items manufactured will go through a stringent quality control process based on preset criteria. Any item that doesn’t meet these guidelines should be recorded with specific details on the reason it failed inspection. Information on what can be done to resolve the issue — like whether it needs a simple change or must be completely remade — should accompany the notes. If you can’t enforce this quality control policy, you might opt find a partner local to your factory partner who can.
The only way to ensure manufacturers adhere to strict creation and quality control standards is to establish clear accountability, making it clear that any errors are the factory’s responsibility to resolve. Without accountability, the manufacturer has no real reason to adhere to stringent standards.
The biggest barrier you may face in trying to implement these cost-saving options is simply lack of financial clout. Manufacturing is a volume business, so many factories won’t take orders unless they are large. That’s why it’s wise to work through an intermediary who has the leverage needed to demand certain standards.
Companies who are used to handling back-and-forth with a factory on behalf of a brand — like The/Studio — are excellent partners in developing your brand, because they typically have an existing relationship with that factory. These companies work based on the economy of scale, in that they aggregate the orders of multiple brands — meaning that they could do millions of dollars of business with a single factory, and can pass their savings along to you.
Partners like this have the “clout” needed to negotiate stringent terms that guarantee quality and reduce supply chain costs — which could take you years to create. Companies needing a low minimum order quantity (MOQ) from the start benefit from this the most, as their order is paired with hundreds of others’ giving them all the leverage of a high quantity order without the cost of being one.
Partnerships like this provide a way for small brands and those needing low MOQs to manage their outsourcing the same way the billion-dollar companies do. For instance, they can leverage The/Studio’s clout to demand higher quality through enhanced inspections, thorough training, and accountability without creating the “clout” themselves.
So when considering how supply chain costs can be reduced, “improving quality” is always the first, best answer. And not surprisingly, The/Studio is always the first, best solution.
At The/Studio, we understand how supply chain costs can be reduced through a focus on quality. We demand the strictest standards from the factories we work with and our clients enjoy the benefits. For more information, contact us, or get started designing your product today.