Member Article

The real opportunity for the outsourcing model

Why the economic downturn is a real opportunity for the outsourcing model - Willie MacKinnon from Plexus explains how savvy manufacturing companies managed to grow their business in recession times

After the latest GDP figures were announced in April this year, a sigh of relief went through Britain’s executive boardrooms: The British economy rose by 0.3% and we narrowly escaped a triple-dip recession.

The message to UK companies is clear, whilst the latest developments are encouraging, and the worst part of the economic downturn might lie behind us, make no mistake: there’s a long and steep road ahead to recover from the impact the recession had on our economy.

Interestingly, while many industries have been hit hard by the effects of the downturn others surprised the market by demonstrating growth. These positive results have not been achieved despite the recession, but to some extent because of it.

A prime example of how to beat the doom and gloom scenario comes from the allegedly crisis-stricken engineering and manufacturing industry, where the downturn has created a real opportunity for outsourcing services companies. When there is uncertainty, people start to focus on their core competencies and what they should be engaged in going forward. In keeping with the motto: Do what you do best, outsource the rest.

With regards to manufacturing, this is particularly true, as many companies look hard at whether this is one of the core competencies which they need to keep in-house. The same could apply to product design or sustaining solutions. For them, it’s crucial to get the product for the right price and to the market at the right time, so if they have a partner that can achieve exactly that for them, it takes unnecessary internal expenditure away and essentially gives them a variable cost structure.

For example, if a company is manufacturing internally and the volume projections decrease that subsequently becomes an internal problem. When the manufacturing of the same product is outsourced, it becomes the outsourcing partners issue. However, the outsourcing partner typically has a broad portfolio of products and customers that provides a buffer and fully utilises equipment and resources to the benefit of all.

Going far beyond the engineering and manufacturing industry, the success of the outsourcing model has seen a revival over the last few years and it will likely continue to remain an integral part of companies’ strategies to streamline their business operations.

The recent expansion of our local design and manufacturing facilities in Livingston, Scotland, proves that British companies are not only making it through the recession, but by pursuing the right business approach they are growing their business too.

This was posted in Bdaily's Members' News section by Plexus .