Outsourcing vs in-house: why it’s time to bring in-house production in from the cold

on 01 March, 2016

In 2014, we invested £1m in a new production mill at our headquarters in North Kent. The decision to commit so large a sum wasn’t easy, particularly on the back of a difficult recession.

Our decision wasn’t unique; bringing production in-house is becoming increasingly common. So just what is driving this trend?

Flexibility and responsiveness

A key driver of our decision to bring production back in-house was our desire to have more control over our business.

Being able to respond quickly and effectively to changing circumstances is important to any business. But when you outsource production, your ability to innovate and respond quickly to market trends is restricted by the capacity and willingness of your supplier.

Taking back control of production has meant we now control our supply chain, so we’re better able to meet customers’ changing demands.

This aligns perfectly with our company’s heritage: we have always prided ourselves on being able to take the right decisions at the right time.

Cost control

An important driver of outsourcing for most firms is the potential to save money. However, while the direct purchase price of an outsourced function might be attractive, there are many hidden costs associated with finding and managing a supplier, meaning that the overall transaction cost is often far higher than the headline figure.

Once you have outsourced, it can be difficult to bring those functions back in-house because of the large upfront cost – particularly when you’re talking about production capabilities. But if you can look beyond the initial investment, the longer-term savings generated by your ability to directly control your costs can be significant.

Quality control

Manufacturing in-house gives you far greater control over the quality of your products than is possible to have with an outsourced supplier.

Throughout our 134-year history, quality has always been our number one priority. Before we built our own mill, we had become increasingly dissatisfied with our then suppliers, so the prospect of being able to fully manage quality was an important driver. By investing in state-of-the-art machinery, we’ve managed to make our production processes a source of our competitive advantage.

The decision to bring production in-house should not be taken lightly; it requires significant investment in terms of both money and people. However, it has certainly proved to be right for us.

Emma Lovett is marketing executive at Alsford Timber.

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