Why Outsourcing is Hot in the Manufacturing Sector

During National Manufacturing Week in Chicago (February 23-26), the National Association of Manufacturers predicted US manufacturing production will increase by more than six percent this year. Headlines also declare that manufacturing growth in the UK is at a four-year high, and demand is strong in Australia. Consumer spending is on the rise; but so is the competition in the manufacturing arena.

“Companies are facing intense competitive pressures and being challenged to innovate, introduce new products, and expand into new markets,” states Romala Ravi, program manager, BPO Services, at IDC, a leading global market intelligence and advisory firm.

Outsourcing is increasingly the strategic business solution of choice to position manufacturing firms for growth. IDC, a subsidiary of IDG, an IT media, research, and event company, predicts significant worldwide growth in manufacturers’ adoption of business process outsourcing (BPO), as indicated in the figure below.

According to IDC, the top three growth areas for BPO in manufacturing are engineering (product design and development functions), logistics, and finance and accounting (F&A).

The goal of decreasing time to market is driving manufacturers to outsource engineering processes. “Today’s shorter product lifecycles, technological obsolescence, rapid technology advances, and the increasing complexity of design and engineering are challenges to time to market,” says Ravi.

An increasing reliance on a global supplier base, a shift toward offshore manufacturing, and the development of multiple channels to market impact the logistics and supply chain functions. IDC’s research indicates that the role of logistics has been greatly elevated. “Success,” says Ravi, “now depends not just on what companies produce or how they leverage low-cost production but, more importantly, on whether they can actually get the right goods to the customer on time and cost-effectively.”

Finally, F&A outsourcing is increasing in the manufacturing sector because many discrete manufacturing firms have grown through acquisitions; many also have production or operational units located in various regions around the world. “Outsourcing is an effective solution for consolidating their disparate accounting systems and gaining transparency in business units’ financial operations,” states Anna Danilenko, IDC’s Program Manager for Consulting and F&A BPO Services.

Outsourcing in the manufacturing sector achieves increased productivity, new revenue generation, cost reduction, and business transformation – all adding up to increased shareholder value.

Outsourcing Center, Kathleen Goolsby, Senior Writer

Recent Posts

  • Business Challenge
  • Contract
  • Function
  • Governance
  • IT Applications
  • IT Infrastructure & Applications
  • Multisourcing
  • Service Level Agreement (SLA)
  • Time to Market
  • Transition
  • Vendor Management

The Meat and Potatoes of Multi-Vendors

While the glamorous multi-vendor deals are the ones garnering most of the attention in outsourcing,…

26 years ago
  • Contract
  • Function
  • Governance
  • IT Applications
  • Multisourcing
  • Procurement
  • Service Level Agreement (SLA)
  • Vendor Management

Teaming: Making Multi-Vendor Relationships Work

Since the late 1980's, outsourcing vendors have relied on subcontractors to perform part of the…

26 years ago
  • Business Challenge
  • Communication
  • Contract
  • Energy & Utilities
  • Financial Services & Insurance
  • Governance
  • Industry
  • Manufacturing
  • Time to Market
  • Vendor Management

Lateral Leadership For Organizations That Are Outsourcing

American firms continue their rapid expansion of service and product outsourcing. Companies signed major new…

26 years ago
  • Business Challenge
  • Communication
  • Contract
  • Financial Services & Insurance
  • Governance
  • Healthcare
  • Industry
  • Manufacturing
  • Pricing
  • Service Level Agreement (SLA)
  • Time to Market
  • Vendor Management

The Many Sides of a Re-Do

Outsourcing's maturation as an industry has created a substantial body of experience in 'renegotiating' and…

26 years ago
  • Business Challenge
  • Contract
  • Cost Reduction & Avoidance
  • CPG/Retail
  • Financial Services & Insurance
  • Government
  • Industry
  • Pricing
  • Risk-Reward
  • Service Level Agreement (SLA)
  • Time to Market
  • Transition
  • Vendor Management

EURO: Ready or Not, Here It Comes

On January 1, 1999, eleven member countries of the European Union (EU) will adopt the…

26 years ago
  • Business Challenge
  • Cost Reduction & Avoidance
  • Financial Services & Insurance
  • Function
  • Global Service Delivery
  • Industry
  • IT Applications
  • Manufacturing
  • Procurement

The Rise of Global Business Process Outsourcing

Business Process Outsourcing (BPO) is paving the way for leading companies to compete globally and…

26 years ago