As the end of the financial year approaches for some businesses, many brands and producers of products are considering their financial plans for the 12-months ahead.
Potential capital expenditure (CapEx) on long-term investments such as equipment and facilities is often near the top of the agenda.
However, with the elevated cost of borrowing and increasing economic and global uncertainties, many brands are looking for ways to avoid significant financial commitments.
It’s perhaps unsurprising then that outsourcing elements of production is an increasingly common tactic for companies seeking to minimise CapEx – and the benefits are not only financial…
Why outsource elements of production?
As the name suggests, CapEx requires capital – money!
Whilst this can be from retained profits, it is more often through borrowing or investment. Both are long-term commitments which come with the financial pressure to pay back the loan or share profits and control with an investor.
Alternatively, Operational Expenditure (OpEx) is made up of the regular (often monthly) costs most businesses incur for necessities, such as rent, wages, materials and energy.
OpEx typically rises in proportion to activity and sales, making it easier to plan and sustain – and avoiding the long-term financial commitments of CapEx.
A contract manufacturer produces goods, parts or components on behalf of another company using its own facilities and equipment.
Cox Wokingham Plastics has over 80 years’ experience producing thermoformed, CNC machined and assembled plastic components used in many products – including trim panels and inserts for major bus and coach manufacturers.
Expanding production by purchasing new machinery and premises increases CapEx. Outsourcing to a contract manufacturer simply increases OpEx.
What are the benefits of outsourcing production?
As well as the reduction in need for long-term and costly CapEx, there are many more benefits from outsourcing elements of manufacturing:
1. Expand production faster
As contract manufacturers like Cox Wokingham Plastics already have the equipment, skilled workers and supply chain, the businesses who choose them can increase production much faster than developing these assets themselves.
2. Reduced financial risk
As the last decade has demonstrated more than most, demand can fluctuate.
The economy, new technology, changing trends, global politics and even war and disease can have a rapid impact on demand.
If a company devotes significant CapEx to a factory or equipment – but demand then drops – expensive assets can quickly become underutilised. However, the business still carries the fixed costs.
By outsourcing to a contract manufacturer like Cox Wokingham Plastics, production can be rapidly scaled to react to demand without financial risk.
3. Access to specialised expertise
This is perhaps the greatest advantage of outsourcing elements of production to a contract manufacturer like Cox Wokingham Plastics.
We can’t all be good at everything – and attempting to do so often dilutes a company’s success and diminishes its results!
Many contract manufacturers specialise in specific industries or processes such as electronics assembly, precision machining or – in Cox Wokingham Plastics’ case – thermoforming plastics.
This expertise typically leads to lower costs, higher quality and more dependable supply.
4. Focus on core competencies
Increasing production capabilities can be a distraction. Rather than product innovation and customer satisfaction, companies begin to focus internally on their processes and capabilities.
By outsourcing to a contract manufacturer and avoiding CapEx, companies can retain their focus on product design, brand management, improving distribution and growing sales.
5. Geographic flexibility
Contract manufacturers often exist in locations which allow companies to produce products closer to their customers – reducing shipping costs and avoiding tariffs or other trade barriers.
Supply chain disruption and geo-political turmoil have both led to a high proportion of manufacturing being brought back to the UK.
Manufacturers like Cox Wokingham Plastics are increasingly providing fellow UK brands with British-made components which not only improve quality and reduce risk but make their goods more attractive to UK customers.
Avoiding CapEx and getting the most from contract manufacturing
Outsourcing to a contract manufacturer allows companies to quickly expand production capacity, reduce capital costs and remain flexible – all whilst focusing on their core money-making activities.
At Cox Wokingham Plastics, we design, manufacture and assemble high-quality plastic products for companies across the UK – and further afield – using thermoforming and related processes.
We offer an end-to-end service. From an initial concept to full-scale production, assembly and distribution, we support clients who produce leading products in sectors including passenger transportation, aviation and medical equipment.
Like the manufacturing sector itself, we continue to develop and have invested over £2.0 million to date in equipment which has enabled us to become a highly trusted manufacturer and partner to those we support.
So, if you need dependable manufacturing of thermoformed plastic components and parts – which helps you avoid costly CapEx – we’d love to help.
Find out more about Cox Wokingham Plastics at: https://www.coxwokingham.com/