Should I setup my own Factory?

Manufacture Ourselves or Outsource?

We have been meeting with entrepreneurs with up and coming brands, with a lot of them deciding to move into a pathway of going into manufacturing. Unknown to them this pursuit unless strategic has a lot of hidden costs.

What do I mean by hidden costs?

Pursuing a factory involves heavy capital investment and requires management of staff. Hidden costs include certification, renovations to get the required certifications and a perpetual rehiring cycle of production level staff.

Usually with most up and coming brands in Malaysia the quantity of sales is unable to sustain the factory continuously. So every hour the machines are not running they manufacturing division is losing revenue, naturally you will progress into OEM to sustain the operation.

Quantity (Volume of Scale) & Cost Control.

A major misconception is that by owning the factory we are able to drive costs lower, majority of the cases with exception of massive volumes which can continously sustain the factory are the exception.

Most times manufacturing up-to 500,000+ units per order contract manufacturers are extremely competitive with factories at major quantities looking at 2 – 5% contract values as their margin.

Lower quantities ranges from 20% – 50%.

But still consider a factory?!! Why are suggesting a paradox?

A small factory to experiment and create test market products should be considered running manual machines. This will help accelerate commercialization of concepts to market with minimum effort. Cost of goods are extremely high due to fix operation cost and low quantity of production, regardless on this junction the purpose of this is to see market acceptance.[/vc_column_text][/vc_column][/vc_row]