Competitive pricing
Components are usually extremely cost-competitive because of the economies of scale. Large volumes, streamlined processes, and efficient supply chains especially in low-cost regions such as India make OEM parts cheaper than if they had been manufactured by the buying company itself. When a good quality product is priced at a low or reasonable price, it leads to increased sales, revenue, and profits.
Access to experts leads to good quality:
Several companies have been using the same manufacturing process for years. This makes them experts in that process. Take die casting. An experienced manufacturer will know the reasons for manufacturing defects such as low wall thickness and high die surface porosity and take steps to prevent these defects from cropping up. Companies that do not have vast experience with Original Equipment Manufacturers have will make mistakes that can be costly. Trial and error costs money so why reinvent the wheel, right?
Cut capital costs and protect yourself against fluctuations in operational costs:
By outsourcing manufacturing, companies save on capital costs spent to acquire machinery and factory space. That’s not all. The benefit with regard to operational expenses such as costs of raw materials, some of which can fluctuate over time, upsetting the best-planned budgets. While outsourcing to India, companies often lock in the per-unit cost of the product for a fixed period after negotiations with their supplier. This protects them against any fluctuations in the price of inputs such as raw material or even currency. So a company will know, say, that 100 units of their product will cost them $100 for the next 10 months. This aids planning and budgeting and prevents any nasty price-related surprises from popping up (except in extreme situations, which are rare). If you run your own manufacturing facility, these risks are all yours.
Focus on product development, marketing, and sales:
Outsourcing manufacturing allows companies to invest more resources into research and development for new products or finding new markets and customers for their existing products.
