Risks Associated With Outsourcing Wholesale Manufacturing To The Third Parties

Third parties in wholesale business provide wholesale manufacturing solutions to the manufacturers and suppliers

. There are a lot of benefits of outsourcing manufacturing to the third parties and that is the reason every major logistics supplying company is now utilizing these benefits by outsourcing their manufacturing to the third party vendors.

But with so many advantages, there are also certain risks which the wholesale suppliers are likely to face while outsourcing their wholesale manufacturing to the third parties. These risks can be minimized if you select a right and reliable vendor with best outsourcing solutions. Let?s discuss these risks in detail.

Less customer contacts

If the wholesale suppliers outsource their manufacturing to the third parties there is always a risk of loosing customer contacts. This risk becomes massive when your third party is responsible to deliver the wholesale products directly to your customers. The lost customer contact can wipe your identity in the wholesale business industry as over the time your customers develop relationships with your vendors. So, third party vendor becomes capable of shifting your customers on to their businesses which is not healthy for your wholesale business. As a result, there always exists a risk that the third party vendor can become the competitor of a wholesale supplier in the long run.

Loss of internal capabilities and strengths

When the wholesale supplier outsources his manufacturing operations to the third party vendors there is always a risk that the third party vendor will increase his power significantly. By the time he may get familiar with your other techniques of designing and packing and get better level of aggregation in these activities. This can result in loss of your internal capabilities and strengths. So, it is always advisable to keep some portion of manufacturing in-house as otherwise the bargaining power of the third party becomes stronger over the time which can ruin your internal capabilities and starts discouraging your strengths.

No secrecy of wholesale business

When wholesale suppliers use third party vendor, a risk of no secrecy of the business arises automatically. There is sensitive and confidential data of a wholesale supplier?s business that should be kept secret like demand forecasts, competitors information etc. In some cases it becomes compulsory for wholesalers to disclose such data to their third party vendors. This can pose a danger to their survival especially when their third party vendor also provides manufacturing services to their competitors.

Less managerial control

When wholesalers outsource their manufacturing to the third parties, their managerial control is at risk. One of their operations becomes out of their control but on the other hand, if they keep their manufacturing in-house it is more easy and convenient for them to manage their employees and operations when they are in charge of their entire wholesale business.

High cost with no control over quality

There is always a danger of high cost in case of outsourcing manufacturing to the third parties. So the wholesale suppliers all the time keep themselves busy to keep their costs into their budgets in order to earn maximum profit. On the other hand, wholesalers are not sure of the quality of the wholesale products. If their finished products don?t maintain the quality standards and third party vendor is not ready to accept his fault, they repeat their manufacturing process with another vendor which becomes very costly for the wholesale suppliers.

by: Palmer Ortiz

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