2 minute read
A common misconception in the tank manufacturing industry is that building your own component parts is cheaper than outsourcing them. In fact, there are many ways in which producing your own tank components could be losing you money.
Here are three ways your profits can increase by outsourcing your tank components.
Decreased Variable Cost Risk
There are many cost variances involved when you manufacture stainless steel tanks. " A cost variance is the difference between an item's actual amount and its budgeted, standard, or planned amount," states John Paulson. Variances may occur from each of these three manufacturing costs:
- Direct materials
- Direct labor
- Manufacturing overhead
Instead of allocating the exact cost for each of these factors, manufacturers will determine a standard cost—the expected amount to be paid. Even so, the manufacturer still pays the exact cost, and the discrepancy between the two becomes a cost variance.
If the cost comes out to be less than was estimated, there is a favorable cost variance. If the cost results come out to be higher than estimated, there is an unfavorable cost variance.
Labor can be inconsistent and hard to price because it depends on work efficiency, priorities, and scheduling. Material prices also fluctuate depending on the current market and other factors.
Trying to price these objectives may result in going over or under budget on a specific project. Your company will directly absorb all those variances by attempting to manufacture your components in-house. Choosing to outsource your component parts means no variable cost risk.
Efficient Labor Hours
In the world of manufacturing, timeliness equals profit. If you are creating your own tank components, this requires many labor hours.
By choosing to buy your component items you are able to open up the capacity of your company. Letting a trusted partner manufacture your tank components allows for freedom and flexibility.
Your company can put workers where they are able to focus on vessel assembly, the heart of your business. Your company can prioritize special projects, boosting efficiency and profitability.
Outsourcing tank components can expand the production capabilities of your company. A lost opportunity to expand upon your product offerings equals lost sales. And nobody likes to lose a sale because they can't deliver the product feature a customer needs.
By partnering with a company to produce your components, you can broaden the base of products you are able to offer to your customers.
Perhaps you want to build larger vessels that may be beyond the capacity of your rolls or presses. Purchasing your tank parts can help by giving you access to complex systems or processes without having to invest capital funds.
Or maybe you wish to utilize welding methods or code stamps your shop is not certified for. Purchasing tank components can provide you these benefits without going through complex certification efforts.
Becoming more versatile in your offerings will be attractive to customers. Whatever your goals, expanding upon these capabilities can help you increase your customer base and become more profitable. Future prospects may even decide to purchase from your company for this very reason.
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