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In-house vs. outsourced custom cable assembly: an honest cost analysis

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As a custom cable and wire assembly manufacturer, we know that choosing whether to outsource your facility’s cable production is both difficult and consequential. We freely admit that while outsourcing cable assembly can make a big difference for a lot of manufacturers, it isn’t the most sensible route for every facility. In this article, we’ve taken an honest look at important considerations when determining the true cost of producing cable in-house and outsourcing cable manufacture to a dedicated partner.

To accurately evaluate a quote from a third-party supplier, you need a complete understanding of the costs of producing cables in-house, as well as the cost of working with a partner who isn’t a good fit for you. There’s a chasm between sending away part of your production to take it off your hands and partnering with a right-fit custom cable supplier, and the differences come back to you as additional costs. 

The stakes are high: the wrong decision (or indecision) could result in unnecessary labor expenditure, a misused workforce, project management headaches, production downtime or even product failure. The three most important cost considerations when choosing whether to outsource cable assembly are:

  • Labor cost
  • Production efficiency
  • Cable quality

What labor is really costing you

Cable assembly can be tedious, and it may be bogging down your team. It’s worth assessing what your true labor cost is to meet your own cable needs in-house. 

You may find that you’re able to build cable affordably compared to what you’re seeing from third party vendors. 

Alternatively, upon thorough inspection, you may find you’re paying more than you thought. If your cable assembly is being performed by team members whose specialties lie elsewhere, consider the opportunity cost of the time spent outside their area of expertise.

For example, a speaker manufacturer that was assembling all their own wire harnesses found that, as a team, they were spending 60 hours a week on harness assembly, at a rate of one full hour per speaker built. When they approached the cost of outsourcing, they had a clear idea of the labor cost of in-house assembly for comparison and found that their in-house expenditure far outweighed the cost of using a third-party supplier, even for a product customized to their needs.

Your people are your most valuable asset – allocating their time to cable assembly carries cost beyond their wages. Since choosing to outsource their wire harness manufacture, the speaker company has been able to dedicate the time of their employees more effectively to save 60 hours of labor opportunity cost per week.

In addition, their custom wire harness vendor is structured to produce at scale, so the speaker company can ramp up production without being limited by their own wire assembly capacity.

The labor involved in outsourcing

Working with a third party doesn’t eliminate your labor costs entirely, and the amount of labor required to outsource cable production will depend on the supplier. Is the vendor difficult to get in touch with? Do you trust the quality of their work? Will you need your team to perform additional quality checks? Your answers to those questions will vary by vendor and point toward your labor cost of outsourcing.

The cost of inefficiency and where to find it

Inefficiencies are the plague to operations costs, and efficiency starts with saving time.  A surefire way to increase your margins is to decrease the time it takes you to build your product. Therefore, time needs to be a key cost-consideration when determining whether to outsource cable assembly.

If you aren’t a fully outfitted cable manufacturer, it’s likely that your process could be producing admittedly high quality cables via outdated and costly means. A specialized cabling partner would have access not only to trained experts but machinery allowing for increased speed and precision by virtue of automating processes like wire cutting, crimp terminal application and jacket stripping.

The equipment required to make automation a part of your in-house cable assembly is cost-prohibitive to purchase and maintain unless you’re producing cable at extreme volumes. A specialized custom cable vendor, however, will be incentivized to continuously upgrade their operational infrastructure to drive their own costs down and pass on better prices to their customers.

For example, a moisture-monitoring company building roof-leak sensors was building out all their cable needs in-house. For their employees, this meant assembling the cable by hand because they didn’t have any of the advanced tools that a specialized cabling partner would have. As a result, their production timeline was suffering. Cable components like wire harnesses and PCB connectors aren’t the kinds of parts that can be slapped on a product at the end of the line – if production halts to wait for cable, your operational costs are ballooning.

At first, this inefficiency hid behind the company’s low production volume – it wasn’t until they grew that they started to feel its true effects. They should have been creating economies of scale but were held back by a cable assembly process that involved their employees sitting around attaching connectors by hand. They found that outsourcing cable assembly to a dedicated partner smoothed over production inefficiencies and allowed them to scale profitably.

How choosing the wrong partner could cost you

Your production efficiency won’t be affected equally by all third-party vendors. Outsourcing internationally may invite supply chain delays that come back in the form of production efficiency costs. Some suppliers may have efficient operations in their own right but communicate poorly with their customers, leading to clunky relationships that affect your production and waste your project’s time. Some vendors have unpredictable lead times or poor track records when it comes to on-time delivery. The perfect partner for you will help make your process smoother and be built to scale with you as your business grows.

How you pay for quality, now or eventually

Chances are, your team’s expertise does not rest in cable manufacturing. You may produce excellent cables for your products, and you likely have plenty of quality control measures in place, but even slight drops in performance or integrity could cost you valuable business in the long run. 

An expert cable partner knows eliminating risk of product failure is the best way to preserve cable quality and save cost. Cable performance shouldn’t be sacrificed by outsourcing to untrustworthy vendors who risk performance and integrity for the sake of cost – product failure is far more expensive than functional cable (as it starts a domino effect that can involve work orders, machine downtime and unproductive diagnostic labor). Moreover, if your employees are inexperienced at cable assembly and working with sub-optimal tools, you could be inviting similar risks by keeping production in-house.

Not all custom cable assemblers are created equal, but partnering with the right people can provide definite boosts in integrity and performance by putting your cable in front of specialized experts with highly functional equipment. A key factor, if shopping around for cable assemblers, is how they plan to work with you on quality control. Some worthwhile considerations are:

  • What quality control measures the supplier takes on their end and how those fit with your own process
  • What their quality management system looks like and what accompanying documentation they provide
  • Whether they offer a satisfaction guarantee

You may also feel comfortable about the quality of the work that your team has been doing but worry about a new product in development. Remember that moisture monitoring company? As they continue to grow and develop new products, they have a partner that they trust, so that quality is a given, no matter the project. When they need a UL listed or recognized component, they know their partner can navigate those certifications and make recommendations based on cost, performance and fit.

That same custom cable supplier has been able to reduce costs for the moisture monitoring company by understanding the goals and needs of their projects and making recommendations when wiring is overdesigned or the original design asks for unnecessarily expensive components. Custom cable specialists can often recommend areas where you could design for greater manufacturability, reduced cost or even increased performance.

Avoiding risks to quality by outsourcing

It can seem difficult to gauge differences in the custom cable quality that vendors are offering before beginning an engagement with them. The easiest tells that a supplier’s cable might not meet your standards are:

  • They seem uninterested in the application of the cable or the greater machine the cable will be supporting
  • Their facility doesn’t meet certification specifications
  • They refuse to work with industry-recognized components regardless of your design and are willing to risk the performance or integrity of your product to lower their costs

If you find a third-party supplier who cares both about the quality of cables they produce and the quality of the project you’re using them for, then that’s a great sign. If they specialize in custom cables, they should want to talk about application – they’ll know how to understand your needs from there.

Still have questions?

Working through these considerations in detail should give you a clearer idea of whether outsourcing makes sense for your project. But determining that a partner would be helpful is just the first step, and it’s important to choose a partner that will make sense for your business in the long term. There’s conceptual difference between “outsourcing” part of your process to take it off your plate and “partnering” with a specialist that can elevate your entire production.

Outsourcing part of your production just anywhere probably doesn’t make sense. But, bringing in the right custom cabling partner could free up your labor, speed up your production and increase performance. If you’re interested in partnering with a dedicated custom cabling expert, reach out. We would be happy to answer any of your questions and learn more about your project.