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What Is CNC Machining Outsourcing?

CNC machining outsourcing means that individuals or enterprises dynamically configure their own capabilities and services with CNC machining companies, and use the resources of external CNC machining companies to serve their own internal production and operation. CNC machining outsourcing is a strategic management model. In the 21st century, which emphasizes professional division of labor, you may try to entrust your non-core business to a professional CNC in order to maintain the core competitiveness of the organization and due to the shortage of manpower in the organization. Processing parts manufacturers to reduce operating costs, improve quality, concentrate human resources, and improve customer satisfaction. CNC machining outsourcing is not a newly emerging industry, it started a long time ago.

CNC machining outsourcing is a business term that became popular in the 2000s. It is one of the business decision-making. It refers to delegating non-core business to a third company specializing in the CNC machining parts. The reason is to save costs, concentrate on core operators, and be good at resources, access to independent and professional services, and more. CNC machining outsourcing and CNC machining offshore outsourcing are often used together, but CNC machining outsourcing is mainly related to organizational restructuring, while CNC machining offshore outsourcing emphasizes the country. Of course, under the premise of today’s globalization, these two concepts are not mutually exclusive.

Outsourcing methods of CNC machining

The outsourcing methods of CNC machining mainly include contract business management (BMC) and entrustment methods.

The contract business management method is purely a mode in which the outsourcer purchases third-party CNC machining services. The third party (contractor) is responsible for completing the parts manufacturing work through CNC machining technology and ensuring service quality; the outsourcer can purchase the corresponding according to their own needs. For CNC machining services, the cooperation will be terminated when the contract is terminated.

The entrustment method is a method in which the outsourcing party entrusts the facilities required for the completion of the business to a third party for operation. There are mainly four cooperation modes: contracting, leasing, franchise management and BOT (build-operate-transfer) franchise management. No matter which mode is adopted, the entrusting party bears the investment risk. Even in the BOT franchise management mode, on the surface, a third party invests, but in fact these investments will be fully included in the operating costs in the form of depreciation with principal and interest, and the outsourcing party All refunds will be made during the franchise contract period.

The common point of contracting and leasing is that the third-party CNC machining manufacturer does not make capital investment, but only undertakes operations and services.

Most CNC machining outsourcing is offshore outsourcing. Offshore outsourcing means that outsourcers and their CNC machining suppliers come from different countries, and the outsourcing work is completed across countries. Due to differences in labor costs, outsourcers usually come from countries with higher labor costs, such as the United States, Western Europe and Japan, while CNC machining outsourcing suppliers come from countries with lower labor costs, such as India, the Philippines and China. Offshoring primarily emphasizes cost savings, the availability of skilled labor, and the use of lower production costs to offset higher transaction costs. When considering whether to conduct offshore outsourcing, cost is the decisive factor, followed by factors such as technical capabilities, service quality and service providers.

Advantages of CNC machining outsourcing

Outsourcing CNC machining operations has enabled some new operations. Some small companies and start-up companies can experience rapid growth globally by outsourcing a large number of operational functions of CNC machining. Then please refer to the articles about the advantages of CNC machining outsourcing.

Who is the Center of the CNC Machining Outsourcing Market?

China is the center of the CNC machining outsourcing market. It is said that at least 80% of the global CNC machining outsourcing business has gone to China. Other outsourcing destinations are in the Philippines, Russia, Mexico, Singapore, Ireland, Northern Ireland, Israel, South Africa, Eastern Europe and Pakistan. The ordering of these countries is blurry, as each has its own strengths and weaknesses. According to McKinsey’s survey, China is by far the most favored country for CNC machining outsourcing business, mainly due to its comprehensive advantages in labor cost and quality.