Outsourcing vs Insourcing: What's the Difference and Which is Best for my Design/Manufacturing Process?


insourcing vs. outsourcing

Producing products can be a complicated process when you’re first getting started with it. Many businesses find that they struggle to choose the right options when they are starting with manufacturing, and it can be all too easy to make mistakes along the way. Choosing whether you will outsource or insource your production is one of the hardest parts of this. Thankfully, though, this article will be guiding you through these different options to give you an idea of which is best for your manufacturing process.


Insourcing vs. Outsourcing Component Manufacturing


Businesses often choose to outsource manufacturing tasks. This method involves hiring an external company to handle the work for you, with their skilled designers and engineers working to create your products on your behalf.

The Advantages of Outsourcing

Outsourcing comes with a range of different advantages, making it a popular choice for small businesses looking to make products.

  • You don’t have to hire skilled engineers or designers, saving time and money as you begin production.
  • You don’t have to pay for the facilities to manufacture your products, saving a huge amount of money.
  • You won’t have to deal with any issues during the manufacturing process, with your provider solving them for you.
  • You can focus on marketing your products so that you are ready to start making sales as soon as you open your doors.
  • You will benefit from cheaper resources as your manufacturing provider will buy them in bulk.


The Disadvantages of Outsourcing

While a great way to get work handled for your business, outsourcing can also come with a few different disadvantages.

  • Leaving your manufacturing project in the hands of another business gives you less oversight when parts are being produced.
  • This option isn’t always cost-effective when you want to use complex manufacturing processes or make extremely large orders.



Insourcing is essentially the opposite of outsourcing, with companies assigning their design and manufacturing tasks to employees or departments already within their business. In some cases, businesses will insource their design but outsource their manufacturing.

The Advantages of Insourcing

Much like outsourcing, insourcing component manufacturing can come with benefits that help your business. This is assuming that you are insourcing your entire production process, from design to manufacturing.

  • Your team will have the skills to design and make new products, giving you security and independence.
  • You will be able to play a heavy role in the manufacturing process, providing control over the way that your products are made.


The Disadvantages of Insourcing

Alongside having some great benefits, insourcing can also come with some significant downsides, especially for smaller companies.

  • You will have to hire or train team members to handle specific manufacturing tasks, making your costs go up.
  • You will have to buy and maintain machinery, raising costs and giving you less security if any of your machines break down.
  • You will be limited by the skills of your team and the equipment available to your business.

As you can see, these two different manufacturing options are very different. Outsourcing enables you to save money and time, while insourcing can give you greater control and security in the future. This makes the choice between these two options depending on the type of production run you’re undertaking.


Which Is Best For Low-Cost Components?

In the vast majority of cases, outsourcing your work to component manufacturers will be the best way to make low-cost components. You will save money on building facilities, sourcing resources, and training a team to design your products, while also benefiting from the expertise of seasoned engineers. For large production runs that are likely to last for many years, though, insourcing could be the best option.

It can be difficult to decide how you would like your business to operate when you’re starting with manufacturing. Assessing your options and setting them against your business is crucial, as no method is able to offer everyone the same benefits. Thankfully, this is only getting easier as time goes by and manufacturing becomes more accessible.

We look at the bigger picture for our customers here at Pegrex. Read this article to see how we can overhaul your production processes to save time and price on your component manufacturing process.