The Pros and Cons of Manufacturing: Is It Right for Your Business?

Manufacturing represents a significant strategic decision for any business. By handling production in-house rather than outsourcing production and distribution, companies can potentially exercise much greater control over quality, processes, pricing, and customization.

However, taking on the complex world of manufacturing also requires massive investments and poses an array of operational risks. Understanding both the potential advantages and disadvantages of operating your own manufacturing facility is crucial when determining if it is the right choice to meet your business goals and capabilities.

Potential Advantages of Manufacturing

Quality Control

One of the foremost arguments in favor of manufacturing products internally is the ability to implement tighter quality control over inputs, production processes, and final outputs. By monitoring each step of the transformation from raw materials into finished products, manufacturers can provide greater oversight to identify and resolve quality issues as they arise. Investing in robust quality assurance programs and selective sourcing further protects the integrity and reliability of the end products.

Improved Production Efficiencies

By consolidating production expertise, resources, and workflows into dedicated manufacturing facilities, businesses can also achieve improved production efficiencies. Manufacturing allows companies to streamline standardized processes, leverage division of labor, implement automation, and specialize equipment for greater scale and productivity per fixed costs. Concentrated efforts into refining the manufacturing process over time can yield significant gains in cost-efficiencies.

Product Customization

Manufacturing in-house provides unparalleled flexibility for companies seeking to offer customized or personalized variations of products. When all production and materials sourcing is controlled internally, manufacturers possess much greater capability to alter, adapt, or tailor outputs according to specific customer demands or through configurable options. The customization enabled through direct manufacturing control can deliver immense value for certain industries and buyers.

Pricing Control

Removing reliance on upstream suppliers and distributors grants self-sufficient manufacturers greater discretion over pricing of their products. Companies can set strategic prices aligned to internal costs and margins without needing to pad pricing to account for partner markups throughout the supply chain. Stable pricing can promote sales volume predictability while price adjustments can readily respond to market demand shifts.

Potential Disadvantages of Manufacturing

High Initial Investments

The infrastructure, equipment, materials, and labor required to commence manufacturing operations all necessitate substantial upfront capital investments well beyond many small or midsize business budgets. Manufacturers face daunting costs just to establish production facilities, acquire specialized machinery, source reliable materials providers, hire personnel with manufacturing expertise, and fund inventory acquisition. It can take many years before production output and revenues offset those initial investments.

Inventory and Supply Chain Complexity

Operating an in-house manufacturing facility greatly amplifies the scope and complexity of inventory and supply chain management facing businesses. Organizations must account for raw material sourcing, storage of components, management of work-in-progress inventory, warehousing of finished goods, and product distribution logistics. Each phase of the supply chain escalates risks of waste, obsolete stock, rising carrying costs, and shipment delays that manufacturers must mitigate.

Recruiting and Retaining Staff

The success of any manufacturing operation heavily relies on the contributions of reliable, skilled staff across a range of functions from machine operators and technicians to engineers, quality supervisors, and production leadership. Locating and retaining personnel with manufacturing experience can prove challenging amidst competitive talent markets and shifting workplace expectations. Extensive hiring and ongoing training costs further contribute to escalating labor overhead for manufacturers.

Regulatory Compliance

In taking control of physical production processes, businesses also assume legal accountability for complying fully with applicable health, safety, and environmental regulations to reduce workplace hazards and minimize environmental impacts. Moreover, manufacturers must adhere to extensive employment laws with extra diligence given the labor-intensive nature of such operations. Keeping current and complying with frequently updated federal, state, and local manufacturing regulations creates considerable administrative burden.

Key Considerations Before Pursuing Manufacturing

Conduct Cost-Benefit Analyses

Before electing to develop manufacturing capabilities, businesses should objectively estimate both the substantial initial and ongoing investments required as well as the long-term margins and revenues achievable over time so as to quantify total costs versus total rewards. Comparing future projected cash flows to manufacturing’s heightened fixed costs aids evaluation of breakeven timeframes and return on investment. Weigh production efficiencies against inventory risks.

Assess Internal Capabilities

Expanding into manufacturing may be outside the core competencies companies have developed until now. Businesses should closely self-assess whether they truly possess the right combination of production knowledge, process optimization skills, technical expertise, distribution networks, and managerial experience within their workforces to excel as manufacturers. The steeper the learning curves, the greater the disruption to existing operations.

Map Out Contingencies

Despite best efforts, unanticipated challenges around anything from supply availability to equipment breakdowns to staffing issues are essentially inevitable in manufacturing environments. Rather than hoping for flawless execution, companies should actively identify where processes are most vulnerable to disruption and map out contingency plans for minimizing downtime. The ability to quickly adapt to unpredictable events can determine success.


At its core, the decision of whether or not to pursue manufacturing comes down to honest evaluation of both readiness and risk tolerance. Business leaders should feel confident they can deliver measurable enhancements to quality or customization that justify added costs before progressing to manufacturing. Once committed, truly realizing advantages requires substantial investments in developing robust operations and managing uncertainties outside company control. If unable or unwilling to make such resource allocation, manufacturing likely constitutes an unjustifiable distraction.

For firms positioned to execute manufacturing well, the payoff in expanded capabilities and market control may warrant weathering accompanying challenges. Careful analysis, planning, and strategic vision are vital to determine if playing a more active production role is the right fit.