Outsourcing Doors: Comparative Example

It may seem contradictory but you might hear that by not building your own cabinet doors, you are giving your profits away. While at the same time, others say that they can make more money by making thier own doors. Actually, they may both be right.

In order for you to really understand which is better for you, you need to analyse the numbers. How much would it cost you to build your own doors, taking into account all of the factors like increased overhead, machinery, employees, etc? Determine the cost per hour for an average door that you are selling to your customer.

Compare this to the price that you pay for subcontracting, taking into account that you will now be able to be building something else with the time that you are not building doors.

Here is a very simple financial analysis:

Assuming a shop rate of $45/hr:

1) An average cabinetry door you build takes about one hour, and you can sell it to a client for $60. This gives you a profit gain of $15 on that hour (including the cost of materials of the door).

2) You ousource the door, it costs you $60 that you take no profit on. However, with that one hour you have freed up, you build a cabinet that costs you $30 in material, but you can sell for $110. This gives you a profit gain of $35 on that hour.

As you can see, if the doors are of similar quality, it would be better to outsource the doors as you would be making $35/hr building cabinets instead of $15/hr building a door. In this case it would be more proftable use of your shop time to stay within your specialized area of cabinet building, and have someone else build the doors for you.

Obviously, there are many more factors involved in this decision (which are discussed in my other articles about this subject), but it gives you an indication of the kind of comparison you should be making when trying to decide to build your own cabinets doors or not. However, pure cost is not the only factor. Quality of the doors and deadlines are also very important considerations. Here is a quick break down of many more of the advantages and disadvantages.

Outsourcing Door Articles Outsourcing Doors: Advantages Outsourcing Doors: Financial Example Outsourcing Doors: Disadvantages Outsourcing Components: Decision Outsourcing Doors: Summary       Outsourcing Doors Finishing CNC Machining Drawers Veneering Wood Turning

WoodWorkingAdvice.com Last page update: July, 2008