It’s pretty common these days for companies to outsource parts of their manufacturing process. Whether this entails having the entire part, toy, or item made elsewhere then sent to your company for packaging, or having a simple segment of the process done outside of your manufacturing platform in order to make assembly easier, it’s crucial to know how insurance applies. After all, you might think that your business is cutting costs by outsourcing, when in fact, the additional insurance that you need may assume a sizable portion of those potential profits.
Wondering what policies outsourcing part of your process may require? Here’s what you need to know in order to make the best business decision.
Supply Chain Issues and Insurance
Having some of your items made by another company can lead to supply chain issues. For example, not only do you need to have those items transported to your warehouse, but you’re relying on whichever service that the manufacturing company uses to move those goods around. Before your products arrive on your property, they are out of your control. As a result, you’ll need to carry a cargo insurance policy on them. This will cover them should something happen while they’re in transit to your building.
In addition, you have little control over the timing involved. Although the other company may offer you some sort of timeline, it’s possible for things to go awry, leaving you without product. The other business should be insured for this, ideally with professional liability insurance, but you need to make sure that you have your own coverage, just in case.
The Problem of Quality Control
Since your business isn’t making its own items in-house, you also lose control over the materials used in the manufacturing process. Again, the other company may promise to use high quality materials that match your requirements, but they may try to cut costs by cutting corners and using less than satisfactory plastics, metals, and more, to make your goods. You may not notice this until your products are complete and on store shelves or in the warehouses of your customers. When these discrepancies are made public, your business will need to have errors and omissions insurance in place to help with the cost of reimbursements, refunds, and replacement items.
What About Copyrights and Trademarks?
Finally, there are copyright and trademark issues that may come into play. Yes, you see your blueprints and descriptions as proprietary, but sharing them with another business, even one that is going to be trusted to make those items for you, can lead to corporate espionage. All that it takes is one disgruntled employee to “accidentally leak” your blueprints to your competitors. To combat this, an intellectual property insurance plan comes in handy. It will help pay for any lawsuits, legal fees, and related costs that come about when you attempt to get your proprietary information back into your hands.
Have Questions? Contact Charlotte Insurance
Want to learn more about the insurance implications of outsourcing parts of your manufacturing process? Contact Charlotte Insurance. Our agents can explore and explain all available options and put together the insurance coverage plan your business needs.