Contracting out manufacturing frees capital that can then be invested in core activities, such as market research, product definition, product planning, marketing and sales.
sir i want to understand how outsourcing a task to some other entity frees up capital? Because anyway we have to pay the subcontractor a sum equivalent to his selling price. so whether we make a product by ourselves or subcontracts it, there is anyway going to be cash outflow.
So, sir can you help me clarify my doubt?
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outsourcing
6y ago#1You are correct that there will be a cash outflow whether they manufacture themselves or subcontract.
However, they will not have to buy capital equipment such as machines and can use that money elsewhere.
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