The Savings--and Hazards--of Outsourcing : Commerce: Firms such as Irvine’s Printronix contract out more operations as they streamline and specialize.

Contracting to private industry may be a new adventure for Orange County government, but it’s been standard procedure for many local companies that are looking to suppliers for everything from specialized manufacturing to security guards and data processing.

Printronix Inc., a maker of commercial computer printers, discovered last year that it could save $200,000 a year by shipping one manufacturing operation to an outside company, and it is starting to save more through additional outsourcing, the term favored by the corporate world.

The Irvine company also acts as a source itself, generating revenue by producing printers for International Business Machines Corp.

Sending certain operations--mainly those in which it doesn’t specialize--to other companies also has helped Printronix obtain quality products from manufacturers that specialize in producing the printer parts needed for its machines.

“This freed us up to do more things that are closer to our core business,” said George Harwood, Printronix’s chief financial officer.

Printronix hired Moulding International Engineering in Temecula to handle an injection molding process used in a printing mechanism. Printronix was spending $450,000 a year to do the work itself, he said. MIE charges about $250,000, saving the Irvine company about $200,000 a year.

The changeover didn’t result in any layoffs. Harwood said Printronix is growing so fast that displaced workers were simply moved to another part of the plant.

Outsourcing is not without its hazards. It requires delegating trust and losing the flexibility that comes with doing the job in-house. But Harwood said Printronix managed to reduce the risk by feeding the work gradually to MEI, thereby ensuring that quality and delivery times were maintained.

“You have to do it in a carefully controlled manner and gradually bring it up,” Harwood said.

Outsourcing has been successful enough at Printronix that the company is starting to rely on Texas Instruments Corp. for printed circuit boards it once made itself. The contract is worth millions, Harwood said, but he was unsure about how much it would save.

Last year, Printronix itself became the outside contractor for a line of IBM printers. “IBM stopped manufacturing their own line-matrix printers and started buying them from us,” Harwood said. “We have better technology.”

The printers are branded with the IBM name and sold as IBM products.

From its experience, Printronix no longer has any qualms about the contracting process, Harwood said.

“This is more and more the age of specialization. Companies are specializing where they can add value,” Harwood said. “We will look at where an outside supplier can be more effective than we can.”