There are a lot of reasons to use a contract manufacturer (CM) but finding the best match for your company’s goals will require some consideration. Contract manufacturer selection takes time, patience, and understanding. Having a clear understanding of contract manufacturing pros and cons is an important first step, but to build a long and fruitful relationship with your future contract manufacturer, it’s important to identify necessary capabilities, make sure business needs are met, and follow some basic steps in the selection process.
Step 1: Understand Your Business Needs
Contract manufacturers come in all varieties, so there is a good chance that at least one of them can satisfy your business needs. The first step to working with the right CM is to identify what is important to your business. Then you can learn what traits to look for in a future partner.
Contract manufacturing is not a “fire-and-forget” activity. As a business, you need to maintain active, ongoing communication and management of the manufacturing process. This can look like anything from a weekly update meeting to a daily business meeting with personnel on the floor. Whatever it looks like, management of the relationship should be carried out by those manufacturing and supply chain professionals best suited to understand and help with issues as they arise.
Step 2: Keep an Eye on Cost
Beware of the lowest cost. It might be the deal of century, but chances are much greater that the piece part price isn’t the full picture. It’s quite likely that not all the support and manufacturing activities are captured in one cost alone.
Large contract manufacturing firms often bring capabilities and expertise, but it might not be the capabilities and expertise needed for your business. It’s important to select a contract manufacturing partner based on how they can meet business goals. This includes cost but it also includes things like their capabilities with the scale and phase of your project.
Step 3: Understand the CM and Maintain a Professional Relationship
If a CM partner possesses capabilities suitable for your business, chances are those capabilities were developed with your competition, and that relationship might be an ongoing one. Most CMs have procedures in place to maintain confidentiality, and the experience gained from the competition will aid with things like operator training, process development, and supply chain management.
Just as your business has financial obligations to investors, suppliers, and employees, so does the contract manufacturer. Asking the CM to neglect its obligations in your favor doesn’t lay the groundwork for a successful relationship. If your business relies on the CM to fund some or all of the manufacturing, you may need to reconsider your manufacturing readiness and business model viability.
Contract manufacturers don’t have to be able to do everything as long as they can satisfy the needs of the business. Vertical integration can come with significant cost and quality implications so it’s important to recognize that, just as your business is selecting manufacturing suppliers based on their capability, the contract manufacturer is doing the same for the same reasons.
Step 4: See the CM For Yourself (And Ask the Right Questions!)
A visit is worth a thousand slide decks.
The skill of a CM lies in their ability to stitch together a variety of skills and systems in the service of the customer. A business that focuses on one of a few of those skills as imperative to the success of the relationship might be doing so because those are shortcomings they possess and are apparent in the product. It’s not uncommon for selection criteria to contain items that were problematic in previous relationships. If this is the case, it’s important to recognize that the CM, while they may offer services sufficient to offset the shortcoming, is not an optimal solution.
The reasons to go to a contract manufacturer are as varied as the capabilities possessed by those CMs. The decision typically revolves around a desire to get to market faster, with greater quality, and with lower cost. Priorities vary among businesses, but those tend to be the basic drivers. There are a few criteria that CMs should be measured against in pursuit of these goals. Consider asking the following questions when assessing your potential CM:
- Does the CM have product and process experience consistent with the need?
- Are they currently exercising these capabilities on the production floor?
- If the product is particularly new or novel, the CM’s abilities might be interspersed with learning on the job, but the basic technologies and processes should be present.
- Is the CM generating quality product?
- Are they meeting yield targets at the agreed price point?
- Are their current customers returning defective products to them at an unusually high rate?
- Do they have confidentiality policies in place and are those policies being followed?
- Does the CM have a certification with accepted quality standards and regulations and are they in good standing?
- Do they employ ERP, PLM, PDM systems effectively?
- How well does the CM document and communicate their manufacturing processes?
- Can they present documents illustrating traceability of non-conforming materials and travelers?
- How and how frequently do they update clients?
- How long has the CM been in operation and what has their financial performance been during that time?
- Is their location going to help or hinder active collaboration?
- Do they have multiple sites?
- Do they have space to grow with your product volumes?
Once you’ve gotten answers to the questions above, choosing a CM with confidence will be much easier.
Conclusion: Takeaway Tips and Tricks
Going through the process of selecting a contract manufacturer can be time consuming and expensive. There are a few steps to consider that will help standardize and streamline the process.
- Ask for recommendations. There is a good chance that colleagues, clients, or suppliers have had experience with contract manufacturers. Internet searches are valuable but can lack product or industry-specific details that come from a trusted personal network.
- Make a list from discussions and searches. It can be helpful to generate a decision matrix with priority-weighted criteria for each of the candidates, the details of which can be filled in or verified during visits or interviews. There are a lot of factors that can influence the number of candidates under consideration like schedule, travel costs, or availability of personnel but 5 to 10 candidates is probably reasonable assuming they have already received some vetting.
- Create a standard Request for Quote (RFQ) package that provides enough detail for the contract manufacturer to understand the product and tools, processes, and methodologies they’ll need to implement for manufacturing. The follow-up questions from contract manufacturers are valuable since they often highlight their skills and shortcomings.
- Include the helpful information below:
- Team overview
- Funding
- Product description
- Product Status
- Pending work
- Bill of Materials
- Existing Schedule
- Future Schedule
- Based on the results of the preliminary RFQ, narrow the field to 3 to 5 candidates.
- Get NDAs in place with the remaining candidates. Issue a more detailed RFQ.
- Schedule a visit with each of the remaining candidates. Allow enough time for each of the candidates to review the detailed RFQ and follow up before the visit.
- Request and contact references for each of the candidates.
- Be sure the CM Decision Matrix is complete so candidates can be compared based on available data.
- Request draft service agreements from the top 2 or 3 candidates. The RFQ reveals how they will perform on the next project, and the service agreement indicates how they will perform on all the projects that follow.
- Select the CM that best fits the needs of the business but make efforts to leave the others on good terms.
In conclusion, selecting the appropriate CM for your business is no easy feat, but with realistic expectations and a clear understanding of your business goals, you can find the right CM partner to take your product to market.
Follow us on LinkedIn or reach out to a member of our team to get help with your CM selection, ask questions, leave comments, and discover more product development tips, tricks, and insights.
info@flyingpigdesignsllc.com
(720) 627-7778
555 Alter St. STE 19-D Broomfield, CO 80020
Katrice Stover is the Community and Office Manager for Flying Pig Designs LLC. She’s passionate about providing informative, engaging content for inventors, creatives, engineers, and industry professionals alike. In her spare time, you can find her dancing with her daughter, playing video games, and dying her hair vibrant colors.
Recent Comments