Changing Contract Manufacturers - Why and How?
Successful products are built on collaboration between multiple teams that work together for a common goal. While in theory this is easy to understand, the reality of having different teams come together to achieve a common goal is far more difficult than one would think. The most common example of a party that fails to effectively collaborate for the common goal is the manufacturing partner. There are many reasons for this, but the most common factors revolve around not knowing or working with the right manufacturer.
Resource: CM Evaluation Form (PDF)
If any of the following areas ring true for your situation, then you’re likely working with the wrong manufacturing partner.
Concern 1: Poor Engineering & Technical Support
Less than 15% of developers are getting productive feedback on their product. Product developers and engineers are looking for the contract manufacturer to provide constructive feedback that will improve their product and manufacturability. The area’s of expertise product developers look for are production process, materials, technology, design for manufacture (DFM) and supply chain expertise.
Concern 2: Slow Response Rate
Most contract manufacturers now have a global presence with teams in multiple countries in order to provide round the clock support. To plan and prepare for new product manufacturing, the process can be complex and responsiveness should be a top priority. If you’re frustrated with slow responses and delays, you’re likely working with the wrong contract manufacturing partner.
Concern 3: Long Lead Times
Flexibility with MOQs and the time between placing an order and receiving it is tighter than ever before. It’s important that your contract manufacturer is able to adapt to these market trends and provide you with flexible/shorter lead times to meet these conditions.
Concern 4: Quality Issues
Previously, the most common reason to change suppliers was that they lacked the quality controls and processes that a company needed. Manufacturers now need to provide additional services, plus faster lead times, all without jeopardizing the quality of the product.
Concern 5: Pricing Issues
With cost being a key factor to your success, your contract manufacturer needs to consistently offer competitive pricing. You need contract manufacturers who can quickly assess your BOM and engineering drawings to find improvements in process, materials, and parts. When done right, the end result is a more competitive quote that does not jeopardize the quality of your product.
Concern 6: Too Many Suppliers
Managing multiple suppliers is costly and takes time. Leading companies prefer a single supply chain source that can manage the production of everything or at least most of their products.
If any of these areas are potential weak spots for your company, then you should be exploring alternative contract manufacturers. Don’t just settle for the status quo, explore other contract manufacturers that can provide better support and services to meet your needs.
One key part of building a relationship is learning. Having the contract manufacturing supplier provide you with resources and knowledge that relate to your product is a key factor and the foundation for building trust.
If you are thinking of switching contract manufacturers, below is a step by step guide to help you get started.
Step 1: Analyzing Company Needs
This is all about assessing your current situation. The goal of this step is to see whether or not your current supplier(s) provides you with the speed, solutions, and services that are needed in order to maximize the results and potential of your products. You should itemize your needs and pair them up with what you’re receiving. Nowadays, contract manufacturers are expected to provide support and services in pre-production, production and post-production stages of the manufacturing process. Are getting the full suite of services that you need?
Step 2: Due Diligence
At this stage, you want to identify and explore other options. The goal of the due diligence step is to accumulate knowledge and information from other contract manufacturers that help you make an informed decision of whether to pursuing a change would make sense. To receive adequate background and information from a few suppliers, you’ll need at least 4 weeks which can consist of multiple stages of meetings and discussions. Make sure that you take advantage of their knowledge of the production lines, materials, engineering support and other key area’s that will help you make an informed decision.
Step 3: Testing Capabilities
This step test’s the capabilities of the new manufacturer to see whether or not they are capable of taking on your project(s). It is suggested to provide the supplier with an issue that your company and your current manufacturer are unable to solve to see if they can provide you with a solution. The recommended areas are engineering, technical support, and quotation. If a manufacturer provides a good solution for your problem then they should be considered an ideal candidate.
Step 4: Transfer of Documents
Both parties at this stage will pass all of the necessary documents to the other party. There are a number of documents that you will provide to the supplier, such as the drawings (both 2D & 3D), material specifications (if defined), tolerances (if defined), demand, quality requirements, and packaging requirements. And in return, the supplier will provide the company with engineering & technical support, DFM, product quote, tooling prices, lead time, quality specifications and more. The main purpose here is to start to objectify the manufacturing processes and confirm the documents.
Step 5: Pre-Production
With the transfer of documents completed, it’s time to fully objectify the manufacturing process by completing and signing the contracts and documents. The supplier will draft up a contract that states the price, MOQ, lead time and quality requirements for the product. Both parties will sign the final contract which also contains the supporting documents.
Step 6: Launch, Sustain & Repeat
This is the only step that is continuous and doesn’t stop. The goal of this step is to launch the first product and to continuously produce a high-quality product. The success of this product will give the company confidence to transfer additional existing products to this supplier and to also develop new products together. By launching new products, sustaining production and repeating the process continuously will provide your end customer with a higher rate of satisfaction.
Results & Benefits
Companies that are able to optimize their relationship with their contract manufacturing suppliers will see immediate benefits. There are a number of monetary and non-monetary outcomes that are a result of switching contract manufactures:
Improved engineering & technical support
Higher margins
Quicker development speed
More SKU’s
Higher product quality
With the above improvements, the bottom line is that the financial situation of your company will improve which provides additional resources for the following:
Product development
Employee bonuses
Increased marketing budget
Conclusion
Having a contract manufacturer that works with you as a partner is crucial to provide your customers with the best product. There is a strong trend with companies partnering with contract manufacturers to improve their financial position, reduce lead times, improve quality and reduce costs. If you find your company not optimizing their relationship with your supplier then you should think about switching suppliers.
Resource: CM Evaluation Form (PDF)
Get started now! Contact EPower Corp to schedule a meeting.