Would you marry someone you have only had a virtual relationship with Hopefully, the answer is NO. Finding the right supplier is not that much different from dating. Dating as a process serves to filter and narrow the field of eligible partners down to a specific few that will eventually lead to that one special person. Vetting your CM can be seen as the same process, a way to filter out certain CM’s that don’t compliment the goals and needs of your company.
While a bad marriage or divorce can lead to difficult times due to legal expenses, alimony, and more, a bad supplier can also lead to painful times:
Loose control of your product
Defective and substandard units
Customer dissatisfaction and a tarnished reputation
You get the picture; the stakes are high, right?
Like marriage, the stakes are high and careful due-diligence is critical when choosing important suppliers. Virtual due-diligence can only take you so far. The best way to vet a CM is by scheduling a visit, it can be the difference between a successful product launch or production flop.
Visiting a CM is vital for three principal reasons: 1) building trust; 2) evaluating engineering & technical support; 3) assessing the overall efficiency of their organization.
While vetting may be the most apparent goal of visiting your CM, cultivating a healthy relationship is critical to pave the way for successful projects as your company expands and grows. A healthy relationship can reduce risk, improve cash flow, make your product development process more streamlined and enhance your overall production experience. A healthy relationship with your CM can do the following:
Improve the financial situation of your company
Improve overall cash flow
Minimize COGS (Cost of Goods Sold)
Streamline the development process
Collaborate with the CM’s engineering team that has experience with developing products using the materials that your product uses
Smooth transition from prototypes to production
Understanding the process the organization takes to eliminate IP leakage is vital to trust
Improve the overall satisfaction rate
Overall happiness is always higher when there is mutual trust in a relationship
Trust is difficult to obtain and easy to lose, and in this industry, transparency is critical to forming a sustainable relationship, which is expected from both parties.
Withholding information from CMs due to IP concerns is very common in this field, and understandably so, but it's counter-intuitive considering a CM is contracted to take products and turn them into reality.
How is a CM expected to provide a useful design guidance, product quotations, and alternatives when kept in the dark with some of the products' most fundamental details?
In short, transparency and communication shape mutual understanding, and having a shared knowledge will help avoid confusion, problems, and disagreement down the road. Here are two options to help solve this:
If IP is an obstacle, ask your CM to sign a non-disclosure agreement (NDA). If they are not able to, then do not proceed.
If they agree to sign, yet still feeling uneasy? Ask the CM if they are willing to advise on one part of your product, I suggest focusing on the most challenging element of your product.
Ask the CM to provide you with a quote, which will allow you to gauge their prices, communication, and speed to determine if they are the right fit. This way, you only send them what you need, without jeopardizing and revealing your secret sauce. Depending on their speed, quotation, and overall effectiveness, you can make a risk-free decision of whether or not to proceed.
Face-to-face is still the best form of building rapport and the leading way to communicate both your product expectations and requirements, so visiting your CM is highly recommended.
Conducting an Informal Audit
While visiting your CM, take the opportunity to analyze the organization, cleanliness, production lines, quality system (or a lack thereof), and most importantly, evaluate both their technical support capabilities and engineering speed.
While a 3rd party audit can tell you a significant amount of information about a manufacturer, you do not necessarily need to be a qualified auditor to get a basic understanding of your manufacturer’s capabilities. Visiting the CM helps you avoid working with an unqualified manufacturer and gives you a real glimpse into their operational and manufacturing capabilities.
The objective of an audit is to provide you with a comprehensive idea of the manufacturer’s production capabilities before investing in an order. You want to ensure you remain as fact-based as possible. For assistance, feel free to download our free Supplier Evaluation Form. During your visit, evaluate whether or not the CM has the tools, machinery, personnel and facilities to produce your product.
Do they have the necessary equipment to manufacture your product?
If your product requires machine stamping, does the CM employ stamping machines? Does this happen in-house or is it outsourced?
Ask how many units they can produce a day, week, or month? Will they be able to meet your demand?
Talk is cheap, request to see documents supporting this. Sales do not typically know so ask to speak with one of their industrial engineers (IE) - the proof is needed.
Are their products similar to yours?
It will be likely that you will see customer logos, shipping cartons, product labels, etc. all around. This information is valuable and can tell you more than any list of references would. Please take a look at actual customers they work with.
Visualize the flow of goods
Ask your CM to take you through the departments that each part would flow through. There are several key areas that you should watch out for and those are the following: IQC warehouse, in production inventory warehouse, finished goods inventory, and each production line needed to make your part.
Develop a relationship with the Point of Contact(s)
Speak with the person who will be your point of contact. Are they knowledgeable about your product? Do they have designers that know their products and their procedures?
For a more comprehensive list on what to look for, feel free to check out our Supplier Evaluation Form.
Assess their Engineering Speed
Speed and timing are shifting to become the essential part of bringing a product to market, making your partnership with an efficient CM that much more crucial. Especially important if you are looking to create OEM or complex products. Visiting a factory can help you determine their engineering, technical support, and production capabilities necessary to quickly take your product to market.
While, it can take anywhere from 2 weeks to 1 year (or more) to design your product, visiting the allows you to view their engineering and technical supporting capabilities.
Transparency plays an important role here, but asking your CM to take a look at a complicated problem is a good test. You can also sit down with the CM’s engineering team to speak with them about the function of your product to see what kind of engineering and technical support they can provide.
To go into further steps of product demonstration, you can speak with the engineers about the budget of the product. You can work with the engineers to ensure they can meet the functional part that the client desires all within their budget. If the price is too high, which is often the case, then the engineers can collaborate with your team to find engineering solutions that are within your budget.
A recent report from Deloitte states that launching more products is the number one goal of product based companies. Therefore, taking proactive steps to collaborate with your CM’s engineering team will improve your ability to launch your product as efficiently and economically as possible.
While all this is taking place, ask yourself the following:
How long did it take the CM to provide you with a cost breakdown?
Did they provide you with timely responses to your inquiries?
Were their responses informational and clear?
Determining a CM's swiftness, a visit has the potential of saving you tens of thousands of dollars down the line.
Visiting your CM helps gauge everything from the quality of the products to the technical expertise they may offer. While onsite, you can also look for red flags that can lead to complications in building a strong and lasting relationship. Remember to always look to expand your knowledge of the various engineering and manufacturing processes to maximize the value of your CM visits.