Why do you need to switch Contract Manufacturers?
There are multiple reasons why a brand would consider switching its contract manufacturing partner. Brands of all sizes need to leverage the knowledge, infrastructure, and supply chain their contract manufacturers can provide. And if you feel like you are being shorted, you will consider switching.
A contract manufacturer provides you with the product that you sell. Therefore, costs, quality, lead time, and overall support are dependent on the performance of the contract manufacturer.
If your partner is lacking one key aspect, it will be difficult for your brand to grow and scale.
Here are the top reasons to switch your contract manufacturing partner.
The most difficult hole to get out of is a hole with bad quality. This leaves you financially hurting with unhappy customers. It’s always an uphill battle.
While quality issues come up, you need to keep them under control. If you notice the reject rate increasing, increased customer complaints due to manufacturing problems, and more, you should consider changing for the overall health of your business.
Or, let’s say you have a quality problem found on the production line but your contract manufacturer can’t solve it quickly or can’t find the root cause. Then, it might be a time to change.
The most obvious reason is to lower your cost of goods sold (COGS). You are most likely not the only company in the market and must be competitive. You might also have found that your contract manufacturer has been gradually increasing their prices. This hurts your overall margins.
The best way to approach this would be to target products that have seen a price increase or you feel are too expensive. If you only have one product, you can get quotes from different suppliers for the part you feel is too expensive and go from there.
There are several reasons why the support might be sub-par for you. Maybe when you started working together, you were a large client for them but since then you have faded and they now have larger clients. Or maybe it’s a bit more technical and they are not able to provide you with the value engineering you are looking for.
Regardless, of the reasons, a lack of support kills the leverage factor. Meaning, if they lack the support you are looking for then you are not able to leverage them to get the result you need.
Do I need an exit strategy?
No matter where you are with your relationship, it’s safe to have a backup plan. You might be happy now but what if they go out of business, they have regulation problems, or something else? You are left vulnerable with no other options.
An exit strategy does not mean you need to make a quick switch, but it just means that you have another contract manufacturer in your back pocket when you need it. To develop a backup plan, it’s safe to go through the evaluation process, RFQ and sampling processes verify another supplier.
If you are happy with your backup supplier, you can also split orders between the two suppliers. Therefore, if the performance of one contract manufacturer declines, you will not be vulnerable, you can simply increase your order volume to the other contract manufacturer.
Are you thinking about switching contract manufactures or diversifying your supply chain? Let us know. Send us an email to Hello@EPowerCorp.com and we would be happy to talk.