When considering the outsourcing of your manufacturing, it’s important to understand the full impact of that decision. It’s equally important to conduct detailed due diligence of the potential contract manufacturing (CM) partner in order to ensure that you’ll experience the full benefits of outsourcing without sacrificing your own customer relationships.
Here are five things OEMs should focus on:
1. Don’t sacrifice visibility and control
It is important to understand you lose a level of visibility to what is happening on the factory floor when you outsource. It’s important to choose a CM partner that offers a “glass plant” service to provide you with the ability to see an up-to-the minute view of your order status. It is highly unlikely that your CM uses the same IT infrastructure that you do, so requesting a demonstration of its capabilities in this area is an important requirement.
2. Proactively manage inventory liability
In most cases, outsourcing to a CM doesn’t relieve you of the financial responsibility for the inventory that your partner acquires on your behalf. Look for a CM that can provide timely updates on your inventory liability position and who deploys best practices for optimizing available inventory across all of the sites that build your products. Ask for examples of its ability to collaborate between sites.
3. Measure the ability to respond to change
Your CM’s ability to respond rapidly to your requested changes is a critical factor in ensuring that you have the ability to be responsive to your customers. Why? Despite the fact that a delay or a disruption is technically out of your control, your customer holds you accountable. Even when the disruption stems from customer-requested changes to an order or delivery date, their expectations for swift action and rapid delivery remain. Delivery performance is critical.
4. Check the ability to introduce new products
The window of opportunity for introducing new products to market can close rapidly, especially in the electronics industry. The speed at which Apple’s competitors were able to produce a device that mimicked the iPod was extraordinary. When that collides with the incumbent’s inability to meet demand, the lost opportunity that represents can be fatal. To ensure that your CM is prepared for new product introductions (NPI), ask the executives to cite cases of how they’ve rapidly and successfully ramped up their factories to respond to these engineering changes and NPIs for other customers.
5. Map their geographic presence
Whether your business has a global footprint or specific geographic reach, inquire whether your CM has a plant in, or as close as possible to, those regions. It just may be that you’ll save time and money and be speedier to market if your goods are being produced in the market they are ultimately destined for.
The best test is to simply ask the potential CM partner to describe to you its core competency in response management. If it includes references to the five key capabilities listed here, chances are, you’ll be in good hands.
Webplan produces software that fills the reality gap between planning and execution for rapid response manufacturing.