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Best Practices for Selecting a Manufacturing Partner
Published on Feb 21, 2013
Read our article, 'Best Practices for Selecting a Manufacturing Partner' at 'Time to Start Up,' the small business blog by BizFilings.
By Brad Heath
Selecting an outsourced manufacturing partner is an important decision. You are placing the responsibility for manufacturing your product in the hands of someone else. Doing the right work up front can minimize the chance that you will make the wrong decision. This is really a multi-step process and requires honest answers to the following questions.
What Am I Trying to Accomplish by Outsourcing?
There are a number of good reasons that companies outsource. Topping this list is getting a product manufactured by someone who just does manufacturing. Many companies are looking to reduce their inventories, reduce their cycle times or reduce their costs. Understanding what you are wanting to achieve is critical to successful outsourcing. What are your most critical needs? If you need volume flexibility or short lead times, a domestic source may be your best option. If you have steady, high volumes, you may be concerned just with product cost. Are you a startup or a stable company with stable product. How much early stage product support do you need?
Where Should I Manufacture My Product?
The choice of location involves much more than just a lower labor rate or price. Sure price is important, but many other factors determine what it will really cost you to manufacture in that region. What is the lead time? A product with many changes, or fluctuating demands adds additional cost and complexity to offshore relationships. Who will deal with the supplier in the other time zone. Late night phone conferences will quickly become a distraction if this is not your sole job.
What about quality issues? Do you have a support team that can head to Asia, India or Mexico for several weeks, or do you need to support your product locally. How many months of product will be affected by an engineering change or a quality issue? How much inventory do you need on hand for these situations?
What is the Total Cost to Outsource?
Whether you manufacture in house or outsource, it is important to understand all of the costs which come with each manufacturing decision. Logistics costs and lead time can be significant with offshore manufacturers, near-shoring or domestic manufacturers may provide lower total cost when the cost to provide support, lead times, quality and other product yield issues, pre-payment or payment terms and inbound and outbound logistics cost are factored in.
Doing a thorough evaluation and spending time discussing what you are trying to accomplish with your prospective manufacturing partners can save much in the way of surprises and misunderstandings. Remember that open dialog is the key to any successful partnership and your manufacturing partner is no exception. Go into the relationship with a clear understanding of what you want and what they can provide. Match your needs with their services, rather than assuming they can change to meet your needs or vice versa. You will have a smoother relationship if you do.
Heath is the CEO and Founder of VirTex Enterprises, an Austin, TX-based contract manufacturer.