Contract manufacturing is by far the most-used form of manufacturing utilized by companies across the globe in need of outsourced manufacturing services. Outsourcing creates a partnership that is mutually beneficial for both parties involved, enabling them to grow quickly, efficiently and successfully.
Contract manufacturing is a form of outsourcing that makes parts, components, and finished products for other companies. Contract manufacturers are not just job shops; they can provide a variety of different services from product consulting to finishing, packaging and logistics. They are a crucial tool for small business and start-ups looking to make their product or scale their production levels beyond their in house capabilities.
First Thing's First: Determine Your Cost
Before you start researching companies to outsource to, you need to take in consideration what your company’s manufacturing costs are. Every company has their own way of determining cost; taking a look at your accounting practices can help you perceive what your cost is. It is not fair to take the cost of just your material and labor and compare it to the price of a contract manufacturer’s quote; there are many other factors that come into play. Where you allocate things such as employee and inventory burden, manufacturing overhead, and sales and administration cost can make your perceived cost vary greatly. On the flipside, if your accounting practices put too much overhead and burden into your manufacturing cost, your perceived cost will be inflated and the quote from a contract manufacturer will seem unrealistically low.
If you are using a contract manufacturer for additional capacity or to add to your product line, most of the burden and overhead should have been already absorbed by your existing in house manufacturing. Applying additional manufacturing burden and overhead to a supplied part could make it appear that outsourcing is not a viable option.
If you are replacing your in house manufacturing with an outside source, the math may get more complicated. You will need to dissect your entire burden and overhead to determine what you are reducing or eliminating if you didn’t manufacture in house. While evaluating whether or not to use a contract manufacturer don’t forget to consider outlying cost that periodically occur, such as hiring, training, personnel issues, and environmental and safety regulatory concerns.
After understanding your company’s manufacturing cost, you are ready to researching for your contract manufacturing partner. There are many different factors to take into consideration when looking for a company to partner with; below are some of the most important features to look for in a dependable contract manufacturer.
Established contract manufacturers have extensive experience working with simple parts to complex assemblies. You should look to partner with companies that will use the knowledge they’ve gained to give you input on how to improve your design to make it more manufacturable. Large contract manufacturers have diversified customer bases which makes them better versed in different manufacturing styles and techniques; they can give insight on how to make your design in the most efficient way possible. Collaborating with contract manufacturer in early stages of development can be beneficial in order to know their manufacturing capabilities and use them to your advantage, which leads to creative innovation that enables new products and improving current products.
Reduce Capital Expense for Equipment
When looking for a contract manufacturing partner, find a company that continues to invest in the latest technology and equipment. The more equipment they have, the more options they can provide in making your parts in different ways, which can result in cost savings. Since large contract manufacturers use their equipment more extensively, they are able to justify their purchases and upgrade their equipment more often.
When you outsource your manufacturing process, you will free up time for your employees to focus on what’s important such as creating more innovative prototypes and design additional products. Partnering with a contract manufacturer can also help you with scalability; it can be difficult to scale your product with limited resources. The resources that contract manufacturers have allow them to be more than able to scale your product. They can also help take your product to new levels and be in control of demand fluctuation; whether it is a peak or seasonal decrease, contract manufacturers can quickly scale production needs to whatever is necessary.
When considering a contract manufacturer, keep in mind that the more services they provide, the closer you are to a “one-stop shop.” If they are able to handle every aspect of the project in house, it is easier to track the progress of the part. Once the customer submits their design the contract manufacturer manages the entire project, ending with a finished product. They also have their internal supply chain optimized and are able to get more competitive pricing on raw materials. Having the entire manufacturing process in one facility helps with budgetary control and can help avoid running into unexpected costs. Partnering with a contract manufacturer offers buyers a single point of contact and less logistics to coordinate.
Make sure your potential partner understands and is capable of meeting your quality guidelines. A good contract manufacturer can adapt your needs into their processes to ensure their quality is up to your company’s standards. A good indicator is if the manufacturer is ISO certified since they are required to have a formalized quality management system in place. When evaluating different companies, don’t hesitate to meet with their Quality Control department to address any questions and inform them of your expectations. Having an open dialogue is the best thing you can do to ensure both parties are on the same page.
Partner with a contract manufacturer that will pay close attention to all the ways to drive down costs, including logistical. Many companies have methods in place to help reduce freight and logistics costs, such as having their own trucks and/or contracts with freight companies. This can help avoid freight to distribution centers and get products to the customers with the least amount of freight. Some companies offer warehousing as well as drop shipping, which results in major cost savings for their customers.
Most importantly, find a partner that is interested in your business’ growth and success, as well as their own. They should have a win-win mindset; they are only successful if their customer is successful. If a company is only looking out for their best interest, they are competing with you for profit. Look for a company that is continually growing and looking ahead; these types of companies embrace the change in the industry and will keep up with the latest technology.
What to Avoid
Without proper research, you could end up outsourcing to the wrong company. In order to find the perfect contract manufacturer that fits your company’s needs, be sure to perform due diligence. A low-quality manufacturer can easily disguise themselves as a high-quality, reliable partner; web pages and selective advertising can be misleading. Take the time to schedule a plant site visit, ask other companies for referrals, and look at company reviews to help make your decision. Companies that won’t sign a confidentiality agreement can be a red flag. Unreliable companies can delay processes and provide flawed products; make sure to do your comprehensive research to save you time and costly mistakes.
Washington Metal Fabricators can handle all of your contract manufacturing needs. We are a full service contract manufacturing company with services including product consulting, engineering, manufacturing, finishing, packaging, warehousing, logistics and more. Operating since 1979, we have decades of extensive experience producing products for a wide variety of companies. The knowledge and technical insight we have gained throughout the years have made us versatile in our processes which give us the ability to make parts for just about every industry. We have made thousands of different parts and continually grow and adapt to meet the evolving needs of our customers and the manufacturing industry. We value the business partnerships we hold currently and look forward to creating many more in the future.
Contact us to learn more about Washington Metal Fabricators or to schedule a tour of our facility: email@example.com or 636-583-1600.