By Lisa Commette
As large- and medium-sized companies downsize in order to yield increased profitability, reduce costs and increase output, they typically contract out services that previously had been done in-house. Possessing the equipment necessary to manufacture electromechanical and cable assemblies, as well as maintaining a well-trained work force, make in-house manufacture of assemblies just too costly for most companies. These commodities are almost always one of the first things that are outsourced to contract manufacturers (CMs).
For an original equipment manufacturer (OEM), partnering with the right CM can prove to be just as important to profitability as the decision to outsource in the first place. Finding the CM that can best serve the needs of the OEM, qualifying that vendor, building and maintaining the partnership, and comparing the value-added services that one CM offers vs. another are important factors that must be considered by the OEM.
Outsourcing decisions have a lot to do with corporate policy as well as other needs the OEM requires. Small CMs tend to be much more responsive than larger ones, but they certainly do not have the resources of the larger CMs. Sometimes, these small CMs need financial assistance in order to fulfill larger contracts. Some OEMs still insist on using small CMs though, preferring to be the "large fish in the small pond."
Finding a Partner
An OEM can be introduced to prospective contract manufacturing partners through a variety of channels in today's marketplace. In line with most other inquiries, the Internet is a great source to search out CMs. Many CMs have a Web site showing their capabilities and specialties. It is a good media to display products, quality data, equipment, personnel and other pertinent facts necessary to entice prospective OEM customers to visit.
Factory representatives for components as well as firms representing the CMs themselves are also a strong source for initial contact. Many times, a vendor for fans, metal work, wire or connectors advises a prospective OEM customer on which CMs might be in the area that could complete the project if the OEM has decided to outsource the job. CMs that have their own representation are usually brought two to three major contract quotes a month to review for future business.
Finally, reputation and word of mouth are good avenues through which an OEM can be introduced to a CM. There is no better referral a CM can receive than from its own customer speaking to a prospective client. Many trade organizations give OEM employees a chance to meet and converse about common needs and problems, of which outsourcing is almost always a familiar and popular subject. Tradeshows specializing in outsourcing are also good places for interested parties to come together.
Plant tours usually tell the OEM first-hand whether the type of product it needs to have manufactured fits the CM's abilities. Test equipment, high-speed manufacturing equipment and other "must-have" requirements are easily identified during a complete plant tour.
Organization, plant capacity and other important factors also become evident in this way.
Quality audits are usually the next step in qualifying a vendor. The OEM examines all processes and reviews all ISO 9000 manuals. After this type of scrutiny, an OEM is usually ready to place prototype or first-article orders to determine if the CM can perform.
Maintaining the Partnership
Once a CM has been chosen, proper maintenance is crucial to the longevity of the OEM/CM partnership. Constant support to the quality, engineering, production and purchasing departments by the CM is crucial to the success of the partnership.
Through the use of ISO 9000 process control, statistical process control (SPC) and production techniques, the CM can give recommendations to ultimately improve the quality and cost of the product. This can be accomplished in several ways. When Freedom Electronics produces first-article or development orders, they set up process control for production to take ownership. During this process, suggestions are made based on experience and/or tooling capabilities to determine the most cost-effective way to manufacture the product in a production environment.
Typically, the OEM calls in the CM during the initial stages of design. This enables the CM to share its core competencies and provide input on the "manufacturability" and cost-effectiveness of the design. The CM's knowledge on specific components and production processes can translate into valuable information for the OEM.
Once an initial design is discussed, the CM can provide a prototype to the customer for examination. The design can be re-evaluated and any necessary changes implemented. This close relationship minimizes time to delivery of product by utilizing readily available raw materials in a cost-efficient manner on a proven design.
Upon the initiation of the production cycle, final adjustments are made to the project. At this stage, accuracy and volume are also major considerations. The CM is looking for economies of scale so that the product can be produced with the utmost quality in the most cost-effective manner.
Conclusion
The burden of achieving the best possible situation in the production of the product rests on the shoulders of the CM. The OEM can concentrate its efforts on other aspects of the project. Although not all CMs are able to offer this type of expertise, those that do know and understand the quality standards, ambitions and goals of their customers and, ultimately, provide the highest level of service to those customers.
LISA COMMETTE is Director of Operations/Marketing, Freedom Electronics Inc., 625 Industrial Way West, Eatontown, NJ 07724; (732) 544-8778; Fax: (732) 544-2192; Web site: www.freedom-electronics.com.
