Early-stage companies typically lack all of the necessary equipment and/or personnel required to launch their new concept into production. Rather than overextending themselves by locating a suitable facility, investing in expensive equipment, and hiring on necessary experts, many young companies wisely choose to work with a contract manufacturer (CM).
But finding the “right” CM can seem like a monumental task, so here are three best practices to help you get the process started:
- Be prepared with necessary documentation prior to reaching out to a CM. This includes not just part drawings and CAD files, but also material specifications, identification of any necessary certifications, a detailed Bill of Materials (a list of all parts and materials used to make a product), and ideally, a Bill of Process (a step-by-step production map of the parts, tools, machinery, and operations needed to assemble a product).
- When approaching a potential CM, be honest about your product’s stage of development and have realistic volumes estimates, target costs, and payment terms expectations. Discuss your growth goals as they relate to future volumes and the CM’s capabilities, to eliminate CMs that will not be able to grow with your company.
- While price is a key factor in making your decision, partnering with the right CM is so much more important in the long run. You should be looking to develop a strategic partnership with a CM, not trying to beat them down to get the lowest cost. Think strategically and consider the “total cost” (including risks associated with overseas supply chains), not just the number provided in a quote. A “win-win” value proposition that is mutually beneficial will allow both you and the CM to grow your respective businesses more profitably.
Bear these in mind as you start your research into suitable CMs, and make sure you ask the right questions. The following list will help provide some insight into several key areas that you will want to consider as you approach and qualify potential CMs.
- Appropriate Assets: Do they have the most appropriate manufacturing equipment necessary to produce your product? Can their equipment scale-up as your company grows?
- Technical Capability: Do they have in-house engineering and research departments that understand your material requirements and can help transition your product from prototype to production? Do they have expertise familiar with the industry regulations and standards? Do they work with other companies in the same markets?
- Quality System: Do they have any type of 3rd party certification (example: ISO 9001)? Do they have internal processes/procedures that allow them to trace parts if there is a quality issue?
- Part Quality: Do they have testing facilities, parts inspection, revision control, and order accuracy/verification? What is an allowable scrap rate and how will defects/rework be handled?
- Responsiveness: Are they receptive to working with early-stage companies with small minimum order quantities? How timely are they in response to new quote requests, change orders, and responses to emergencies/rush orders?
- Delivery: How does their proposed delivery time and frequency of shipments stack up with your needs? What is the contingency plan for late or missed shipments?
- Security: Even if your product is protected by a patent, have they signed a non-disclosure agreement (NDA)? Have they taken measures to protect their systems against cyber-attacks?
- Other: If special tooling is required to make your product, how is it paid for (up front or rolled into product cost) and who will own it? If new techniques are developed in the process of scaling up your product, who owns the rights to those?
This is just a small example of the level of scrutiny that should go into selecting a CM. For a more comprehensive discussion on what to look for, be sure to watch the recording of FuzeHub‘s past webinar on New Suppler Validation and Best Practices, available at https://newyorkmep.org/mrei-supplychain1/.
This insight is from FuzeHub. You can read the full article here.
If you need assistance locating a suitable contract manufacturer in the NYC area, or making sure you are ready to approach one, reach out to ITAC today.