Working with a contract manufacturer can add many benefits to an organization, from quality and speed to flexibility and efficiency. However, if you want to get all of those advantages, you need to work with the right people. No business is the same, and finding the right contract manufacturer for yours is no easy decision.
Deloitte, a member of the Big Four accounting firms and the largest professional services network in the world, even found that spending more time in the selection process was the top lesson learned for businesses in their 2020 outsourcing survey. Thankfully, a bit of research into what you need and what your contract manufacturer has to offer can make it a more straightforward process.
This guide to choosing a contract manufacturer will help you break things down and make the best choice for your organization.
What Is Contract Manufacturing?
This concept refers to an agreement between two manufacturers, where one creates the parts the other uses in building their product or makes the finished product. A contract manufacturer like us fabricates parts, products and materials for a wide range of industries. As an alternative to producing these parts in-house, contract manufacturing allows other manufacturers to outsource the fabrication process and take advantage of a variety of benefits.
The advantages of selecting a contract manufacturer include:
- Cost savings: In their 2020 survey, Deloitte also found that cost savings are the top reason companies outsource — contract manufacturing can relieve an organization of the capital costs of equipment, space, utilities and a staff. These manufacturers often put a lot of resources toward optimizing their facility and creating the most efficient setup possible for sizable cost savings that get passed on to the buyer.
- Improved quality: Similarly, contract manufacturers put significant resources toward building high-quality parts, with many steps involved in quality assurance and meeting specifications. Additionally, outsourcing adds a second layer of quality control, allowing you to achieve better oversight and a doubled inspection process.
- Resource management: There are several moving parts involved in manufacturing operations. By outsourcing some or all of your manufacturing needs, you can divert your company resources elsewhere toward more important goals. Perhaps you’d like to spend more time focusing on your marketing, staff training or research and development, among numerous other topics. As a solution, contract manufacturers can free up time and money for organizations to spend working on other goals.
- Scalability: If fabrication needs to change quickly, an in-house operation might struggle to increase its capacity. Between additional costs and the time it takes to scale up, companies could face delays, quality concerns and increased costs for expedited services. Fortunately, contract manufacturers can quickly adjust to increases in demand and are accustomed to changing batch sizes.
- Risk management: The right contract manufacturer will give your parts the utmost care and fabricate them with a sharp eye. These manufacturers will usually have highly-trained pros in charge of different aspects of manufacturing, such as quality control, compliance and testing. With the help of their expertise, which could be costly for in-house operations, you can reduce risk across the manufacturing process. With risk reduction in mind throughout fabrication, you can minimize the chances of malfunctions or defects down the road.
Determining if You Can Benefit From Contract Manufacturing
Many companies can take advantage of what contract manufacturing has to offer. That said, there are a few factors that can influence how much value you’ll get from this process. Consider your business position, and if you answer any of the following questions with a “yes,” contract manufacturing can probably help:
- Are you a small business or a startup? When just getting a business off the ground or maintaining a smaller organization, the labor and time commitment of in-house manufacturing can be intimidating, if it’s even viable. By outsourcing the job, small businesses and startups can reduce the burden of these tasks and avoid high capital expenses. Another advantage is the scalability of contract manufacturing that allows it to keep pace with your business growth.
- Do you need external labor? It’s sometimes hard to come by skilled labor, especially if you’re looking for highly experienced professionals. Building a relationship with a contract manufacturer allows you to utilize a well-trained team of professionals without the costs that come with labor, benefits, hiring, management and more.
- Do you want to simplify your supply chain? As your supply chain gets more complex, it becomes more challenging to organize and control. Instead of sourcing every material that goes into a part and tracking it through your facility, a contract manufacturer can take care of everything and deliver you the finished parts.
- Do you experience variable product demand? If your product demands ebb and flow or you’re looking at fast growth, contract manufacturers can meet that need, allowing you to save when demand is low and meet production spikes when it’s high.
- Are you looking to focus internal resources elsewhere? By outsourcing manufacturing, you can dedicate time and resources to the most important goals in your organization.
What to Consider When Choosing a Contract Manufacturing Partner
There are many factors involved in a contract manufacturing solution. When considering a contract manufacturer, look into the following factors to ensure they can offer the right services for your organization.
Whether or not you anticipate growth, your manufacturer should be capable of scaling operations. After all, you never know when an influx of demand will appear, and if that’s the reason you’re turning to contract manufacturing, you need to make sure your provider can meet that need.
Aside from meeting the number of parts, a partner that can meet a variety of part sizes and types can help you expand your offerings or improve products if needed.
A manufacturing partner that’s well-known has more at stake with every part they produce. That’s because they’re more invested in creating the best product possible to maintain and build on their reputation. Of course, a solid reputation can also show you that the company walks the walk and has a long-standing position in the industry as a dependable provider.
To assess the company’s reputation, look for positive reviews on places like the Better Business Bureau and Google’s business reviews. Be sure to locate a portfolio of previous projects so you have an idea of what to expect. The company should be upfront about this information, too.
To make sure a contract manufacturer will work within your business model, conduct a feasibility study. Spend some time collecting data on your project. Map out how much it would cost to produce in-house, including overhead costs, direct labor, equipment maintenance, depreciation, quality assurance and other aspects of production. Compare that to the costs of the manufacturing partner, considering differences in production time and whether you could meet the same demands.
A company’s existing resources will make a big difference here. Consider where you’re at in terms of staffing, equipment availability, facility space and compliance and testing requirements. If any of these components are lacking in your operation, they’ll contribute to the feasibility of the partnership.
A track record of quality work goes a long way. While general quality and customer satisfaction are essential, you’ll also want to look at the experience of the manufacturer’s team and how much they’ve worked with the type of materials and parts you need.
Look on the provider’s website for information about the experience level of the team. Ask for examples of work that are similar to what you’re looking for to properly evaluate their capabilities. Experience in specialized areas can be a significant bonus.
Along with your feasibility study, consider the less obvious costs associated with outsourced manufacturing. These expenses include shipping costs, compliance requirements, tariffs and packaging. Evaluate how they compare to the potential costs of in-house manufacturing. If these costs are low, you’re likely looking at a viable manufacturing relationship.
When establishing a relationship with a contract manufacturer, communication is key. The entire process relies on the discussions between the two parties, so you’ll want to investigate how well they communicate.
Use your initial discussions to inform this aspect, keeping an eye out for mentions of good communication in reviews. Consider how they approach visibility during the process and if they’re proactive about keeping you in the loop. Be sure to note what the company offers in terms of quality reports and metrics.
Another aspect of communication worth mentioning is the communication you have with your team. Make sure everyone is prepared for the new plan and understands how it may affect everyday operations.
The location of your contract manufacturer will also play a role in their viability — the further away they are, the higher the price of shipping could be. That might not matter as much for lightweight supplies, but the harder they are to ship, the more this variable factors into the decision. A nearby facility can also make in-person meetings simpler and allow you to tour the facility when needed.
If you’re looking at offshore companies, keep in mind that domestic providers often offer advantages for shipping costs, simplicity and language barriers.
A contract manufacturer’s team should be well-suited for the work at hand. Specialized expertise goes a long way, as does the right team members. Likely, your main points of contact will be heads of departments, such as project management, engineering, manufacturing, compliance and purchasing. Though their backgrounds and skill are critical, keep the floor workers in mind, too. Ask about training procedures, certifications and oversight practices.
9. Equipment and Technology
Equipment will play a large role in the capabilities of your provider. Ask about the type of equipment available, ensuring it can accommodate the materials and parts you need. Some equipment to consider include:
- Metal cutting equipment, such as saws, CNC punching and carbon dioxide and fiber lasers
- Welding equipment, including flux core arc welding, gas metal arc welding and gas tungsten arc welding
- High-capacity CNC machining
- Finishing tools, like surface preparation and abrasive blasting and washing areas, paint booths and powder coating equipment
- Assembly services
Look at the testing methods available, as some offer specific advantages for different types of products. These methods include:
- Non-destructive testing (NDT)
- Mag particle testing (MP)
- Ultrasonic testing (UT)
- Dye penetrate testing (PT)
- Radiographic testing (RT)
- Material traceability
Several third parties have certifications in place for manufacturers. A significant one is ISO 9001:2015. Developed by the International Standards Organization (ISO), this standard certifies that an organization maintains a rigorous quality management system that consistently meets requirements from customers and regulatory authorities. It also shows that they aim to increase customer satisfaction by effectively applying the quality management system and aiming for improvement.
Look for team member certifications, such as those from the American Welding Society (AWS) or a Certified Welding Inspector (CWI). Some parts may also need certifications from organizations like the American Bureau of Shipping (ABS) or Det Norske Veritas (DNV). A manufacturer with experience in these areas and the ability to create certified parts can add considerable value to the operation.
Other factors to investigate include:
- Regulatory experience
- The design process
- Documentation practices
- Financial stability of the company
Questions to Help Guide Your Contract Manufacturing Search
As you meet with a potential manufacturer, asking the right questions can help you glean the correct information. Consider asking the following questions:
- Do you offer transparent pricing? Are there any additional fees I should be aware of?
- Who will be our primary point of contact and what qualifications do they possess?
- How do you protect our intellectual property?
- What steps do you take to adhere to a timeline?
- What deliverables will you have to offer, such as reports and certificates of analysis?
- What are your strengths across the manufacturing process?
- How do you approach material traceability?
Knowing how to choose a contract manufacturer means knowing which questions are most relevant to your work. It is a crucial time to make sure everyone’s on the same page and that the provider can meet demands. This step allows you to get to know the team and see if they seem like a good fit.
A relationship with a contract manufacturer is one that will ideally last a long time, and switching providers is costly for both parties, so it is key to make this decision thoroughly and ask all the questions you need.
Enjoy the Benefits of Contract Manufacturing With Pro-Cise
At Pro-Cise, we deliver comprehensive contract manufacturing services to numerous industries, from mining and rail to construction, oil/gas and food processing. With a skilled team of trained, dedicated professionals and numerous third-party certifications, our 130,000-square foot facility is run with care and precision. Pro-Cise has a robust collection of state-of-the-art fabrication, manufacturing and testing equipment, and we can work with a wide range of materials.
Ultimately, we aim to be your trusted single-source contract manufacturer with on-time delivery and satisfaction guaranteed. Though we are based centrally in Eau Claire, Wisconsin, we serve customers from coast to coast, so you could be our next client. To begin the process, learn more about our capabilities or reach out to us today to learn more about working with us.