The decision to outsource manufacturing for your product is a huge one for OEMs. Giving up some control can be balanced by a variety of benefits, including monetary savings, access to better technology and expertise, and the ability to strengthen your team in research and development. When you begin the journey to outsourcing, consider these questions (either of your management team or prospective manufacturers) to guide you to make the right choice:
WHY ARE YOU CONSIDERING OUTSOURCING?
Many OEMs consider outsourcing when launching a new product. There are many expenses involved when introducing a new product and hiring a manufacturer to take over some of the initial costs may be attractive. Areas where savings can be seen are:
- Reduction of asset purchases—no need to invest in new technologies specific to the new product launch
- Focus on current in-house production efforts
- Decreased labor costs
- Lower per-unit cost
- Expertise not found within the brand organization
By reducing some expenses, OEMs can focus investing in the core of the organization, spending more on R&D, promotion, solidifying the brand’s presence in the industry, and other brand activities while the product is in manufacturing. You must consider whether to look at both domestic and overseas manufacturers; there are many things to consider in this area alone!
Additionally, contract manufacturers likely have established relationships with suppliers, providing negotiating powers which OEMs may not have. This is especially true with a new product launch, where the OEM doesn’t have established supplies and inputs are purchased in smaller volume.
Finally, contract manufacturers provide one key benefit: EXPERTISE. With years of experience in manufacturing, the most senior manufacturing firms offer their engineering, relationship management, and networking experience to OEMs. The years of successful networking can be used on your behalf, which can be pivotal when launching a new product.
NOW THAT YOU HAVE DECIDED TO OUTSOURCE, WHAT DO YOU ASK PROSPECTIVE MANUFACTURERS?
- Are you financially stable; can you handle the capital investment involved in a new product? Since many components must be purchased prior to production, there will be a monetary lag between spending and earning.
- What certifications do you hold? Every industry has its own required certifications; this one area where choosing a manufacturer who is already working within your industry can be very beneficial. The team at SMC holds certifications for quality and manufacturing, offering our clients the confidence that their products will meet all necessary standards.
- What is your approach to communication with OEMs? You must determine if your management styles will meld.
- Are you capable of scaling as demand for our product increases? Are you committed to further investment as manufacturing technology and product improvements are discovered?
- Do you have the technology to grow with us? As new innovations are discovered, our products will be upgraded and/or replaced. Are you nimble enough to make modifications as we develop them, and can you modify processes as we determine are necessary?
- How strong is your supply chain? Do you have a strong framework in place to handle all aspects of production? Will we be able to keep production up while still innovating?
PROJECT MANAGEMENT
- What is your company structure? How involved is your management team in operations? Do you have a project manager who acts as a liaison between the OEM and manufacturer?
- What is the basis of your quality process? What controls and systems do you have in place and how do you mitigate risk and ensure deadlines are met?
- What types of communication do you utilize and how often do you provide reports to OEMs?
- What is your system for risk management, record of safety, and customer satisfaction history?
Although there may seem to be an overwhelming number of questions to ask when outsourcing is in your sights, you will find the more you plan, the better your chance of a successful relationship with a manufacturer and more profitable product launch. Remember, you are trying to establish a long-erm relationship for this and future products, so you must ask (and get answer to) the tough questions. Do your homework ahead of time and look at the reputation and expertise of the manufacturers you are considering. With years of experience and a team committed to the latest technology and the success of our clients, SMC’s offerings can benefit your team and product development. We offer prototyping and design services combined with a strong project management and planning approach. Let us become valued partners in your manufacturing goals!
