12 Questions to Ask When Selecting a Contract Manufacturer

Posted by Craig Zoberis

Jan 13, 2017 6:00:00 PM

Read Time: 4 MinutesFUSIONOEMCOLOR (297).jpg

When it comes to outsourcing manufacturing for one of your product lines, no decision is as difficult as choosing which contract manufacturing partner is the best fit for your business.

As an Original Equipment Manufacturer (OEM), your standards are high when it comes to how your products are made, managed and moved to market, so it’s natural that you’d have apprehensions about handing over one of your product lines to a contract manufacturer.

Fortunately, choosing the best contract manufacturing partner for your business isn’t as difficult as you think. If you weed out weaker alternatives and eliminate poor-fit partners, the remaining manufacturers are few and your decision is simple.

The following questions help you flesh out which contract manufacturer is worth your time:

  1. Is the contract manufacturer’s facility as flawless and organized as your plant?
    The organization and cleanliness of a contract manufacturer’s facility says a lot about their dedication to quality control. A clean, well-lit facility also speaks to their ability to handle work in a professional manner. Lean manufacturing best practices mean your contact manufacturing partner should be implementing the 5 S’s of facility organization: Sort, Straighten, Shine, Standardize, and Sustain.
  2. Does the contract manufacturer protect your intellectual property?
    Your intellectual property (IP) is one of your most valuable assets, so it’s worth asking if your prospective private label manufacturer has data system security in place that protects your IP from potential infringement.
  1. How vertically organized is the contract manufacturer?
    Evaluate your business needs and ask if the contract manufacturing partner provides the services that meet your needs in a cohesive and streamlined manner. Consider common needs such as in-house product development, prototyping, packaging, logistics, fulfillment and Vendor Managed Inventory (VMI) services.
  1. How healthy is the contract manufacturer’s corporate culture?FUSIONOEMCOLOR (525).jpg
    Evaluate the culture of the contract manufacturer you are considering – from the front office to the factory floor. Are their employee relations as good as or even better than your own? A facility that focuses on employee happiness and professional development creates longer tenures, which in turn produces expertly trained individuals.
  2. Does the potential partner have a quality program?
    The contract manufacturer you’re considering needs to have a quality program in place, such as ISO 9001:2015 certification. In your search, look for records that the contract manufacturing partner provides accurate documentation, high-level reports and detailed test data.
  3. Is the contract manufacturer the right size for your business?
    Small- to medium-sized OEMs don’t want to use a contract manufacturer that’s too large. Bigger contract manufacturing companies have a more difficult time servicing smaller accounts, which means you might not be getting what you need, when you need it.
  4. Do they make the customer every employee’s business?
    As the outsourcing OEM, you essentially pay the wages of your contract manufacturer’s employees, so those workers should understand how their work contributes to the success of your OEM. Employees with that knowledge work more effectively in delivering value to your business.
  5. Does the contract manufacturer hold daily morning huddles?
    Brief morning huddles keep your contract manufacturer organized and concentrated on your production projects. In less than 10 minutes, your potential outsourced manufacturing partner should cover yesterday’s lessons and today’s improvements so that all of your projects stay on track. FUSIONOEMCOLOR (200).jpg
  1. Do they dedicate a value stream manager to your account?
    With such a big budget on the line, your account deserves a dedicated value stream manager whom you may contact anytime you have questions or concerns. This dedicated contact person shouldn’t just be the owner or a salesperson – look instead for an account manager who cultivates a long-term partnership.
  2. Is the potential contract manufacturer in sound financial condition?
    You should have the assurance that your contract manufacturing partner will be in business for many years to come. Evaluate any potential contract manufacturer’s financial stability by getting a bank reference check, checking for UCC filings or even attaining their Dunn and Bradstreet Report. Don’t shy away from asking some hard questions either, such as how they reinvest in new equipment or workforce training.
  3. Do they offer historical renewal programs?
    Ask about their renewal programs with other clients, particularly on legacy product lines. Did the prices of their programs increase year after year? If the price did increase, what was the cause? The best contract manufacturer shouldn’t increase the price every year unless they’re able to easily justify the decision. 
  1. Does the contract manufacturer operate with an open book?
    When you outsource manufacturing, your partner should be a seamless extension of your business – and operate with open-book clarity as a result. A potential contract manufacturer should provide you with everything you need upfront as you research their business. They should be willing to share their production processes, materials cost, direct labor costs, overhead costs and even profits.

The search for the right contract manufacturing partner isn’t always easy, but using these questions should help eliminate all but your best options. By threshing out the weakest vendors, you’re assured that the selection you make is a decision you won’t regret.

Topics: contract manufacturer