Questions to Ask When Selecting a Contract Manufacturer

Posted by Craig Zoberis

May 13, 2016 6:07:30 PM

Read Time: 4 Minutes

When it comes to outsourcing manufacturing for one of your OEM product lines, no decision is asFUSIONOEMCOLOR_72.jpg difficult as choosing which contract manufacturing partner is the best fit for your business.

As an 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 OEM isn’t as difficult as you think. If you weed out the weaker alternatives and eliminate poor-fit partners, the remaining vendors are few and your decision is simple.

The following questions help you determine which outsourced manufacturing vendors are worth your time – and which ones aren’t.

When your product development or manufacturing services are outsourced to a private label manufacturer, your company’s image and reputation are in their hands, so it’s first priority to make sure their business values and customer mindset align with your OEM’s brand.

IS THE CONTRACT MANUFACTURER’S FACILITY AS CLEAN AND ORGANIZED AS YOUR OWN 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 contract manufacturing partner should be implementing the 5 S’s of facility organization: Sort, Straighten, Shine, Standardize and Sustain.

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.

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 and Vendor Managed Inventory (VMI) services.

HOW HEALTHY IS THE CONTRACT MANUFACTURER’S CORPORATE CULTURE?

Evaluate the culture of the contract manufacturer you are considering – from the front office to the factory floor. Are their employee relations as good 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.

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 9001:2008 certification. In your search, look for records that the contract manufacturing partner provides accurate documentation, high-level reports and detailed test data.

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.

DOES THE OUTSOURCED MANUFACTURER HAVE REGULAR LEAN MANUFACTURING EVENTS?

Your contract manufacturer should be holding regular Kaizen events for employees both on the factory floor and in the front office. These regular events ensure that your potential partner is dedicated to continuous improvement of their process.

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.

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 7 minutes, your potential outsourced manufacturing partner should cover yesterday’s lessons and today’s improvements so that all of your projects stay on track.

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.

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 Dun and Bradstreet Report. Don’t shy away from asking some hard questions either, such as how much they reinvest in new equipment or workforce training.

It’s also important to know if their customer base is diverse. If they are highly concentrated in one industry and that industry slows down, you need to be aware of how that affects servicing your business.

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.

DOES THE CONTRACT MANUFACTURING PARTNER 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 manufacturing

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