The world of contract manufacturing is riddled with misconceptions and beliefs about the manufacturing or product development process that simply aren’t true. Unfortunately, many Original Equipment Manufacturers (OEMs) believe these misconceptions – often to the detriment of their businesses and their bottom lines. If you want to see success in your contract manufacturing efforts, leave these falsehoods behind.
Here are the five most common misconceptions about contract manufacturing and why they need to be better understood:
Contract Misconception #1: “There Are No Indirect Costs”
Too often, OEM companies simply compare their internal direct costs of labor and materials to the final price of contract manufacturing with a partner. However, your true cost of manufacturing a specific product line isn’t just the sum of these direct costs – it also includes your indirect overhead costs and any potential opportunity costs.
Compare contract manufacturing prices against your total costs (both direct and indirect) to make sure you’re getting the best value for the deal.
Contract Misconception #2: “Employee Culture Doesn’t Matter”
Lean manufacturing isn’t just a trending tool or passing fad; rather, it’s a necessity for OEMs looking to stay competitive. Yet, without establishing a long-term lean culture among employees, your lean manufacturing programs dissipate quickly.
Your employees are at the heart of all lean manufacturing. Craft a lean culture for their workflow, attitudes and relationships and you’ll see profitability soar.
Contract Manufacturing Misconception #3: “Certification Is Irrelevant”
When choosing a contract manufacturing partner, your OEM company’s reputation is on the line, so you need to be highly selective. To guide your decision, you need outside, objective validation that their business is run effectively.
ISO certification (especially ISO 9001:2008) is an industry-accepted standard for quality certification, but it’s also one of the most stringent. This standard ensures that every aspect of a contract manufacturing partner’s business is well run.
Contract Manufacturing Misconception #4: “Lean Doesn’t Apply to the Office”
Lean manufacturing efforts are often overlooked when it comes to your front office and administrative team, but that oversight could be costing you significantly. In fact, implementing a lean office culture is just as essential as lean initiatives on your factory floor.
A lean office not only reduces your overhead costs, but it ensures that your leadership team is included in company-wide lean efforts and profitability awareness.
Contract Manufacturing Misconception #5: “Product Development Should Stay In-House”
Many OEMs believe that they can simply hand off their newly developed product while the outsourced partner does the rest. Yet, involving your contract manufacturer this late in the product development process actually hurts your profitability: Inherent differences between product design and production capabilities are sure to increase manufacturing costs.
Your OEM company deserves to work both efficiently and profitably with a contract manufacturing partner. With these common misconceptions identified, you’re able to select the best contract manufacturer for your business and easily identify partners that are worth leaving behind.