Working With Contract Manufacturers

[dot_recommends] April 14, 2022 Manufacturing Business Strategy

Tips from Milo Werner, former New Product Introduction leader at Tesla

Milo Werner and a Tesla car dealership with a quote on working with contract manufacturers

When we get on the phone with our manufacturing marketing clients, we talk about more than manufacturing marketing strategy. As partners with our clients, we’re interested in the whole business. That’s why we’re focusing on working with contract manufacturers in this manufacturing business strategy post.

How Common Is Contract Manufacturing?

Of the manufacturers polled during the “Build Better 2022” virtual conference segment on product development, 80% reported that they rely on contract manufacturers. Only 20% indicated that they do all manufacturing in house.

Companies launching new products and technologies often lack the capability to manufacture in house. Using a CM allows them to scale their business up over time.

So, it makes sense that such a high percentage of the conference attendees would be using contract manufacturers. But what are some other use cases for working with CMs?

Use Cases for Working with Contract Manufacturers:

  • New product innovation that requires different equipment or automation
  • Scalable production for start-ups
  • Need to expand production quickly
  • Save on costs and maximize profits
  • Access the CM’s awareness of trends and technical insight
  • Free up your employees to innovate faster and more successfully

Challenges of Working with Contract Manufacturers

  • Quality control
  • Loss of production management control
  • Communication issues, missing information
  • Need for perfect prints, manufacturing instructions, documentation, and assembly instructions to avoid higher costs and delays
  • Intellectual property risks: leaks or misuse by the CM

5 Expert Tips for Successful CM Relationships

According to Businesswire, Milo Werner oversaw industrializing technology and new product introduction for Tesla’s Roadster; Model S powertrain, battery, and dual motor; the first iteration of Tesla’s autopilot; and the Model X. Werner previously held senior roles across engineering, manufacturing, and product development for multiple companies.

Here’s a summary of what Werner said about contract manufacturing (CM) during the Build Better 2022 session as aired on the Manufacturing Happy Hour podcast.

#1 Right-size the Contract Manufacturer (CM) you choose.

If you’re a smaller company and you choose a large, multi-national CM then you will not be a priority for them. CMs operate on razor thin margins. So, they will give the most attention to the companies with higher contracts.

#2 Listen to CM recommendations when it comes to trends.

CMs work with numerous projects and have a broader perspective. For example, they may be able recommend new and innovative type of surface for plastic injection molded pieces.

#3 Beware of late design changes.

Any changes post contract drive costs up and delay delivery. “You think you’re improving your product, but in changing the design or materials you’re driving costs up,” said Werner. They will pass those costs along to you so talk with them as you make those decisions.

#4 Stay on top of manufacturing oversight.

Although you lose some control over the manufacturing process, you need to maintain open communication and check in about deadlines. Someone within your company must track and follow up on all important stages.

For example, don’t assume that the CM ordered the materials just because you told them to order the materials. Follow up and make sure that it got done.

Also, don’t assume that they are running Material Requirements Planning (MRP) and keeping up minimum order quantities. Check on it.

#5 Communicate line automation preferences.

If you want to have an automated line for your product, then you may need to take responsibility for making that happen. Werner recommends that you communicate that to the CM right from the beginning.

Tell them, “We’ve designed this product for automation, and we want to automate it.”

Your company may want to select the automation vendor. Some CMs might have the capability on staff to automate a line, but that will not be true for all CMs.

For more on new product introduction, listen to the entire Manufacturing Happy Hour podcast with guest Milo Werner.

Share Your Thoughts. . .

What tips do you have about the pros and cons of working with CMs? How do you vet CMs you choose? Share your thoughts with us!  We’d love to hear from your experience. Get in touch through this website, or connect with us on LinkedIn or Tweet us.

—parin

Managing Partner

 

Image source: Businesswire

 

 

 

 

 

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