Outsourcing leads to a loss of control
Outsourcing is a way of life for manufacturers and many would not survive the marketplace without this option. Original equipment manufacturers (OEMS) cannot only offload manufacturing, but also tasks such as design, testing, materials’ management and logistics can also be assigned to a contract manufacturer.
However, alongside these benefits there are some risks to consider. Outsourcing leads to a loss of control and when placing manufacturing activities in the hands of an outside company specific processes and infrastructure are required to support the supply chain.
Over the next few weeks, Mark Causer, director at Emsea will take us through the five most common outsourcing mistakes and what your business can do to avoid them.
1. Selecting The Wrong Contract Manufacturer
Choosing the wrong contract manufacturer/ subcontractor is at the root of many of the problems observed in outsourcing. I have seen it happen many times when, perhaps unintentionally, OEMs cut corners and fail to assess key selection criteria, such as technical capabilities, materials’ management capabilities, quality control and financial health.
This can then lead to issues with quality, timescales and ultimately non-delivery of the contract.
Often an existing operational problem is the cause of these poor outsourcing decisions: frustration with the current manufacturer or a looming deadline for a new product launch are two common examples.
Outsourcing must managed strategically
I always emphasise to customers that unlike a traditional buy/sell agreement, outsourcing must be managed in a strategic manner with the CM seen as an extension to your own business. Determine what role factors such as size, technical expertise, financial strength and reputation play in your criteria, and be careful not to exclude major stakeholders (engineering, product management, quality control and finance departments) from your decision-making process.
Many of our customers have chosen to work with Emsea as they place a high value on quality, and also respect the reputation that we have built up over the last twelve years.
Identify long & short term requirements
But whatever criteria are important to you, it will be easier to identify the right company for your specific needs once you have identified your long-term and short-term requirements. Develop a clear plan and follow a methodical process until you have narrowed down your choices, finalised your key contract terms and agreed how your products will be priced- now and in the future.