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What is Contract Manufacturing?

  • February 12, 2019

One of the most misunderstood segments of manufacturing involves the use of a third-party to manage the relationship between an end user and the folks who actually make the parts. With the advent of the world market, realizing lowest manufacturing cost of goods for resale has taken on a number of challenges, not the least of which are distance, language, timing, and trust.

Companies that supply low cost manufacturing solutions have found themselves in a unique place. While they might not actually make the part your after, they know and have a relationship with those that do. It was natural for them to “contract” to make parts within their business system from suppliers providing good value…….and resell those products. This is not to be confused with brokers, engineering liaison firms, or rep firms. –each of these segments has a role. The most complete solution when seeking third party support for a manufactured good is to find a partner with a strong footprint in the Manufacturing segment, a track record of accountability, and financial stability.

The common perception is that the “Contract” adds a layer of cost. Purchasing agents have learned to ask do you make the parts? If the answer is “no” away they go. Let’s talk for a moment about why that might be a mistake. Here is what is to be gained by a relationship with a responsible contract manufacturing partner:

1. Vendor Base – Good contract manufacturing partners have multiple suppliers in multiple markets for every discipline. They don’t have just one Laser cutter….they have three or four. You know that means the work finds the open capacity and the lowest cost.

2. Engineering Review – A wide variety of sources means a Contract manufacturer can determine best process for the Volume or timing requirements of a given part. They simply know how to match your part to the lowest cost manufacturing discipline. Experience tells them when Laser or waterjet might be the best process. Something your purchasing agent or engineer may not know.

3. Quality System – A True Contract manufacturer operates within an approved quality system, because of those systems they can manage their partners to the standard of quality the part requires. Airplane parts go to the places that make airplane parts, RV parts go to the place they make RV parts.

4. One Stop Accountability – The Contract Manufacturer controls customer expectations, manages the flow of information and helps with good decision making. They do the dirty work of putting boots on the ground to solve problems and head them off.

5. Financial Stability – Every Contract Manufacturer started with a core competency they rode to accomplishment and recognition. This allows them to use Success and Reputation to grow a network of trusted partners in every discipline of Fabrication and manufacture of any kind of product.

6. Program Management – Contract manufacturers by nature track parts through multiple operations. They buy the material, stamp it, weld it, send it to heat treat, paint it, plate it, and put in the box with a certification that it’s good.

Please see our article on manufacturing failures.

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