Contract manufacturers have learned to be flexible and nimble to adapt to the new business environment that ALL manufacturers work in. Cost pressures, customer service challenges, OEM demands, and competition from around the corner to around the globe are here to stay.
In recent conversations with engineering management, customers, and even competitors we have discovered the top 3 areas that we expect will impact the contract manufacturing industry trends through 2015:
- Talent War:
Engineers typically fall into two buckets: Those that stay at one company for years and years and those that learn what they can and move on after a few years. Finding and retaining good, talented engineers who understand the complexities of contract manufacturing is pivotal to running a successful business. If hiring and developing a deep bench of talented engineers is number one on your priority list, then keeping them engaged and challenged is number 2. We are very picky about who we hire and work hard to keep them excited about what we do.
OEM (Original Equipment Manufacturers) engineering teams continue to face staff reduction and workload escalation. They are simply forced to do more with less and bottlenecks requiring spec deviation, tolerance adjustment, or raw material substitution are taking much longer. NPD (New Product Development), SKU development changes, and much of the DFM (Design for Manufacturing) is simply being pushed from the OEM to the contract manufacturing. This shift has forced the OEM to seek strategic partnerships with their contract manufacturers who have really become an extension to their own engineering teams. If you are not adding significant value back to your OEM know that you are facing significant risk of being replaced by someone who will. It’s not personal; it’s just a growing trend for survival in our industry.
- Compliance Costs:
Dealing with third party validation agencies have shifted from the OEM to the contract manufacturer in a big way. Seeking UL, CE, RoHs, ETL, or CSA approval has always played a role in the CM’s work, but like the downstream push for engineering resources the cost and most of the responsibility to manage the third party validation will continue fall on the contract manufacturer you have selected.
East West Manufacturing is positioned as a market leader to work with clients who need to understand all the complexities of managing a complex supply chain that global contract manufacturing companies will face in 2015 and beyond.
What will 2016 bring for those in the Contract Manufacturing industry? Download our free guide "5 Challenges Contract Manufacturers Will Face in 2016" and learn how you can help your business prepare for the upcoming year.