East West Manufacturing Blog

Contract Manufacturing is Dead

Written by Andy Reese | May 21, 2015

Words have a way of defining us and creating labels. Every year new words or phrase are created and many fall out of style.  “Google it” did not exist prior to 1998. If you share a new technology and your friend say it is “far out” you are apt to define and label them as a throwback hippie from the 1960’s or 1970’s.  So it goes with what we used to know as Contract Manufacturing.

Twenty years ago the term Contact Manufacturer grew up and started to really grow outside the U.S. as Global Manufacturing began a very rapid international advancement. Apple’s growth timeline paints a great picture of their shift from domestic to global manufacturing.              

The term ‘Job Shop’ brings an image of a small volume, high mix, typically domestic and often lower value fabrication operation.  (The “term” not the company) The owners compete with other similar organizations in a continuous ask - bid – quote cycle to larger OEM’s who are typically looking for just the lowest price.  It is hard to build a business or add value to a customer who sees what you do almost as a commodity. 

So the phrase “Job Shop” evolves into Contract Manufacturing as they look to add more value to the OEM.  (Even Jobshop.com calls themselves a ‘contract manufacturer’.)

To distinguish themselves now as manufacturers add more value by offering help for their customers in three areas:

Engineering

They offer Design, Design for Manufacturing, Alternative Material or Component Options, by asking questions about the end use.  The ‘job shop’ just builds to the print.

Manufacturing

The global manufacturer asks, “Where is the best place ‘In the World’ to make your product?”  The answer might be Virginia or Vietnam. Where are the natural resources and the capabilities to produce?

Distribution

Your components or products are made.  Great, now what? Should you call an LTL Carrier or Freight Forwarder or is your manufacturing partner willing to help manage the supply chain to your door?  Can your Contract Manufacturer offer you inventory options or do they just build to print and ship to your door?

OK, so maybe contract manufacturing isn’t really dead.  But the old term of what to expect is certainly approaching extinction.  Make sure the ‘who’ you are doing with has changed with the times and is offering you the level of service you offer your own customers.  There’s always someone who can do it cheaper.  Not always better…

 

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