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June 14, 2018
7 minutes to read  

6 Biggest Mistakes When Selecting a Contract Manufacturer

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We get it.

Finding the right manufacturer for your project is tough. Do you stay in the U.S. or go overseas? Do you need to work with a design service team? How much is it all going to cost? It's cheaper in China, right? Can't I just find someone on Alibaba to do it all?

 

We probably won't answer every question on your list, but we can tell you about the 6 biggest mistakes we've seen people make when looking for a contract manufacturer. 

They boil down to:

  1. Price
  2. Time
  3. Experience
  4. Communication
  5. Quality
  6. Legal protection

We'll take a look at each one of these items one by one. 

 

1 | PRICE | "The cheapest price is the best price." 

Maybe that's true when you're buying bananas or a gallon of gasoline, but not when you're buying electronic components to interface in an assembly in critical-to-function engineered products. In fact, saving money — while on your list — isn't at the top at all. 

Price is important, of course. It is a factor in doing business, but it is only one factor and, as in the example above, not always the most important factor. 

Our Takeaway: Talk is cheap, not your product.

Keep in mind that many issues can affect the price of your product, including factors that you control. If any changes large or small are made to the design of your product the quoted price will change - and usually the price will go up.

Here are a few examples of ways your price may change if YOU make even a small change in any facet of your product:

  1. If the process requires additional labor.
  2. If the process requires additional material.
  3. If the process requires an additional finish.
  4. If the material costs have changed.
  5. If the tooling requires a change.
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2 | TIME | "I was told I would have product 6 months ago!"

If you have experience in manufacturing, then you know that it simply takes time to finalize drawings, make tools and molds, build samples, approve samples, tweak molds, start production and ship product halfway around the globe.

Our Takeaway: Be realistic with your production timeline expectations.

Even if you’re not developing a new product, the process of manufacturing overseas will always be slower due to the time it takes to move products from facilities overseas to ports in the U.S.

If you’re developing a new product, you’re adding layers of complexity to the mix. Using an experienced CM will certainly alleviate some of that time and stress, but not all of it.  For example, giving feedback on first preproduction samples. This is a big moment in product development. A lot of customers think, “Okay now we’re ready!” Actually, it’s just another step in the process. It’s a big one, but if the customer doesn’t take the time to closely examine the samples and decide exactly what he or she can live with, they can end up slowing down the project. How?

  1. By approving samples without examining them carefully, the project could move forward when it really shouldn’t. Then later come to a halt because the samples weren’t right to begin with.
  2. By disapproving samples because they’re not “perfect” (holding the manufacturer to too tight a tolerance) the project can slow down or even grind to a halt because the customer thinks the sample has to be perfect.

Find the happy medium. Determine what you can live with and keep the project moving forward.

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3 | EXPERIENCE | "I can do this by myself!"

Yes, you can. You can find a manufacturer on the internet who says they will make a quality product for a certain amount of money in a certain amount of time and when you get it maybe it will be right but probably it won’t. And then you’ll have to start all over again and you won’t have the benefit of the money you had to begin with.

Do we sound negative? Yes. (Sorry!) Experience has taught us that the aforementioned scenario is the likely outcome.

Our takeaway: Partner with a manufacturer with feet on the street and with a plan to get your product made.

In fact, we suggest working with a contract manufacturer that uses a Project Manager to handle all the details of your project. It doesn’t mean you’re not in the loop, you are. You’re still needed — remember those preproduction samples?? But your Project Manager will handle a ton of responsibilities between the CM and the suppliers including:

  • Creating budgets and timelines
  • Creating schedules and checklists for product development engineers
  • Monitoring/troubleshooting project progress
  • Convening after-action meeting to determine lessons learned

Project Managers are a great resource, like an extra set of eyes looking out for you.

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4 | COMMUNICATION | Mistaking talking for communicating

If you work in company with more than one person, communication will be a Top 10 complaint. Bank on it. Now, imagine trying build a complex critical-to-function engineered product with specific plating requirements, dimensional tolerances and color that must be matched to a specific Pantone. Now imagine trying to communicate those specifications to an engineer or factory owner in another language, in a different culture 12,000 miles away. All of a sudden you learn the necessity of a process for communication. Communicating globally can be very tricky business. 

Our takeaway: Engineering support for your project, where you need it — where you manufacture. 

We’ve written frequently about the value of engineering support in contract manufacturing. Here are just five good reasons for working with a CM with an engineering team:

  1. Your goals are their priority. They’re making your product. They will listen, advise, suggest and execute on your specification.
  2. They know 80 percent of the cost of a product is fixed in the design phase and that the earlier they’re involved the better the chance that they can keep costs down for you.
  3. They’re always thinking about the manufacturing process when they’re designing the product.
  4. They understand Good Manufacturing Practices (GMP) and are looking for ways to make a quality part for a low cost.
  5. They often have a wide range of work experience both in materials, processes, testing procedures and specifications.

 

5 | QUALITY | Thinking you can have your product good, fast and cheap

There's a saying in business "Good, Fast and Cheap. You can pick two." It's funny, right? 

Our takeaway: Be realistic in your expectations regarding price, speed and quality. 

In other words, it’s up to you need to decide if you’re willing to forgo speed for cost. And while we’re on the subject of cost, you’re not going to get products overseas dirt cheap. Those days are gone. We recommend you read our post of the 10 Key categories that go into product pricing. They are:

  • Materials - three types of materials Raw Material; Hardware; Electronics
  • Tooling - the parts it takes to make your parts
  • Overhead and Margin - everyone deserves to make money
  • Packaging
  • Freight/Duty - fees associated with shipping
  • Cost of Quality - Quality performance testing is not negotiable
  • Third Party Compliance - Additional product testing
  • Volume discounts - Purchasing in volume to save money
  • Yield/Scrap - Defects happen
  • Labor

Each of these factors goes into the cost of your product so, realistically, your product will not be “cheap.”

 

6 | LEGAL PROTECTION | Being Lazy About IP Protection

Working directly with a factory ‘overseas’ offers you little or no protection of your IP if you go it alone.  If the factory you choose is already engaged in the same vertical, what protection do you have from them sharing YOUR IP with their other customers?  Exactly, “nothing”.

Our takeaway: Working with an experienced contract manufacturer is like taking out an IP Insurance Policy.

We have written other blog posts about IP but to give you the thumbnail sketch, there are five main reasons to work with a contract manufacturer with good connections in the country where you plan to manufacture.

  1. They’ve already built strong supplier relationships. Why re-invent the wheel? An experienced CM has already qualified the suppliers. They’ve invested the time and energy in cultivating the relationships. They know who to trust.
  2. They are strategic sourcing ninjas. Their supply network is strong and diverse. They’re not risking your supply chain to one single supplier and providing visibility into your supply chain to a single source - a perfect opportunity for an unethical supplier to steal.
  3. They have on-site resources. An experienced CM will have a sourcing agent or engineer on site to oversee production and monitor potential IP encroachment.
  4. They have done this before. You can trust them to protect your IP investment.
  5. They have the legal safeguards in place to protect you. This means contracts, patents, trademarks and copyrights. None of the legal protections will help if they aren’t done in advance. A contract manufacturer will see that all the I’s are dotted and t’s are crossed.

We hope this list has helped, or at least given you some hope. Believe it or not, no one is born knowing how to build a global manufacturing business. So cut yourself a little slack. But do take our tips to heart because, seriously, we know what we're talking about. Read some of the posts we've linked to and keep educating yourself. There's a saying we're especially fond of around here, "Experience is a great teacher, especially someone else's experience." There's no need to reinvent the wheel (AKA make the same mistakes) as your predecessors. So don't!

 

FREE Guide: 7 Essential Questions to Ask When Choosing a  Strategic Manufacturing Partner

Filed Under: Contract Manufacturing