Streamlining Hardware Production with a Contract Manufacturer
In the complex landscape of hardware production, companies face the challenge of transitioning from small-scale prototypes to mass production. To address this, many turn to contract manufacturers (CMs) equipped with the necessary skills, expertise, and infrastructure to streamline hardware production for large-scale manufacturing. There are several key factors to consider when streamlining hardware production with a contract manufacturer.
What is a Contract Manufacturer?
A contract manufacturer (CM) is a company that specializes in building products on behalf of other companies. Typically, the design company completes most of the design and engineering internally before providing relevant files to the CM. The CM then refines the design for production and manufactures the product according to the specifications provided.
Types of Contract Manufacturers:
CMs come in various types, often specializing in specific industries or product categories. From a production standpoint, two primary types are high mix low volume (HMLV) and high-volume low mix (HVLM). HMLV CMs produce a large variety of products in smaller quantities, while HVLM CMs focus on mass-producing a limited range of products.
CMs can also be categorized by their market size. Larger CMs will typically have extensive resources, global reach, and cutting-edge manufacturing technology. They may also have higher minimum orders, slower response times, and less flexibility. One of the primary reasons companies lean towards higher tiered CMs is due to their financial leverage and amortization abilities which may enable lower product component costs. Keep in mind, this is not always the case though, especially on specialized components. Smaller CMs on the other hand typically focus on regional markets or niche markets and could offer more mindshare and speed than larger CMs.
Searching for CMs:
A quick search online can help point out the potential global partners or partners in your region. Some of the top companies are Flex, Jabil, Celestica, Sanmina, Plexus, and Benchmark, but there are many others to consider based on your needs.
Using third party research data such as New Venture Research “List of the MMI Top 50 EMS Providers” or Inven’s “Top 15 Contract Manufacturing Companies: The Industry’s Leading Manufacturers” can save you time and provide a starting point. But finding a CM is only the first step in the process.
When to Engage a CM:
Initiating discussions with CMs during the design iteration stage is crucial. Many customers fail to recognize the depth and duration of a New Product Introduction (NPI). The process can take anywhere from 3 months to 18+ months depending on product complexity, equipment availability, material availability, etc.
Engaging with a potential partner like SCRG can help streamline the process while also protecting your IP.
Evaluating a CM:
Choosing the right CM involves defining specific requirements early in the process. A comprehensive package outlining design, production quantities/timing, quality control, logistics, regulatory compliance, testing, and operational needs serves as a guide for evaluating potential CMs (DMA, 2D’s, 3D’s, assembly procedures, BOM data, etc.). It’s also crucial to consider your product complexity and volume, level of flexibility and customization, budget and cost priorities, importance of speed and responsiveness, and required technical expertise and certifications.
Before deciding, conduct thorough evaluations of potential CMs. Factors such as build locations, unit pricing (MVA & BOM comparisons), New Product Integration (NPI) process experience, tracking systems, personnel, communication, R&D/engineering capabilities, and more should be carefully considered. Site visits provide insights into facilities, personnel, and the manufacturing process.
10-point checklist for evaluating a contract manufacturer:
- Reputation and Experience: Research the manufacturer’s reputation in the industry. How long have they been in business? Do they have experience working with companies similar to yours? What practices are in place to protect your IP?
- Quality Assurance & Regulator Compliance: Review their quality control processes and certifications. Are they ISO certified or compliant with other industry standards? Do they have a track record of producing high-quality products?
- Capacity and Scalability: Assess their production capacity and ability to scale up or down according to your needs. Can they accommodate your current and future production requirements?
- Technological Capabilities: Evaluate the manufacturer’s technological capabilities and equipment. Do they have the necessary machinery and expertise to produce your product efficiently?
- Cost and Pricing Structure: Obtain detailed quotes and analyze their pricing structure. Consider not only the initial cost but also any additional fees or hidden charges.
- Location and Logistics: Consider the manufacturer’s location in relation to your distribution channels and target markets. Is their location convenient for shipping and logistics?
- Communication and Collaboration: Evaluate their communication processes and responsiveness. Will they provide regular updates on production progress? Are they willing to collaborate closely with your team?
- Flexibility and Customization: Determine if the manufacturer can accommodate customization and flexibility in production processes. Can they adapt to changes in product specifications or design?
- Supply Chain Management: Assess their supply chain management practices and personnel. Do they have reliable suppliers for raw materials? Do they have supply chain experts on-site to oversee and manage your project? Are they able to mitigate risks such as disruptions or shortages?
- References and Reviews: Seek references from past or current clients and read reviews or testimonials. What do other companies say about their experiences working with this manufacturer?
CM Documents and Selection:
After narrowing down choices, initiate formal discussions by sending a Request for Proposal (RFP) to at least three top contenders. Ensure a signed Non-Disclosure Agreement (NDA) is in place. Evaluate itemized quotes, warranty details, payment terms, and contracts to make informed decisions.
Choosing a CM:
Ranking potential CMs based on specific criteria, including cost, location, communication, Manufacturing Service Agreement items, credit availability, and IP protection, assists in the decision-making process. Weighting these criteria based on their relative importance helps in creating a more nuanced decision matrix. Once a decision is made, communicate the choice to the selected CM and inform other contenders.
In conclusion, the journey from design to large-scale hardware production involves strategic collaboration with contract manufacturers, and careful consideration of requirements, industry expertise, and operational capabilities is essential for a successful partnership.
Author: Pete Mikhjian, CRO
Pete Mikhjian joined SCRG in 2023 as Chief Revenue Officer, overseeing the global sales organization. He brings more than 20 years of experience in business development and engineering across diverse manufacturing markets. Pete is responsible for driving sales strategy and identifying and developing opportunities in new and existing markets for SCRG.
Published: February 12, 2024
Supply Chain Resource Group (SCRG) is a global market leader offering Strategic Workforce Solutions to some of the world’s most exciting brands. SCRG’s sweet spot is bringing highly skilled engineering talent to solve complex offshore manufacturing challenges. Our clients are OEM’s producing intricate technology-led products that use our vendor managed solutions to increase speed to market and manage costs. Whether you need to audit your existing suppliers, find new ones, manage logistics, understand Cost Downs, DfX or FMEA, we can help. Connect with the company that has been reinventing supply chains for household name brands since 2008.