Since the 1970’s many companies have moved away from manufacturing and completely outsourced the production of their products. While the reasons may vary for each organization, normally, this is closely related to the costs associated with this part of the business, being at the component level (economy of scale), general capital expense, labour costs or expertise, or even supply chain/warehousing. To address this need, many contract manufacturers created Solectron or Jabil or expanded their business away from former entities like Celestica, which was originally part of the IBM conglomerate, to mention a few in the electronic parts arena.
Two main benefits of partnering with such organizations are: -
The general economy of scale they achieve when sourcing components or raw materials in the market. Particularly with items that have a significant volatile market value. This then helps reduce overall product/sale price or maintain stability in the face of material cost change.
- The application of best practices and consolidated knowledge. Due to the array of different products and customers that a contract manufacturer has, best practices and knowledge that otherwise would be unachievable in the short or mid-term for an organization running independently are now embedded in their product.
While there’s no harm in seeking a better operational cost, it is regularly assumed by the contracting party that regardless of what their organization designed, all manufacturing is easy, prompt, and seamless, focusing on the existence and execution of a commercial contract, and – perhaps mostly due to lack of knowledge – not paying attention to the need of a quality agreement or quality plan, and the benefits that it brings to any product.
So, what is the importance of a quality plan or quality agreement? This document set “the rules of engagement” between the parties, covering the full description of the product, its requirements, the production processes involved and where the test criteria are applicable, as well as process controls needed and provided, and finally, the measurements for the product functionality and performance, and also processes KPI’s. All should define the boundaries of responsibility of the contract manufacturer without any doubt. Despite the fact that the quality plan is directly related to the type of commercial contract set between the parties, here are some key points that should be considered to make this relationship a bigger success:
- Understand the capabilities of the Contract manufacturer: It is very important to understand if the contract manufacturer is able to meet your requirements and needs. A technical audit of their process, in the form of an ISO 9001 or another industry specific audit (VDA 6.3, AIAG, AS9100, etc.…), should give you hints of any immediate roadblock or adjustments needed to work with a given contract manufacturer.
"Contract manufacturers are normally very good at identifying design issues or manufacturing constraints and suggesting improvements. Take their input into account"
-Identify a clear core team on both sides: Having too many people involved is as bad as or even worse than having no one. To identify the different departments that need involvement and for each side of the business, a responsible person. This will be mostly driven by the type of contract in place. For example: for turn-key manufacturing, the focus will be on supply chain, scheduling, and logistics, while if you have a collaborative programme, this will also cover quality, manufacturing/process, and engineering.
-Relay on their knowledge and proven processes: Given their vast experience with equipment and different customers and products, the contract manufacturer has a wealth of knowledge that should not be underestimated. If you don’t have a specific and proven requirement for a given process or test, adopt their existing processes, rules, or guidelines as much as possible. This will enable faster reaction on their lines in case of issues and will be easily followed, as it is their regular operating business. Your benefit is the cost reduction as this is seen as a standard approach and the safety of working on a proven process. On the product side, contract manufacturers are normally very good at identifying design issues or manufacturing constraints and suggesting improvements. Take their input into account.
-Define clearly which traceability information is available or needed: Although this would always be a must in highly regulated industries, this practice does bring quite a lot of benefits for all products. In case of any defect, issues, or even non-compliance, traceability data enables both parties to identify an accurate number of products at risk and, consequently, an adequate action plan. Also, identify on the document where the data is stored and for how long it is kept, as this can also have legal implications depending on the industry you are working in.
-Warranty return and part analysis: This will also relate to the type of contract involved, but here is a good opportunity to observe how your product performs and issues that can be found. It is important to define regular warranty reviews, the testing process, and how liability is set between the parties.
With these initial 5 points, you should be able to get some guidelines when establishing a relationship with a contract manufacturer and successfully launching and manufacturing your product.
