When Contract Manufacturing Makes Sense

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When Contract Manufacturing Makes Sense

Tuesday Jun 20th, 2017

Categories: SMT

To say businesses today operate in a competitive world would be a significant understatement.  With easy access to information, creative utilization of social media, and new technology, companies can find themselves either leading the pack or lagging woefully behind their competitors.  More than ever, it’s critical for businesses to maintain their “A game”.  They are forced to continuously create value for the customer.  For manufacturers, this means consistently providing exceptional quality, great customer service, and on-time deliveries.  In today’s reality, it doesn’t take much to lose customer confidence, trust and loyalty.  We are far less forgiving than what we used to be.  And honestly…we have more choices for products and services, than ever.  For manufacturing, this means it’s very important to mitigate any chance of breakdown or failure.  Departments must work in concert with each other – sourcing materials, utilizing and maintaining equipment, engineering activities, skilled labor, accounting, human resources…and the list goes on.  And thus, leaving opportunity for a misfire with every step.

So what does this have to do with contract manufacturing?  Manufacturers must continuously remove waste and seek efficiencies; all with the intent of improving profits.  Electronic components are often found in many products which adds another element of complication to the manufacturing process.  Without the right equipment, talent, and engineering expertise in electronics, manufacturers often choose to outsource the electronic assemblies.  This option provides efficiencies, expertise, and peace of mind for companies lacking such resources.  Sourcing out a piece of one’s business, albeit human resources, accounting, assembly, engineering, or electronic circuit board assembly can make financial sense.  It frees-up resources for the manufacturer to concentrate on other more pertinent areas of the business – saving time which then converts to saving money.

So, now with deeper thought into the idea, how exactly does one find the right contract manufacturer?  Well, with everything related to searches, most turn to Google.  Usually a local or regional search with key words specific to the industry is a good place to start.  The criteria will probably differ for each company and person.  For some, the business culture, values, and reputation matter most.  The knowledge and experience with the industry, product, or application seems to be most critical.  And for some, it’s all about numbers.  Only the raw costs are important dismissing the “value add” of the expertise, knowledge and company track record or reputation.  Finally, much of this decision is based upon the anticipated partnership with the individual with whom one might be working. 

In our industry (PCB Assemblies), probably most would say TRUST is the biggest deciding factor in choosing a contract manufacturer.  Similar to a partnership, the two parties must work well together, have a high level of communication, and share the same vision for success.  Each must possess a mutual trust whereby information is transparent and will flow easily.  OEM’s have to trust the quality of work will be representative of their brand and that deliveries will be on time and not interrupting production.  

At the end of the day, the manufacturer must see value in utilizing a contract manufacturer.  And they must fully consider what is at stake in the short-term and long-run.  If losing one customer can potentially cost 20% of the business, then a close evaluation of the OEM’s operation, their customer, and the right contracting partner is vital.  Only you can decide what’s best for your business.

Pine Electronics, Inc. has been a PCB contract manufacturer since the 1970’s.  Their growth and success in providing this service lies in their complete investment in the customer and that partnership.  Pine Electronics has maintained consistency in providing this service and are considered experts in custom boards, box-builds, and wire harnesses assemblies for industrial applications.  Understanding their customer’s needs and having the capabilities has resulted in many decades-long customer relationships.   

It’s important to note that contract manufacturing may not always be the ideal solution.   However, with the right application and business model, utilization of contract manufacturing can be a win-win.  The right partner with the right skill set, and the right application can be a game changer in winning business.