Outsourcing Product Assembly. Considering the 4Cs

Outsourcing Assembly. Considering the 4Cs

It may be the right time to outsource your product assembly and manufacturing operations. But that doesn’t necessarily mean getting to that conclusion is easy or obvious.

Identifying & weighing the various advantages and disadvantages of outsourcing manufacturing and assembly operations can be difficult for many Original Equipment Manufacturer (OEM) and PRIMEs. While the idea of outsourcing may be attractive, you may not want to slow down, or allocate analysis tools and time to effectively conduct a cost and ROI comparison of outsourcing versus in house operations.  As not all assembly and outsource process vendors are the same, we have compiled 4 considerations that will help you decide who is the right partner to explore outsourcing with.

 

Costs… Yours & Theirs – Much more than just Labor & Materials

Costs….. Before outsourcing your product assembly, it’s critical that you understand your actual costs of manufacturing in house. If you understand your actual costs, you will have a benchmark to use when you’re selecting and comparing different contract manufacturers.  Besides having a more holistic understanding and appreciation of all the cost factors involved, you will recognize when an assembly partner is offering a great deal or adding value in ways that you may not have recognized if you didn’t understand your own costs.

Many OEM companies simply compare their direct labor and materials costs against the quoted prices of the contract assembly partner.  However, this approach doesn’t accurately reflect your true costs of assembly for a particular product line or piece of equipment. You shouldn’t forget about other factors, such as fixed and variable indirect costs or the opportunity cost of your own factory floor. Have you thought about direct and indirect costs of benefits to employees, difficulty training and retaining employees for certain operations and the ease on management when you outsource a difficult or touchy assembly operation in return for a fixed cost per part or assembly?

Many contract assembly partners such as Jetool will help you investigate and quantify these direct and indirect costs. A contract manufacturer should be able to share their own production processes, material costs, direct labor costs, overhead costs and profit margins.

 

Capabilities… Not All Product Assembly Partners Are Created Equal

Capabilities & Certification Requirements…. When evaluating the range of services offered by an outsourced product assembly partner, you must keep in mind your own business and industry requirements.  Look past a slick sales presentation and research whether they focus on the particular services and industry you do.  Having a partner that understands your industry, what you do, and WHY you do it, will ensure they remain a good partner and value the same things over the life of the relationship. Make sure they are compliant or certified in your industries quality standard.

 

Capacity…  Size Matters

Capacity… You should match the size of the product assembly partner to your size and scope of operation.  For small- to medium-sized OEM companies, relying on a too-large product assembly outsourcer could result in your needs and products not being prioritized and in a less than flexible relationship.  Larger contract assembly & manufacturing companies can offer great values & efficiencies on larger projects, but may find it more difficult to service the ever-changing needs of smaller accounts.

Your assembly partner should be able to add employees, equipment and/or already have plenty of capacity to take on your operations, without needing much help from you except in the way of training and oversight as they begin to assume your assembly operations.

 

Confidentiality & Cybersecurity… Your Intellectual Property, Secrets, and Government Information Must Be Kept Safe

Confidentiality…. There are only a few assets more important to your company’s success than your intellectual property and the government information you guard. You need to complete your due diligence on the security of an assembly partner’s data systems and (if applicable) the intellectual property laws in that country or region.

A reliable product assembly partner should be able to show you how they secure your physical and digital secrets and IP at all times. A cheaper contract manufacturer might be a bottom-line boost for your business for a little while, but if your intellectual property is leaked or infringed upon, they will be the most expensive contract manufacturer you hire.

Outsourcing product assembly isn’t a decision to take lightly, so you need to conduct thorough research of each potential contract assembly and manufacturer before you make any agreement. When you keep in mind these four facts about outsourcing manufacturing, you’re better equipped to make the best decision for your business.

Looking for a reliable contract assembly partner who is flexible and can grow with you? Call Jetool, at 989-845-3880 to explore your options.