Do I Need Project Management Support at My Contract Manufacturer?

Given the many hurdles to bring a product to mass production, it can be considered a minor success to get to the point of Contract Manufacturer (CM) selection. Going through a robust Request for Quote (RFQ) process and choosing a CM partner is one of the most important decisions you will make on the path to production. In the CM selection process, there are steps you can take to begin to build trust, while also taking into consideration that the CM has their own revenue targets and the need to make a profit. Mutual trust and a good business relationship go a long way towards ensuring smooth production runs. Just as critical is gaining an understanding of the CM’s processes and capabilities, which is usually accomplished through in-person visits*. Having a plan in place to manage your New Product Introduction (NPI) process at your CM -- including how to address any challenges that will arise -- is key to ensuring the mitigation of cost, quality, or schedule issues (and, for the purposes of this blog, specific to offshore manufacturing). Which begs the question, “Do I need onsite project management support at my CM?”

To evaluate this question in light of your product and company, it’s important to start with some perspective of how things may (or may not) go. Here’s a potential challenging example, for something as simple as glue, that we’ve seen come up in the past:

Let’s say the CM finds out they can get a cheaper price for the glue used for boxes of your packaging if they switch glue vendors. If you have not specified that vendor change for the glue requires your approval, they may go ahead and change the glue without you knowing. Then, if the boxes all delaminate or fall apart in shipping because the new glue doesn't hold up to the same temperature/humidity standards that are quality tested, you have an entire shipment that needs to be recalled and boxes rebuilt. Not to mention possible damage to those units that were in transit, missed deliveries to all those buyers, and very unhappy customers. This could be a huge problem. 

Your plan for managing your production is incredibly important. To break it down, there are three basic scenarios for production oversight: 

• Have the CM (solely) manage production with no additional onsite oversight
• Have the CM manage production with your team onsite on a part- or full-time basis
• Have the CM manage the process with oversight from a partner or third-party (with your team onsite during key milestones)

Scenario 1: CM-Managed Production

This approach may work if you are building an uncomplicated product and have done your due diligence (i.e., undertaken a competitive CM selection search, audited the factory, met with the management team, selected a trusted CM that has prior experience in your industry or with analog products, and signed an Manufacturing Service Agreement (MSA) with terms you and your lawyers are happy with). In this case, your CM should be capable of managing your production without you needing to be present. You are paying for a service to produce your product, so the expectation is that this partner should be able to deliver the devices according to your desired outcomes. However, “hope is not a method” as the adage goes, so you should expect to do a lot of preparatory work to ensure the quality of the end product and that there is no confusion throughout the process. Specifically, you can take steps to:

• Have a Manufacturing Service Agreement (MSA) with clearly defined terms that dictate Acceptable Quality Levels (AQLs), yields, payment terms, delivery dates and penalties, and so forth. 
• Invest in an Independent Third Party audit of the CM, so you have a report of the capabilities, testing equipment, etc, and a record of any areas of concern.
• Work with a partner such as Dragon to review (or develop) your Quality and Test Plans and related Standard Operating Procedures (SOP) documentation. This will ensure that corners are not cut, or, define who is responsible if they are.
• Insist upon proper quality control procedures pertinent to your product. These can be developed by you or developed by the factory. If developed by the factory, you should make sure shipment inspections are in place to ensure quality requirements are met.

Scenario 2: CM-Managed Production with Company Team Member Onsite on a Part- or Full-Time Basis

For a company that has experienced internal resources (supply chain manager(s), VP of Manufacturing, Head of Ops, etc) available to be onsite, this scenario may be ideal. You know your product best, you understand the expectations of the quality you want. You have developed the testing protocols throughout the R&D, product design & engineering, and prototyping phases. You have an in-depth knowledge of your Bill of Materials (BOM), including which components are generic, assigned, or consigned, know which component sources are risks or need secondary and tertiary vendors, and when a risk-buy or spot-buy will be necessary to achieve the PO date targets. You know how to identify a shoddy third party vendor and have the ability to require the CM to provide an alternative. The list could go on, but you get the idea.

Scenario 3: CM-Managed Production with Outsourced Production Oversight 

This is an ideal scenario for a number of reasons, specifically as it relates to addressing cost, quality, and schedule concerns. If your team is lean, having a team member overseas at your factory on a full- or part-time basis may not be feasible. From a budgetary standpoint, the travel costs alone will quickly add up. Another critical aspect is the day to day communications with the CM. The phrase “lost in translation” exists for a reason. Having a partner who can understand and speak both the native language of the CM, as well as English, will certainly help you to avoid simple translation and communication challenges that can very quickly escalate into full blown issues. From a timezone perspective, having someone onsite who can address questions and issues in real time is going to save valuable cycles in terms of schedule. Finally, there are the “unknown unknowns”; the things you cannot predict. A global pandemic is a prime example. If you can no longer get to your factory, having a partner who can represent your interests and act as your eyes and ears (and sometimes hands and feet) on the ground will certainly provide peace of mind and confidence that you’ll be able to meet your goals. With this type of arrangement, it is still strongly encouraged that a member of your team go to the factory (if possible) during key milestones as you know your product best and will want to have input and visibility throughout the process.

Conclusion 

The decision you make about how to manage your production comes down to your team makeup and the type of product you are building. If you have a simple product and trusted CM, or if you have the resources, expertise, and capabilities to manage internally, then outsourcing production oversight to a partner may not be necessary. But, if you are lacking those internal resources and capabilities, it’s important to have the security of a trusted partner in order to ensure that you can meet your cost, quality, and schedule goals.

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*Given the ongoing COVID-19 pandemic, Dragon Innovation recommends any and all CM visitations be undertaken only as appropriately subject to international travel guidelines and in compliance with any state and local government restrictions.