By: Jim Brown, President of Tech-Clarity
The CM conundrum
Working with contract manufacturers can be one of those “you can’t live with them, you can’t live without them” scenarios.
Leveraging contract manufacturing organizations (CMO) is a reality for many companies and can be a great way to jumpstart a product when you don’t have the time or capital to bring up your own plants.
What’s more, manufacturers with complex, digital products like telecommunications or other electronic devices may not have another viable option. They simply can’t get from prototype to scale on their own given the required time, money, and manufacturing knowhow.
But working with third parties can be frustrating, particularly if you’re used to making all of the calls and you’re new to the process.
It doesn’t seem like it should be so hard, but there’s a lot that can go wrong – and it usually does.
You may find yourself asking some frustrating questions, but there are ways to manage the inherent challenges and be successful. Let’s explore five questions you may find yourself asking during your CMO partnership, and what you can do about them.
Working with contract manufacturers brings new capabilities and new challenges. Adopting the right processes, technology, and attitude go a long way to making it a success!
1. Who’s in charge here, anyway?
It’s your product, and you’re in control, right?
Working with a CMO can be frustrating if expectations aren’t right.
It’s important to make a strategic decision about how involved you want to be in every decision.
Some get frustrated with a lack of visibility if they aren’t included in every decision, while others don’t want to (or realize they don’t have time to) worry about each decision.
Let’s take selecting components, for example.
Selecting components, qualifying suppliers, and negotiating prices takes time. There’s a lot to take into account.
In addition to performance, you need to consider risk management for things like sole-sourcing, obsolescence, compliance, counterfeits, and certifications. And that’s all in addition to cost!
The CMO’s knowledge and experience can be a strategic asset, allowing you to take advantage of their existing relationships, expertise, and buying power.
So do you want to control everything? Or trust the contract manufacturer to take on the majority of the work and focus on a few, key elements that are critical to performance and/or cost?
Either way, the key here is to decide strategically and then document the relationship and expectations with a comprehensive services agreement. Agree on the roles up front, don’t fight them, and hold the CMO accountable for their part.
Regardless of whether you are making all or only some of the decisions, it’s critical to make sure you know the outcomes. Even for a CDMO (contract design and manufacturing organization) making the vast majority of the decisions, it’s your product and your success depends on it!
Ensure that you have easy access and visibility to information in a central location.
Keep in mind that you want visibility to both product and production details in the context that makes sense to you and your product.
Scattered, disconnected information is no substitute for structured data management. Ensure that your contract manufacturing partner is openly sharing design and production data with you in a way that you retain your product knowledge.
2. What’s going on over there!?
Lack of visibility can be frustrating.
You’re going to want to see what’s happening at a reasonable level of detail as the product is produced.
You didn’t just place a PO for some finished goods from a catalog, this is your baby!
You’re going to want to hear about progress on everything from component selection and suppliers to production results.
Let’s look at quality improvement as an example.
During early production runs, the CMO will encounter problems. Your mutual goal is to catch them fast and correct them quickly because the cost of mistakes adds up rapidly as you scale up production!
Depending on the relationship, you may not have the level of information you need to troubleshoot or find root causes. In particular, make sure you have access to detailed production data, as your manufacturing partner may look at that as their proprietary information.
Ensure you own the data you think you should and set up visibility from the start.
Clearly having the right technology helps with this, but it’s not just a software issue. You need to set out your expectations in the manufacturing services agreement.
From a systems perspective, make sure you have transparency and long-term access to the full BOM, BOP, production specs, and quality data.
This should be available in an easily accessible place that you control so you can leverage your partner’s expertise, but also your own.
Remember that quality improvement isn’t a one-time thing, you’re going to want this information for the future.
Cloud storage solutions are no substitute for a data management system that’s built to manage product and product information. Make sure your data is organized and secure.
3. That’s not what I said!
OK, this one really isn’t a question, but you may find yourself saying this when you get your product back and it’s not what you expected.
Too often, the product contains flaws you’ve already designed out or lacks improvements that were included in the latest revision.
Getting production right when it’s halfway around the globe means documenting your product. REALLY documenting your product.
Let’s take your BOM for example. In order to get what you expect, you need to document it without making assumptions. Things that might be obvious to you aren’t necessarily as obvious to your CMO who hasn’t lived through development and prototyping.
Miscommunication can result in anything from delays for missing parts, paying for the wrong items, or (worse) paying for wasted die or mold versions because they were built based on an outdated version of your design.
When working with contract manufacturers: get the BOM right, make sure it’s complete, and make sure that it’s impossible to produce from an old revision.
You will also want to keep a historic record of revisions to provide traceability for everything from connectors, to tooling and fixtures, through product verification and validation processes.
It’s important to have a system that shares information without ambiguity. As Tech-Clarity’s How Top Performers Implement, Operate, and Maintain PLM Integration shares, “About two-thirds of companies find data inconsistencies between systems at least on a weekly basis.”
Make sure you always know which is the right BOM and be able to retrieve it easily.
Frequency of Data Inconsistencies Across Systems
A spreadsheet is a poor excuse for a product database or product record. Spreadsheets will fail. They typically contain errors, it’s hard to ensure they’re using the right one, and they are simply not a scalable solution for effective collaboration. Store your data in a purpose-built, structured solution.
4. That’s not what I meant!
As the song goes, communication breakdowns will drive you insane.
You might be questioning why you thought contract manufacturing was a good idea in the first place.
Communicating effectively is one of, if not the most, challenging parts of working with contract manufacturers.
It’s hard enough getting a complex prototype built and scaling it to a handful of units. This is nothing compared to working with a contract manufacturers that develop your production processes and make thousands of units of your product halfway around the world.
Let’s take engineering change management as an example.
Of course, it’s important to develop a relationship and communicate regularly. But it’s also important to develop policies for communication.
When working with contract manufacturers it’s important to agree on, implement, and enforce a disciplined ECO process. This helps you implement changes, but also ensures you understand the full impact of the revision before you commit to it.
Good communication helps you maintain control and gives you – and your partner – the confidence to make changes that continuously reduce cost and improve quality.
Effective communication requires strong, flexible workflows and contextual data.
It also calls for an easy way to collaborate with your CMO.
These workflows should be connected to a common data repository to prevent companies from working on outdated data.
This is critical, given that Tech-Clarity’s report Unlocking Engineering Value for Small And Medium Businesses With Product Design On The Cloud found that “Seventy percent [of manufacturers] say third parties wait a couple of days or more to send updated information” such that “engineers report, on average, 20% of the time they are working with outdated information.”
Shared digital workflows tied to data helps streamline communication and enforce processes, making sure everyone is on the same page.
Email is a poor process management solution. It can be a part of the solution, but multiple threads and data replication make it a poor way to share information and make decisions. When working with contract manufacturers, store all of your product information in a central, project-specific location and maintain critical relationships between the data.
5. Why is this (fill in the blank)!?
This question is the catch-all question for the possible frustration of working with contract manufacturers. Why is this:
- Taking so much time?
- Costing so much money?
- Creating so much work?
- Resulting in so many errors?
- All of the above?
Well, working with contract manufacturers is inherently complicated.
Plus, products are getting more complex.
For instance, The Business Transformation Required to Innovate in the Digital Era study conducted by Tech-Clarity found that product complexity has increased for most companies over the last three years, and for companies delivering smart, digital products, 70% say complexity has increased.
Working with contract manufacturers is hard, but it’s not hopeless.
Even if you follow all of the best practices, you should expect issues.
But, if all goes well, you can take advantage of contract manufacturing benefits without suffering from late surprises that cause cost and delivery impacts to snowball.
To improve your chances of success, use best practices and technology including:
- Create the right atmosphere and relationship
- Respect the CMO’s knowledge and expertise
- Ensure that data is structured and you have a data definition designed to document product and production data
- Ensure that your data management platform provides easy access to the right people, any time, any place
- Document discussions, workflows, decisions, and production results – they are part of your IP
- Define structured processes and digitally execute them in the context of related product data
Ad-hoc tools for data management, collaboration, and process management are no match for a purpose-built solution that keeps product data accessible and in context to support a healthy contract manufacturing relationship.
Working with CMOs or CDMOs is complex yet valuable.
Even if you follow all of the advice available, you’ll probably still be asking yourself a lot of questions.
But, if you get communication, collaboration, and data management right, at least you’ll have some tools to find some positive answers.
I wish you the best of success and look forward to your questions, frustrations, and tips related to working with contract manufacturers.
Image credit: Franck V via Unsplash
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