Contract Assembly – Pros and Cons
Are you with an auto parts company? Are you thinking about contracting with a company to do assembly work? If your answer to both questions is yes, you came to the right place. We’ll talk about the pros and cons of contracting with a company to assemble your auto parts.
Hiring a manufacturer to assemble your parts comes with a boatload of benefits. Let’s talk about the biggest ones:
The Pros Of Contracting A Company To Assemble Your Parts
1. Instant Access To Invaluable Expertise
A good contract manufacturer has a wealth of industry knowledge and expertise. An established company has tons of experience assembling many different auto parts. You’ll get to leverage their wealth of knowledge, expertise, and more. That means:
- They have an in-depth knowledge of assembling parts like yours
- They can spot design flaws and other issues, which will save you a lot of money in the long run
- They can help you improve upon the design of your part(s) if needed
A good contract manufacturer already has an existing staff of knowledgeable experts. That means you can hit the ground running. You don’t have to waste any time:
- Hiring a team of technicians with the knowledge and experience required to assemble your parts
- Training your new staff
Another perk is the fact that you don’t need to manage a team every day. The contract assembly company will take care of the HR aspect so you don’t have to.
2. No Need To Invest In Almost Anything
Let’s take a moment to think about what building a facility and/or assembly team from the ground up would entail:
- Years of designing, planning, and building a facility. (This requires a massive investment upfront and you will encounter surprise costs here and there that may cause you to go over budget)
- Conduct a lot of research and development
- Getting all the necessary permits from the local jurisdiction
- Buying hundreds of thousands of dollars worth of equipment
- Putting together an HR department
- Hiring a star team of managers, technicians, and support staff
- Putting your staff through extensive training
It’s common for a new parts assembly facility to cost many millions of dollars upfront. It’s going to take a long time for your company to recoup these costs. A contract assembly company has already done the heavy lifting for you. They already made a significant investment into their facilities, staff, and more.
If you hire an assembly company, you may only need to pay a deposit for them to start assembling your parts. You wouldn’t need to invest in anything. It’s because they already have all the equipment, staff, etc. needed to get the job done.
3. Better Budget Control
If you handle the assembly in house, you’ll be dealing with unpredictable expenses. For instance, your raw material vendors may jack up their prices. Or maybe one of your machines will break down and you’ll get stuck with a huge repair bill. Unless you have a massive surplus in your budget, such surprise expenses may put your business into the red zone.
If you contract with an assembly company, you’ll have a lot more control over your budget. You’ll know exactly what the assembly process will cost you ahead of time. That way, you can set aside a set amount of money for the assembly process. That allows you to control your budget for other business expenses.
4. More Time To Focus On The Core Of The Business
Assembling auto parts sounds simple and straightforward, but it’s actually quite challenging. It can even get downright complicated at times. For starters, if you manufacture in house, your company would need to:
- Maintain the equipment
- Deal with acquiring raw materials
- Figure out shipping logistics and deal with shipping delays
- Implement quality assurance procedures
- Manage a large workforce
When a contract company takes over the assembly process, your company has a lot more time to focus on its core. For instance, you can use your valuable in-house resources to make more sales. Or your employees can use the time to create innovative solutions. By having your employees focus on the core of the business, your business has a better chance of flourishing.
5. Ability To Scale Production With Ease
When you’re manufacturing, scaling up or down production is pretty common. It’s normal for demand to fluctuate, especially with auto parts. If your company has limited resources, it can be very difficult to scale production.
Whether you’re facing a peak or drop in demand, your company would need to make changes at the drop of a hat. If the demand drops low enough, you may need to halt or slow production down enough to lay off some of your workforce. That in itself can be a logistical nightmare. Not to mention, if you handle assembly in house, you would need to hit a certain volume every month to make in-house assembly worth the investment.
If you contract with an assembly company, you won’t have to worry about scaling production. You likely would only need to worry about meeting their minimum production run size. An established company has enough resources to scale up or down production with ease. They can speed up, slow down, or even stop production without any issues.
Other types of changes can be quite hard when you have limited resources. We’re talking about changes like:
- Switching raw material suppliers
- Changing the assembly process to integrate new technologies
- Implementing cost-saving tools and/or procedures
If you contract with an assembly company, you won’t have to worry about any of these problems.
6. Rapid Production Start
We mentioned earlier in this post that it can take a few years to open a facility. Even if you already have an existing facility, it’d still take quite some time to buy equipment, set it up, train your staff, etc.
When you hire an assembly company, production can start as soon as the contract is signed.
The Cons Of Contracting A Company To Assemble Your Parts
Hiring a manufacturing company to assemble your parts comes with some drawbacks. Let’s talk about them:
1. Less Control Over The Assembly Process And Quality Control
When you hire a company to assemble your parts, they have control over:
- Sourcing the raw materials
- The assembly process
- Meeting deadlines
- Quality control
- Pretty much everything else
It can be pretty nerve-wracking to give another company this much power over your products. You would be at their mercy when it comes to quality and deadlines. Yet, it doesn’t have to be like this. You can make sure that your contract with the company delineates what you expect out of them in terms of:
- Quality of the materials
- Assembly procedures
- Quality control procedures
- Meeting deadlines
This will ensure that the company meets your expectations. This post has more information about the key parts to cover in your contract.
2. The Risk Of Contracting With A Bad Company
Signing a contract with a company is like entering a long-term relationship with them. So if you get stuck with a bad company, you’ll encounter a lot of problems. Such problems may include:
- Quality issues
- Missed deadlines
- Miscommunication
- Conflicts about pricing
So if you’re worried about ending up with a bad assembly company, we don’t blame you. Luckily, you don’t have to worry about this if you do your due diligence ahead of time. When shopping around for an assembly company, it’s important to ask the right questions to figure out whether they’d be a good fit for your company. It also helps to know how to tell a good contract assembly company apart from a bad one.
3. Risk Of Intellectual Property Theft
When you contract with a company, you’re entrusting them with your intellectual property. So naturally you may be concerned about them stealing, leaking, or misusing your intellectual property. There are two ways to prevent this from happening:
- Make sure that the contract covers intellectual property and the consequences of stealing, leaking, or misusing it.
- Contract with a reputable Mexican manufacturer like Intran. Mexico’s intellectual property laws are very similar to those in the USA. Also, Mexican courts honor intellectual property rights. You can’t say the same about China’s legal system. In fact, Chinese companies are responsible for between 50% and 80% of intellectual property thefts.
Intran Offers High Quality Contract Assembly Services
At Intran, we have more than 50 years of experience and state-of-the-art equipment. If you’re looking for a contract assembly company, Intran is a great option. Read more about our services here!