How Does Contract Manufacturing Work?

Have you designed a great product, but you’re unable to manufacture it yourself? Let a contract manufacturer come to the rescue!

How does one go about contracting with a manufacturer, anyway? It’s a whole process that requires a lot of thought and consideration. Contracting with the first manufacturer that comes along won’t fly. It’s a pretty big decision that will affect several factors, including:

• The quality of your product
• Your brand’s reputation

This guide will walk you through the basic steps involved in launching a project with a reputable contract manufacturer. We hope this guide will help you find a manufacturer that will lift you up, not drag you down.

Without further ado, here’s how the process works:

1. Figure Out What It Will Take To Manufacture Your Product

First, you need to figure out what it takes to manufacture your product. Some products are simple enough for one company to manufacture and assemble them. But many products are too complicated for one company to produce all the components. In such a case, you will need several contract manufacturers to produce certain components. If your product falls into the latter category, you should ask yourself several questions:

• Which manufacturers produce each component?
• Which manufacturer does assembly?
• Which manufacturer does quality control?

It can be tricky to figure out what it will take to manufacture your product. A good place to start would be to ask yourself some of the following questions:

• What kind of equipment does a manufacturer need to produce your product?
• Can your part be stamped? If so, is it cost-effective?
• Does the manufacturer need to bend tubing, assemble wire harnesses, etc.?

A good manufacturing engineer can help here, as can many contract manufacturers. If you can describe, or send CAD files of your part to a reputable manufacturer, they should provide a thorough explanation of what production will entail. We’ll be happy to help you out if you reach out to us.

2. Make A List Of Manufacturers That Can Provide What You Need

You want to look for manufacturers that know your industry and/or your product well. While some products are completely new and unique, most have a lot in common with existing parts. If you need a contract manufacturer to help you build a vehicle accessory, look for a company with auto industry experience. Like Intran, for example.

To narrow down your options, you need to weed out the contract manufacturers that DON’T have:

• Right equipment and technology
• Up-to-date equipment and technology
• Right experience
• Trained and educated employees
• A good roster of clients
• Quality certifications
• Labor and environmental standards
• Their own facilities and assets
• A good way to source raw materials

If you find a manufacturer that meets all the criteria listed above, great! If that manufacturer can also help with every step of production – from sourcing to assembly to working with other manufacturers – you’ve hit the jackpot. Yet, you still want to add a few other contract manufacturers to your shortlist. Your “jackpot” contract manufacturer may not meet your expectations and standards for:

• IP protections
• Shipping costs and timelines
• Minimum shipment quantity

Too often, companies seek a manufacturer that offers the lowest piece rate. This is a mistake. There can be a lot of hidden costs the manufacturer will tack on top of the low piece rate.

3. Assess How Your Business Fits With The Manufacturers On Your List

Before choosing a contract manufacturer, it’s important to understand how your business and product fit with the contract manufacturers that you are looking at. In general, the further away from you the manufacturer is located, the more established both your company and product need to be. Here are some rules of thumb:

• A company with a product already selling thousands of units annually will typically have the financial, engineering, and management resources to successfully source a product from a manufacturer in another country.
• A large company with a new product will also typically have the resources to source manufacturing remotely.
• A smaller company with an established product is a good fit for a manufacturer in another country if it has the financial resources to commit when ordering.
• A startup with a brand new product is usually better off finding local manufacturing until both the company and the product are more established.

Sourcing products from another country is tempting to startups due to the low price per piece. But sourcing from another country successfully often requires larger runs and more management resources than many startups can manage.

4. Visit And Interview The Manufacturers On Your List

When you have your shortlist ready, it’s time to reach out to all the manufacturers on the list. It’s a good idea to visit each manufacturer on your list. That way, you can:

• Meet them face-to-face
• Tour the facility and check out their equipment
• Meet the engineers who will be in charge of your process

Most importantly, it gives you an opportunity to sit down and interview the manufacturer. Here’s a list of great questions to ask a manufacturer.

5. Select A Manufacturer And Sign A Contract With Them

Once you decide on a manufacturer that best meets your needs, take some time to celebrate! Next, work on a contract with the manufacturer. Make sure you dot all the i’s and cross all the t’s. You want to make sure that you’re fully protected. Here’s a useful guide on all the key parts to cover in your contract.

Once the ink on the contract is dry, it’s time to start the onboarding process. The process varies between manufacturers, but here’s a general overview of what a typical onboarding process is like.

6. Review The Quality Of The Product You’re Receiving

Once you finally receive your first order from the manufacturer, take all the time you need to inspect the products. Make sure that:

• The manufacturer has met your material requirements
• The dimensions are correct
• There aren’t any structural defects

It’s a good idea to give each shipment a thorough inspection before sending the parts to market.

7. Keep In Touch With The Manufacturer

Over the entire duration of your contract, keep meeting the manufacturer. You want to:

• Help their engineering team address any cost and/or quality issues that come up
• Help manage the flow of product from the factory to your warehouse

Once your contract is up, it’s a good idea to complete an audit. That way, you can see if you should renew the contract or go with another manufacturer. Here’s a basic guide on conducting an audit.

Suffice to say, contract manufacturing is a complicated process. Yet, it’s not something you or your company will need to figure out all by yourselves. Experienced contract manufacturing companies like Intran are available to help guide you. A quick email is all it takes to get the process started.