It’s no secret that outsourcing to a contract manufacturer (CM) has its perks. The ability to reduce direct costs so dramatically has made contract manufacturing more common. After handing off labor-intensive manufacturing processes, contract manufacturing gives Original Equipment Manufacturers (OEMs) more flexibility to invest in other areas while focusing on what matters most — engineering, final assembly, sales and marketing.
Throughput of Parts Required to Make Ends Meet Drops
When direct costs drop (i.e. cost of labor, equipment, manufacturing space), fewer products must be manufactured to cover expenses. Ideally, throughput of product increases beyond original capacity, making the potential swing of profit even more favorable for OEMs. This safety net is helpful when product demand drops, product phase-outs are planned, or new products are introduced.
Contract Manufacturing Gives OEMs More Room to Invest in R&D and Marketing
Given the costs of highly specialized personnel, equipment and software, research and development (R&D) is an expensive endeavor. Allowing more funds to fuel R&D efforts allows OEMs to keep up with or even exceed their competitors while not compromising the manufacturing of their current lines of products. Sending a product to market successfully also relies on the competency of, well…marketing. Getting the word out about a new product or updates about a currently existing one can help a product line gain more traction at launch. More funding gives those marketing campaigns the weight they need to be successful.
OEM Manufacturing Updates and Communication Are Easier Than Ever
With the technology available today, communication with contract manufacturers is smoother and instantaneous. Design engineers can make changes to a product as necessary and send the specifications instantly to a Contract Manufacturer (CM) for implementation. If there are constraints in the delivery process, these challenges can be relayed to the OEM, or the CM’s upper management, quickly and efficiently. Manufacturing optimization is possible simply through adopting current digital project management and communication programs.
Not a Matter of “If” Contract Manufacturing, but “Who”
Contract manufacturing, in some form, is in the future of most — if not all — OEMs. Which CM is the CM of choice, however, is the more pressing question. Finding a CM that matches an OEM’s requirements, both culturally and through available services, is the primary challenge OEMs face.